Shopping for money market accounts - with a little help from the FDIC
July 19, 2011
Do you ever feel that the government is not on your side? Then you should check out the FDIC web site. It can make you feel the government is squarely in your corner.
The Federal Deposit Insurance Corporation (FDIC) does more than insure bank deposits, although that is certainly its most important function. The FDIC is also a great source of information.
For example, a special edition of the FDIC Consumer News this past spring focused on how to shop for bank products. It's worth reviewing the FDIC's advice from the perspective of customers - or potential customers - of money market accounts. The following are some highlights of the FDIC's advice, along with some detailed commentary tailored to money market accounts.
Review your existing accounts
The FDIC recommends periodically reviewing your existing accounts to make sure they still meet your needs. In terms of money market accounts, this can mean making sure you are aware of the current rate on the account, and how competitive that is with money market rates generally. It can also mean making sure your needs haven't changed - for example, are you starting to need withdrawals more frequently than money market accounts allow?
You can look at this review of how existing accounts meet your needs from the other side of the coin - do you have deposits in other types of accounts that would be better off in a money market account? For example, money market rates generally are higher than savings account rates, so consider substituting a money market account for a savings account.
If you have a CD about to mature, you may want to switch it to a money market account, rather than rolling over into another CD at today's low rates. Finally, if you've accumulated more than enough money in your checking account to qualify for free checking, consider whether the excess would be better off in a money market account earning interest.
Shop and compare
If you do decide to look for a new account, the FDIC advices that you comparison shop. You can look at individual bank advertisements or web sites, or you can check out a comprehensive list of money market rates online.
The FDIC makes another important point about shopping around. If you find a better rate at another bank, contact your current bank to see if they are willing to match it, or at least improve the rate you are currently getting. The bigger your account, the greater your chances that this might work.
Dig deeper
Finally, the FDIC recommends that you dig deeper into researching a new bank and its products before you make a switch.
For one thing, check out all the account terms. Money market rates are subject to change at any time, but is the rate you are signing up for the current rate for all customers, or just a teaser rate which is scheduled to drop after a limited period of time? Can you live with all of the applicable account restrictions? Does the bank's method of reporting (statements, online access, etc.) meet your needs?
Finally, the FDIC reminds you to make sure the institution is FDIC-insured. Again, that insurance is ultimately the best thing about the FDIC, but their advice is pretty helpful too.
