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Money Market Savings Accounts: Falling Below the Minimum Balance

Chris Gottschalk

Chris Gottschalk About The Author

Mar 11, 2021 5:45:00 AM

For many people, money market saving accounts are like the preloaded apps on a smartphone—they seem useful, but you’re not sure how to use them without messing up your existing progress.

You may find yourself asking: When should I open a money market account? In reality, money market accounts have some significant advantages over a traditional savings account, including a higher interest rate that makes your money work harder for you and a tiered interest rate that increases as you save more money in the account. So if you have the financial discipline to stick to the rules, the sooner the better.

Perhaps one of the biggest issues people have with money market accounts is that they have a minimum balance, like the $2,000 First Alliance Credit Union requires to open a money market account. What happens if the balance in your account dips below the minimum balance? For that matter, why does the account require a minimum balance in the first place?

Why Money Market Savings Accounts Have Minimum Balance

While money market accounts are similar to traditional savings accounts, they’re not the same. Instead, they’re more like a cross between a traditional savings account and a certificate of deposit (CD).

money-market-savings-account-womenEssentially, you’re letting the bank use the thousands of dollars you’ve saved to finance loans to other members, and in return they are offering you a higher rate of interest for letting them do that. While you can’t take your money out of a CD without a penalty, though, you can withdraw the money in your money market account at any time you want.

While you won’t be able to get the higher rates of interest a CD can provide, instead you have the advantage of being able to add more money to your existing account and getting a better interest rate when the money in your account qualifies for the second tier.

Falling Below the Minimum Balance

If your money market account balance falls below the minimum balance, though, you’ll have to pay a maintenance fee. It’s not much—about $5 a month—but it does serve as a reminder that your account has fallen below the minimum balance requirements.

The whole reason financial institutions charge this fee is to discourage you from withdrawing that money unless you absolutely need to. After all, if the money in your money market account is consistently above the minimum balance, the financial institution can count on that money to loan out to other people.

Earned Interest VS Maintenance Fees

money-market-savings-account-rulesEven if you understand the reason a financial institution would charge a maintenance fee for having your money market savings account balance fall below the minimum balance, you still might be wary of having to pay a maintenance fee at some point in the future.

While this is understandable, ask yourself - how often do you make withdrawals from your savings account?

If you’re like most people, the answer is not very often. The odds are in your favor that you’ll be making more in interest than you’ll have to pay in maintenance fees.

You should also know that you can avoid paying the maintenance fee on your money market by closing it out and transferring your money to a traditional savings account before you withdraw any money. You won’t get the higher interest rate, but you also won’t have to pay the maintenance fee.

About Money Market Savings Account with Us

If you want to open up a money market savings account, become a member of First Alliance Credit Union today. A member advisor will help you set up the account and you can manage it from any where, any time with our online banking and mobile app.

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We do our best to provide helpful information but we cannot guarantee the accuracy or completeness of the information presented in the article, under no circumstance does the information provided constitute legal advice. You are responsible for independently verifying the information if you intend to use it in any way. Additionally, the content is not intended to be reflective of First Alliance Credit Union’s products or services, for accurate and complete details about our product and service information you must speak to an advisor at First Alliance Credit Union.