Money market accounts are a type of high interest savings account that offers similar features to a checking account. Typically, these accounts offer the advantage of earning a higher interest rate on the money you’re saving, while still having convenient access to your cash when you need it. As wonderful as all that sounds, though, money market accounts also have some disadvantages.
Below we will cover the key features and benefits of money market accounts, the differences between money market accounts and other types of accounts, as well as discuss when a money market account is most beneficial. By the time we're done, you'll not only have a better understanding of what money market accounts are, you'll also know how to put them to the best possible use.
Money market savings accounts are also called money market deposit accounts. Most credit unions offer them. The key features and benefits of a money market account are:
Traditional savings accounts are similar to money market accounts in that you can make an unlimited number of deposits, as well as withdrawals. However, with a money market account the interest rate you earn is much higher than a basic savings account.
So what is the downside of a money market account when compared to a traditional savings account? In order to get this higher interest rate, you have to have a minimum deposit requirement of around $2,000 to open the account in the first place.
The main benefit of a checking account is the ability to access your funds quickly and easily using your debit card. This is also true for money market accounts. However, checking accounts are not known for their high interest rates.
Of course, you also don't need to keep much money in a checking account, since these types of accounts were designed to have money constantly going in and coming out of them. Money market accounts, on the other hand, are intended as a place for people to keep their savings without restricting access to their funds.
If you're trying to figure out what to do with a large sum of money, a money market account can be a great option. People use money market accounts for all sorts of reasons, ranging from a place to keep their emergency fund to a place to save for goals like a down payment on a home. There are typically no limitations on how you can use the funds you place in the account, just make sure you’re balance doesn’t fall below the minimum requirement or you might have to pay a maintenance fee.
Money market accounts blend together the best features of checking accounts and savings accounts, while offering an attractive interest rate. However, money market accounts also require a significant minimum deposit to open, and you'll have to maintain your initial balance or pay a maintenance fee if your balance gets too low. That being said, if you have a larger sum of money just sitting in a typical savings or checking account that you don’t need to have daily access to, you should seriously consider transferring those funds to a money market account.
If you'd like to see what a money market account can do for you, become a member of First Alliance Credit Union today. Our member experience advisors will be happy to provide you all the answers you need to figure out if a money market account is right for you. You'll also be able to take advantage of all our other accounts, from our checking accounts to certificates of deposit.