When it comes to everyday banking, you’re probably familiar with traditional checking and savings accounts. But, if you’re looking for a smarter way to save, and you don’t need access to the funds daily, then a money market account could be a good option.
Money market accounts typically earn more interest than traditional savings accounts, while still providing access to funds when you need them. In exchange for these benefits, there are some account restrictions. We’ll explain how to choose a money market account for a safe, effective way to reach your financial goals.
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Explore different types of money market accounts.
A money market account is a type of savings account that allows you to save with a better interest rate. These accounts allow for easy access to funds, but they’re not designed to replace checking accounts. In exchange for better interest rates, some money market accounts have monthly transaction limits and higher balance requirements to keep accountholders from using this account like a checking account.
So, if you’re looking to invest extra cash for an emergency fund or you’re saving for a short-term goal, a money market account can be a great tool.
Here are key features to compare when looking for a money market account:
- Balance requirements: To open a money market account, most banks require a higher minimum deposit than a regular savings account—and many will require you to maintain that balance to avoid monthly fees—so be sure the account requirements work for you.
- Interest rate structure: Not only do money market accounts typically offer better rates, but many financial institutions offer tiered rates, where your interest rate increases as you meet and maintain certain balance thresholds. Compare accounts to see if a tiered structure can maximize your earnings.
- Transaction limits & fees: Find out if there are restrictions on certain types of transactions, or if there is a limit on the number of account transfers and withdrawals each month. These constraints can trigger fees and penalties, so you’ll want to know.
- Access to funds: Many banks, including BrioDirect, make it easy for you to access funds through online banking. Some institutions even provide debit cards, ATM cards, or checks—understand the features available so you can access funds when you need them.
Find an insured money market account.
At an insured bank, your deposits and earnings from money market accounts are protected by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures certain types of deposit accounts, including checking, savings accounts, certificates of deposit (CDs) and money market accounts. For credit unions, the National Credit Union Administration (NCUA) provides the same coverage.
Deposit insurance is offered free of charge from financial institutions that are FDIC or NCUA insured. To understand if all your deposit balances are covered, speak with an account representative at your bank. If your balances exceed the coverage limits, you may want to divide your deposits between multiple institutions to make sure your balances are fully covered.
What can a money market account earn?
Money market accounts generally pay higher interest rates than traditional savings accounts. Interest rates are variable and fluctuate depending on the economic environment.
Calculate your money market account earnings.
Money market rates are calculated as an annual percentage yield, commonly known as APY. This is the percentage of interest paid on the account annually—but it’s important to note that most banks pay out interest earnings each month, and rates are subject to change. Also keep in mind that some banks calculate interest differently, and fees can reduce earnings.
Ready to jump-start savings with a no monthly maintenance fee money market account? BrioDirect offers high-interest rate money market accounts to give your savings an extra boost. With free online and mobile banking, you can easily transfer funds surcharge-free—and because your account is powered by Sterling National Bank, you also have the safety and security of FDIC insurance. Learn more about money market accounts from BrioDirect.