Money market accounts are similar to savings accounts – except they tend to pay higher interest rates.
Most people new to banking generally open a checking and savings account when starting out. But banks have several savings vehicles that can earn higher interest than a basic savings and checking account, like money market accounts.
Money market accounts are like a hybrid between a checking and savings accounts that combine some of the best of both features. With money market accounts you earn high interest on your deposits, enjoy easy access to your money, and have the ability to write checks.
In the past year money market accounts have posted some very significant gains. When the Federal Reserve raises rates some banks and credit unions nudge up the rates they pay on savings and money market accounts.
Here are the best money market rates available at online banks:
Best Money Market Rates
Quontic Bank Money Market Account — 3.00% APY
Quontic Bank offers one of the best money market account rates that only requires a $100 opening deposit. Quontic Bank does not charge a monthly fee and interest is compounded daily and credited to your account every month. Customers receive an ATM card and access more than 90,000 surcharge-free U.S. ATMs. Quontic has an A+ rating with the Better Business Bureau.
Minimum opening deposit: $100
Interest rate: 3.00 percent (19x the national average)
Monthly fee: None
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UFB Money Market Account — 3.83% APY
UFB Direct is a division of Axos Bank, offering branchless banking to customers that desire exceptional high-interest rates on savings and money accounts. Accounts at UFB Direct are FDIC insured to the maximum allowable limits ($250,000) per depositor.
Minimum opening balance: $100
Interest rate: 3.83 percent (17x the national average)
Monthly fee: None
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CIT Bank Money Market Account – 1.55% APY
CIT Bank’s Money Market account earns 1.55% APY. With no balance requirements, customers earn this rate no matter how much is deposited each month. Reach your savings goals with a CIT Bank High-Yield Money Market account.
Minimum opening balance: $100
Interest rate: 1.55%
Monthly fee: None
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Who should get a money market account?
Anyone looking for a higher interest and a safe place to store cash may benefit from a money market account. Here are a few more benefits:
- Money markets offer easy liquidity if you need your cash unlike CDs where you pay an early withdrawal penalty unless you have a No-penalty CD.
- You want the ability to write checks.
- You want immediate access to funds in case of emergencies.
- You want a good spot to keep your emergency fund.
Is a money market account safe?
Bank money market accounts are FDIC-insured up to $250,000. The National Credit Union Administration (NCUA) fund insures money market accounts up to $250,000.
What to watch out for with Money Market Accounts
Because money market accounts are considered a savings vehicle, they are limited to six outgoing transactions per statement cycle like savings accounts. This is per federal law known as Regulation D. Under Reg D the bank or credit union can charge you a fee, close your account or convert it into a checking account if you go over the limit.
These types of transactions fall under Reg D:
- Online transfers from those accounts to a different account either at the same institution or a different one
- Transfers processed over the phone
- Automatic or preauthorized transfers, such as bill payments or any other recurring transfers
- Overdraft transfers from your savings account to your checking account
- Transfers made by check or debit card
There is a way to get around Reg D six withdrawal limits:
- Withdrawals or transfers made at ATMs
- Transactions made in person at a bank
- Withdrawals made by telephone if the check is mailed to the depositor
Final thoughts
The average rate on savings accounts currently sits at a meager 0.17%, according to the FDIC Moving your money to a high rate savings account or money market account is a good financial move.
With a savings rate, or annual percentage yield of 0.17%, a $10,000 deposit would only earn around $8 after one year. Start earning more interest for your money today.
If you have a negative banking history consider banks that don’t use ChexSystems to open a savings, money market or checking account.
