If you don’t have a savings account and you have somehow stumbled onto this article, you may want to stay and read about Money Markets and how they can help you save for the future or even create an emergency fund for any possible future accidents. Money markets are a great way to save for the future because they are safe, interest bearing, and have many competitive rates to pick from.
Editor’s Note: If you would like to open a credit card, you should check out our full list of the Best Credit Cards!
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What is a Money Market Account?
Money market accounts are a type of savings account that has characteristics similar to a checking account and have interest rates like a regular savings account. Because it has characteristics of a checking account, specifically flexibility, a money market account is perfect for people who might need to use the saved funds a few times a month.
However, be careful of how many transactions your bank gives for your account. Most banks limit the amount of transactions you have for savings accounts, including money market accounts. They may charge you a penalty for drawing out too much money, too many times in a month. The general rule is to check the terms and policy and ensure that you are not accruing any penalties.
The Safety of a Money Market Account
Money market accounts are great because it allows you to have a great interest and additionally an essentially no risk investment. These types of accounts are ensured under the FDIC for up to $250,000 in funds. To further increase your safety in these accounts, look for accounts that have bank ratings of AAA-rated or 5-stars. Banks with these ratings will indicate a much safer place to put your funds.
What Should I Ask About a Money Market Account?
- What is the best %APY I can get?
- How many transactions can I get per month?
- Are there any monthly service fees? If so, is there a way to avoid them?
- What types of services are offered?
- How much do I need to deposit first to be able to open an account?
- How much daily balance will I need to maintain in order to keep earning the same interest?
Differences Between Other Accounts
There are a plethora of different financial accounts that you can open that each have their own benefits and functions. Here is a basic overview of the differences!
- Savings Account- almost like a money market account, but they usually don't have features like a checking account. It is a great way to save and you will have easy access to your funds.
- Money Market Account- like a savings account, you still accrue interest on your balance, but you may also get the benefits of a checking account. The bank may offer you the service of check writing and debit card purchases directly from the account.
- Certificate of Deposit Account- These accounts are interest bearing as well! However, they are different from savings and money market accounts. CD's, short for certificate of deposits, have certain time frames ranging from months to many years. When you deposit money, you are unable to take the money out until the end of the time frame or when the CD completely matures. If you do take money out early, then you will more than likely be charged with a fee depending on the bank the CD is with.
- Interest Bearing Checking Accounts- These checking accounts allow you to spend and use the money with ease and no limit. They also come with an interest that allows you to earn cash back for up to a maximum balance.
If you haven't started investing into your future, it is probably in your best interest to open up an interest bearing account, like a money market account, to better prepare yourself. Money market accounts and savings accounts in general are a great way to have easy access to an emergency fund or just steadily gain extra cash! Money market accounts are one of the safest interest bearing accounts you can make and are insured by the FDIC. If you're interested in any type of interest bearing account, you should check out our full lists of the Best Savings Accounts/Bank Rates and the Best CD Rates!