Best Money Market Accounts of 2020

What is a money market account?

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).

Top Money Market Rates – Best Money Market Accounts

  • 529 plan. A tax-advantaged savings or investment account earmarked for school tuition, mandatory fees and other education expenses.
  • APY. The annual percentage yield, which is an expected rate of return for 365 days, including the benefit of compounded interest.
  • Certificate of deposit. A deposit account with a term or maturity. A CD is also called a time deposit or time deposit account.
  • Checking account. A deposit account that allows unlimited withdrawals by writing a check or using a debit card.
  • Emergency savings. Sums set aside to be used not for daily living expenses, but only in an extraordinary situation, such as a temporary disability, job loss or natural disaster.
  • Individual retirement account, or IRA. A tax-advantaged savings or investment account for retirement planning.
  • Minimum balance. A sum that a depositor is required to maintain in an account on a daily or average monthly basis.
  • Money market account. A deposit account that pays interest and limits some types of transfers and withdrawals to six per month.
  • Money market fund. A type of mutual fund that invests mainly in cash equivalents.

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