Money Market Savings Account
If you’re planning to move your money from a regular savings account to a money market savings account, you will benefit a lot from knowing their differences.
In some ways, a money market account is no different from a basic savings account. Like the regular savings account, the money market account can be availed from banks and credit unions. The money deposited into a money market account earns interest in the same way as a regular savings account does.
Money market accounts allow withdrawal of money any time—but with limitations. You can withdraw only three to six times a month. Banks usually charge about $5 to 10 for every withdrawal beyond the maximum the bank sets every month.
However, the money market account requires a higher minimum balance and has higher interest rate. If you fail to maintain your minimum balance, the bank will charge you around $5.
Before putting money into a money market account, you must ensure you know the latest interest rate and how it fares against your savings account interest rate.
Funds from the money market account is as liquid as that of regular savings, and both accounts are designed for people who want easier access to their money.
In banks, the money in money market accounts has insurance from the Federal Deposit Insurance Corporation (FDIC). This assures money market account holders that their money is still safe even if their banks close down. In credit unions, the money is insured by the federal agency National Credit Union Administration (NCUA).
In money market accounts, interest rates vary from bank to another bank. Also, the higher the amount there is in the account, the higher the interest rate is.
Banks issue a small book called the register to new account holders of money market savings accounts. This is where you indicate your initial balance or the amount of your first deposit, as well as your deposits and withdrawals in the future. The register serves as your record of all your transactions and the amount of money in your account.
You will also receive a monthly statement of your account either through mail. Like the register, the statement contains all your transactions, extra fees, and the interest you earned. It’s recommended that you check the entries of your statement against that of your register. This process is also known as “reconciling,” which means you make sure that all the entries of the two documents correspond to each other.
More importantly, you must make sure to deposit money regularly into your money market savings account and wait while your money is making more and more money.
Security is one reason why money market accounts attract some people. The funds in this type of account are invested only in financially stable securities. Moreover, all the investments mature at an average of 120 days or less. As a result, the funds go into various government issues such as state, municipal, and federal debt securities. The yield is higher than a regular savings account, though lower than the average market.
When it comes to earning interests, the money market account performs slightly better than the regular savings account. Money market savings accounts yield an income of around 1 to 6 percent, while basic savings accounts give about 0.1 to 3 percent.
