What is a money market account?
Have you ever heard of this item, money market account? Do you know what it is and how does this kind of account work? In fact, money market account is a quite good way to manage your money.
Money market account (MMA) is also referred to money market deposit account (MMDA). You can open an MMA at a bank or credit union, online or offline. The interest rate of MMA is based on current interest rated in the money markets, which is often higher than regular savings accounts. However, there are some restrictions which make MMA less flexible than a regular checking account.
Attention here, don’t be confused with money market funds! Money market funds are mutual funds that invest in money market securities.
How does MMA work?
An MMA is quite similar with a savings account. First of all, you have to apply for an MMA. Banks and credit unions may require a certain amount of money to successfully open the account. After that, they also require you to keep account balance above a certain level. If you fail to do so, a monthly fee will be imposed.
Federal insurance protection is provided for MMA, while money market mutual funds usually don’t.
Pros & Cons
The biggest advantage of an MMA is the APY, annual percentage yields. That is to say, you can earn more from an MMA than putting money into a common savings account for its higher interest rates. MMA is also insured by FDIC. Also, if you have an MMA, you have checkwriting and debit card privileges.
However, there are some limitations of an MMA. First, banks and credit unions require you a certain amount of money to open and run the account. The transaction of an MMA is limited as well. It’s not as flexible as a savings account.
Open Online Money Market Account
You always have to take risks while investing, as long as the rewards worth the risks. For money market accounts, the mostappealling point is its high APY. Though there are risks, they cna be controlled by investing in other “safer” investments, such as certificates of deposit or U.S. Treasury bills. by doing so, the risks of MMA is greatly reduced.
So it’s worth openning an MMA, not only to earn the high interests, but also diversify your portofolio.
Among all savings options, CIT Bank’s MMA comes out on top. The APY is 1%, which is the highest in the market and you’ll earn that rate no matter what your banlance. This is notable because other banks often demand $2,500 or more to earn high rates. CIT Bank also doesn’t charge monthly fees, you only need to fund $100 to open an account.