A few key differences exist between Money Market Accounts (MMAs) and savings accounts, such as higher minimum deposit requirements for MMAs, and lower interest rates for a regular savings account. With a money market account, you’ll be able to write a limited number of checks, unlike a traditional checking account. As we mentioned above, a money market account is best described as a mix between a savings account and a checking account. Money market accounts earn interest like a savings account, although often at much higher rates than a savings account. Money market accounts offer a great addition to your financial accounts for their flexibility and high interest rates.
There’s no monthly service fee, and only a $100 deposit is required to open an account. Account extras include higher interest rates on linked savings accounts and CDs, as well as fee waivers on selected services, including wire transfers and foreign ATM withdrawals. Money market accounts often need a minimum balance to avoid a monthly service charge, which can be $12 per month or more. While you may get various services for that fee, many alternatives, such as savings accounts, are often free, especially if you work with a discount or online bank. If you have a small balance, the fees alone may eat up all of your earnings.
Money Market Accounts vs. Mutual Funds
Backed by FDIC insurance, money market accounts typically provide higher interest rates than a savings account but do not restrict your access to the funds. Like high-yield savings accounts, these accounts offer interest rates that rival and sometimes exceed those of money market accounts. They also share the high-yield savings accounts’ principal weakness, which is that they may have more complicated requirements, such as a minimum number of debit transactions each month.
They act like a checking-savings account hybrid, offering both the flexibility of a checking account with the features of a savings account. Many banks and credit unions also offer high-yield savings accounts and, depending on the institution, the interest rate may be better than on their money market accounts. A potential downside compared with money market accounts is that they may have more rules, such as requiring direct deposits or at least a certain number of transactions per month to avoid penalties. Until the early 1980s, the federal government placed a cap or limit on the amount of interest that banks and credit unions could offer customers on their savings accounts. Money market accounts are offered at traditional and online banks and at credit unions.
While you may want to replace having both a checking account and a savings account in favor of having a single money market account, you may find some issues there. Money market accounts’ ATM cards and check-writing abilities are convenient, but they may not allow you to save as effectively as with a standard savings account.
There is usually a relatively low maximum number of checks that a customer can write on his or her account per month—typically between five and 10. In return for abiding by this restricted withdrawal activity, money market account holders receive a higher interest rate than those that are available for traditional savings accounts.
High-Yield/High-Interest Checking Accounts
If you’d like to be on the ready to send money market dough toward a different type of investment, a fund is probably the better choice. If you want to make fee-free ATM withdrawals at a major bank go with the deposit account. A money market account is a type of savings account offered by banks and credit unions just like regular savings accounts. The difference is that they usually pay higher interest, have higher minimum balance requirements (sometimes $1000-$2500), and only allow three to six withdrawals per month. Another difference is that, similar to a checking account, many money market accounts will let you write up to three checks each month.
A bank offering only a 0.10% interest rate on standard savings accounts, for example, might offer a 0.25% interest rate on a money market account. They are best described as a hybrid of a savings account and a checking account. Money market accounts earn interest much like savings accounts do, i.e. according to the interest rate that applies at a given time.
A money market account is an interest-bearing account at a bank or credit union—not to be confused with a money market mutual fund. Sometimes referred to as money market deposit accounts (MMDA), money market accounts (MMA) have some features not found in other types of accounts. Most money market accounts pay a higher interest rate than regular passbook savings accounts and often include checkwriting and debit card privileges. They also come with restrictions that make them less flexible than a regular checking account. A money market account is a savings account with some checking features.
Alternatives to Money Market Accounts
- Decide between the two types of money market accounts if you choose to go with one.
Compared to a savings account, the annual percentage yield (APY) of an MMA is higher, but comes with limitations. Banks typically require a high minimum balance to be met and/or charge monthly service fees. Accounts must also be limited to a certain number of transactions per month. However, money market accounts generally offer better interest rates and different withdrawal options than savings or checking accounts. Money market accounts (MMAs) are deposit accounts that can be open at banks or other financial institutions like credit unions.
Plus, MMAs typically have more favorable rates than a typical savings account. Then like a checking account, money market accounts often include ATM cards and check-writing abilities. You will want to double check with your bank, though, since not all money market accounts offer these perks. While they are a safe investment, make sure that you understand the terms and conditions that MMA’s entail. Money market accounts are a good investment if you can maintain a high minimum balance, limit your withdrawal of the funds, and understand that you are not protected against inflation.
Having a savings account is incredibly important to your financial health. It keeps your money safe and grows your savings according to set interest rates. Typically, you can have a savings account alongside your checking account for automatic transfers and overdraft protection.
To be sure, those perks can sometimes make it too easy to spend the money you’re supposed to be saving and growing. The main difference between a savings account and a money market account is the access you have to your funds. While you can often access a savings account at an ATM through your checking account’s debit card, the savings account itself does not have its own card. You cannot typically write checks connected to a savings account, either.
They typically come with checks or a debit card and allow a limited number of transactions each month. Traditionally, they’ve also offered higher interest rates than regular savings accounts. And money markets often have higher minimum deposit or balance requirements than savings accounts, so compare your options before picking a money market. Before opening a money market or other alternative account, scrutinize the fine print of your agreement for any restrictions that apply to the account, along with all fees that the account may incur. The answer is yes if you are looking for an insured, flexible, and high-interest yielding account from your bank while maintaining a high minimum balance.
How Money Market Accounts Work
How does a MMA account work?
A money market account is a type of savings account offered by banks and credit unions just like regular savings accounts. The difference is that they usually pay higher interest, have higher minimum balance requirements (sometimes $1000-$2500), and only allow three to six withdrawals per month.
Some offer higher rates than even the best online savings accounts, which allows you to boost your savings even more. And with FDIC insurance, you’ll always know that your growing savings will be kept safe. Just keep the legal $250,000 limit in mind as your savings continue to increase. Chase Private Client is designed for individuals who maintain a minimum daily balance of at least $250,000 in a combination of linked checking, savings, or investment accounts at Chase Bank.
They have both advantages and disadvantages compared with other types of accounts. Their advantages include higher interest rates, insurance protection, and checkwriting and debit card privileges. Banks and credit unions generally require customers to deposit a certain amount of money to open an account and to keep their account balance above a certain level. Practically speaking, a bank can only use savings account funds to make loans. With MMA’s, banks are able to deposit the money into low-risk investments on your behalf, such as CD’s or government securities.
What does MMA savings mean?
A money market account (MMA) is a type of high-yield savings account insured by the Federal Deposit Insurance Corporation. Opening an MMA might require more funds from a depositor than an ordinary savings account would, but it may include a higher interest rate on deposits that a savings account can’t match.
Frequently they also impose a cap—for example, $5,000—above which the high interest rate does not apply. In other respects, high-yield checking is like regular checking, with unlimited checks, a debit card, ATM access, and FDIC or NCUA insurance. In addition to paying higher interest rates than standard savings accounts, money market accounts offer limited checking account services.
You could also suffer from a tiered interest rate system where you’ll earn a lower rate on your money than if you deposited more cash. Money market accounts are designed for savers who typically keep large amounts of money on deposit but want to earn a better rate of return than banks pay on regular savings accounts. Money market accounts are liquid and customers can make withdrawals up to six times per month. Due to the liquidity of money market accounts, the interest rates are lower than the rates paid on illiquid accounts such as certificates of deposit. Money market accounts seem to offer the best mix of features with typically higher interest rates and more flexibility.
Decide between the two types of money market accounts if you choose to go with one. As the Motley Fool notes, you can go with a money market deposit account or money market fund. They’re liquid savings vehicles that won’t lose value; however, you may face fees for making too many transactions or letting your balance drop below a minimum. Brokerages and mutual-fund companies tend to provide money market funds, which invest in conservative investments such as certificates of deposit. They offer similar liquidity–access to cash–and stipulations as money market deposit accounts.