Finding the best money market account
by Robert Beaupre | Money Rates Columnist
By most measures, an FDIC-insured money market account is very similar to an ordinary savings account: It’s a savings vehicle designed to build wealth in virtually the safest manner possible. While money market account yields are unlikely to compete with riskier options, these accounts can offer a meaningful return, particularly if you commit to finding an account that offers competitive terms. When stock markets are particularly volatile, these types of accounts become even more attractive.
In rates updated Nov. 23, 2015, the Federal Deposit Insurance Corp. placed the national average annual percentage yield for money market accounts at 0.08%.
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Type: MMA Minimum to earn APY $0
Rates as of 11/25/2015 Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.
Minimum to earn APY $0
Rates as of 11/25/2015
Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.
There are several factors to consider when shopping for the best high yield online money market accounts, including:
- Interest rate, or annual percentage yield (APY)
- Minimum deposits
- Accessibility to funds
- Perks and rewards
- Purpose of the account, such as for retirement or emergency savings or down payments for a house or car
By doing some homework before you open an account, you can maximize the chances that you’ll find a vehicle that suits your needs for years to come. One important note: Money market accounts are not the same thing as "money market funds" that do come with risks that FDIC-insured money market accounts do not.
Here are five essential tips to guide you as you evaluate the best money market account:
1. Check the rate – twice
Assuming you’d like your savings to earn some interest each month, the rate is a main factor – if not the main factor. But because money market rates change over time in response to economic shifts and changes at banks, it’s critical to not simply glance at the rate you see on the bank’s window or website and assume that that’s all there is to know.
Many banks offer “teaser” rates that may be well above the level of interest the bank ordinarily offers on the account. The goal here is to get customers to sign up based on that splashy introductory rate, but if you’re looking for an account that will excel over the long haul, the ongoing rate – the yield that you’ll get once the teaser rate expires – is much more important.
The ongoing rate may be buried in the account’s fine print, but don’t let it escape you. If you find that the ongoing rate is well below the teaser rate – and especially if it’s below the ongoing rates that other banks offer – you may want to look elsewhere.
Additionally, MoneyRates runs a regular America’s Best Rates feature that highlights savings and money market accounts that consistently offer the highest rates in their category. If a strong ongoing yield is a top priority for you – and it should be – this may be a good place to start your search.
2. Note the minimums
One way money market accounts differ from savings accounts at many banks is in the minimum opening deposit and the monthly minimum balance. Because many banks offer better rates for high interest money market accounts than they do on their savings accounts, they in turn demand higher minimums with the money market account.
A quick glance at the required minimums for a given account can inform you whether it’s a good choice for your savings. If you have $100,000 to deposit, you’re likely to find you’re well above the required minimums. But if you only have $1,000, you may be below the minimum for some accounts.
In those cases, it’s wisest to look elsewhere for a money market account or instead consider that bank’s savings account (assuming it has friendlier minimums). If you start an account without the funds to meet that monthly minimum balance, you’re likely to forfeit your monthly interest payments and even face monthly service charges, which can quickly erode (or even negate) the savings you’re trying to grow.
Also, don’t assume that the opening minimum deposit and monthly minimum balance are ever the same. Some banks offer friendly opening minimums and not-so-friendly monthly minimums. Why do they do this? You’ll know when you have to fork over that first monthly service fee.
3. Ensure sufficient access
While a money market account is a highly liquid type of vehicle – you can access your funds at virtually any time – you shouldn’t assume that it can take the place of a conventional checking account.
As mandated by the Federal Reserve’s Regulation D, money market accounts (and all other accounts classified as “savings deposits”) may only permit six or fewer transactions per month. That includes checks and debit-card transactions, which means these accounts aren’t ideal for funding regular purchases. Still, Regulation D permits that you can access your money via branch or ATM withdrawals as often as you’d like.
4. Pick your perks
As mentioned above, some money market accounts include check-writing and debit-card privileges – something ordinary savings accounts do not. But it’s important to verify that any account you’re considering has these perks – if you wish to have them – because they aren’t universal.
Additionally, some banks also offer reimbursements of ATM fees, as well as online tools to assist you in managing your account. If you’re an online-banking aficionado, it couldn’t hurt to take a tour of a prospective bank’s website – or perhaps even read some reviews of it – before opening an account there.
5. Consider if you need a retirement money market account
If you want to have low-risk investments for your retirement, determine if a retirement money market account is right for you. Not only are your deposits safe with FDIC insurance, this money market account's interest rate may potentially increase along with your balance, earning you more money over time.
A final word on money market accounts
There is one last thing you should always verify before opening any type of bank account, but thankfully this step is usually easy. Before you hand over your money, make sure that your deposits will be backed by insurance from the FDIC. FDIC insurance protects funds up to $250,000 per depositor, per institution in the event of a bank failure, and banks that carry it are required to display the FDIC emblem prominently in their branches or on their website.
Like most types of insurance, it’s something you hope to never use, but that you’ll be very glad to have if things turn for the worse. If you are looking to deposit more than $250,000 in a non-joint account -- FDIC insurance can protect joint accounts to a higher level since there are multiple account owners -- it’s wise to use multiple FDIC-insured institutions to ensure maximum coverage on your funds.
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