Why Choose a Money Market?
Published: September 6, 2022
Money market accounts are similar to savings accounts in that they are primarily designed for stashing extra money away while earning interest. However, they also come with some checking account features, including the ability to write checks. To know if this type of account is right for you, consider these benefits to opening a money market account.
1. Accessibility of funds
Money market accounts (MMA) earn interest while also providing a degree of liquidity. Most MMAs provide check-writing privileges for withdrawals, as well as the ability to transfer money between a checking or savings account. An MMA could be worth opening for consumers who want to grow their savings but still want to be able to access the funds with relative ease.
2. Potentially higher interest rates
Money market accounts traditionally pay higher interest rates than savings accounts (and much higher rates than checking accounts). The current average yield for MMAs is 0.09 percent annual percentage yield (APY), compared with 0.04 percent APY for savings, according to Bankrate’s Aug. 3, 2022, weekly survey of deposit accounts.
USSFCU Money Market Yields Top APY*
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3. Check writing
Writing checks from a money market account can be a useful feature, providing flexibility and liquidity that typically isn’t found with other types of savings products, such as savings accounts or CDs. Some money market accounts permit a maximum of six withdrawals or transfers each statement cycle, which includes checks. The six-withdrawal limit comes from a former federal regulation; the regulation has been relaxed at USSFCU, but many institutions still impose the transaction limit.
4. Safety
Safety is built into money market accounts offered by Federal Deposit Insurance Corp. (FDIC) banks and National Credit Union Administration (NCUA) credit unions. Both organizations insure money market accounts for up to $250,000 per depositor, per insured bank or credit union and per ownership category.
Bottom line
Money market accounts are an attractive option to consider if you’re seeking a savings product that earns interest, offers more withdrawal options, and is insured as long as you’re within federal insurance limits and guidelines.
However, before opting to open a new savings account, evaluate your financial goals, you may find an alternate savings vehicle is best suited to meet your individual needs. For example, if you need an account for daily expenses, a standard checking account may be a better option. Or, if you don’t need access to your money for a specified period of time, a savings certificate will likely earn a higher rate of return.
It’s also important not to confuse money market accounts with money market funds, which are offered by brokerage firms and mutual fund companies, like Fidelity and Vanguard. Money market funds generally offer higher returns than money market accounts, but they carry slightly more risk since they are not insured by the FDIC or NCUA.
* APY = Annual Percentage Yield. Rates are subject to change without notice. The minimum balance required to open a money market account is $2,000.00. You must maintain a minimum daily balance of $2,000.00 in your account each day to obtain the disclosed annual percentage yield. You will earn dividends for every day during the period that your account equals or exceeds the minimum daily balance requirement. Tier I Money Market with a balance of $2,000 will earn 0.55% APY. Tier IX Money Market with a balance of$500,000 will earn 0.95% APY. Fees may reduce earnings. Other restrictions apply. See details at ussfcu.org/moneymarket. This article is for informational purposes only. 5 reasons to get a money market account, 8 Aug. 2022, www.bankrate.com.