You can open a money market account as a safe way to grow your savings. Money market accounts offer some features of checking and savings accounts, but typically earn a higher interest rate. They also usually come with a debit card and checks, which gives you more ways to access your cash than a savings account. Online banks, traditional banks and credit unions all typically offer money market accounts.
How to compare money market accounts
To choose a money market account, first determine what you’re saving for and when you’ll need the funds. Next, research banks and credit unions to compare accounts and find the best match for your needs. You want to look for a competitive APY, annual percentage yield, or APY. Your deposit earns the full APY on your balance over the course of a year. Many money market accounts offer higher APYs than those offered by savings accounts.
You should also consider check-writing privileges, ATM access, minimum balance requirements and monthly service fees. Finally, make sure that the account is insured by the Federal Deposit Insurance Corporation.
How to open an account
You can open a money market account via an online bank or in person. You’ll need the following information on hand: your Social Security number, contact information, your initial deposit and the method you’ll use to fund your account. Be prepared to submit a form of identification upon request.
What’s the difference between a savings account and a money market account?
When you open a money market account, you’ll get checks and an ATM or debit card for withdrawals. That means you have the flexibility to write checks and use an ATM to take out your cash, just like with a checking account.
Savings accounts allow you to withdraw cash via ATM, but they don’t issue checks. However, you can make as many withdrawals or transfers as you need with a savings account, while transactions on money market accounts are typically limited to a handful per month.
Money market accounts typically have higher minimum balance requirements and monthly service fees than savings accounts do, but they offer higher interest rates as well.
What are the benefits of a money market account?
These accounts offer many of the same benefits as savings accounts, checking accounts or certificates of deposit.
Safety: Money market accounts are FDIC insured up to $250,000 per depositor, per bank and account type. Your money will be safe even if your bank or credit union fails.
Higher interest rates: A money market account earns more interest than a regular savings account.
Checks and debit card access: Money market accounts also usually come with a debit card and checks, which gives you more ways to access your cash than a savings account.
The main drawback of money market accounts is the restrictions on transactions.
The bottom line
Money market accounts can be opened at traditional banks, online banks and credit unions. It’s a low-risk savings vehicle with higher interest rates than traditional savings accounts. You’ll also get the flexibility to write checks. Note that a money market account is not the same thing as a money market fund, which is a low-risk investment vehicle.
