Best Money Market Accounts of 2021

Best Money Market Accounts. The money market account is essentially a higher-yielding, slightly more flexible savings account.

Banks utilize MMA balances not for loans to other bank customers (as is generally the case with savings accounts). Instead they are typically channeled into short-term investments. This reduces the bank’s dependence on traditional lending and widens its investment base.

Those short-term investments aren’t junk bonds or penny stocks. Most bank investments drawn from money market account balances are very safe. Government bonds, for example, feature prominently in bank portfolios using these funds, as do certificates of deposit (CDs) and other limited-term but reliable securities.

This short-term investing provides another potential advantage for MMAs — the possibility to capitalize on rate increases. There is much turnover in a short-term portfolio, so when rates start to climb, the instruments the bank is investing in should pay out better too. That rising tide raises the MMA boat, and account holders reap the benefits of a higher return on their money.

The interest rate is not the only draw of MMAs for consumers. This type of account is usually more flexible than a savings account in terms of access to funds. Checks and debit cards are frequently available to account holders, although they must conform with certain restrictions mandated by law (for more, see “The limits of a money market account” section below).