When it comes to different kinds of savings accounts, money markets are a great option for higher returns. But how do you know if you’re choosing the best money market account for your needs?
Read below for expert tips, and be prepared to open an account that will ensure you reach your savings goals. The sooner you open a money market account, the sooner your savings can begin to really pay off.
First Things First: What Is a Money Market Account?
To choose the best account for your needs, you should have a good understanding of what a money market account is, how it works, and how it differs from other accounts.
Money market accounts are a type of savings account. However, depending on the type of money market account and the amount you have to save with it, you may have the potential to earn a higher annual percentage yield (APY) than with a traditional savings account. Plus, since money market accounts are insured by the FDIC or NCUA, opening a money market account can be seen as a safe investment.
Another benefit is that money market accounts are also flexible. These accounts often come with the ability to write a few checks a month or to make debit card transactions. A similarity to checking accounts is that you typically have unlimited transactions with a money market account. And you can access the funds wherever and whenever you need.
Note that a money market account is not the same as a money market mutual fund. The latter is for shorter-term investments and is not insured.
Choose the Best Money Market Account by Defining Your Goals, Needs, and Preferences
If you’re looking for a better way to save than a traditional savings account, you probably have a particular goal for your money, such as saving for education, a vacation, a new house, or another type of major expense. Keep this goal in mind while looking at the terms of different money market accounts, as it can help you choose the right account for your needs and timeframe.
An important factor to consider is the rates for the different account options. While all money market accounts have higher interest rates than traditional savings, no two money market accounts are created equal.
In addition to your monetary goals, you should to consider what features you’d prefer. Would you like to be able to write checks or make debit card transactions? Then choose a money market account that guarantees those benefits.
Money market accounts typically have minimum opening deposit and minimum balance requirements. They may also have service charges or other fees. These will vary by account. In general, money market accounts have a higher minimum opening deposit than traditional savings accounts, but credit unions often have lower minimum balance requirements than banks. They are, after all, designed to provide a higher return on investment. So, starting out with more money in the account, alongside that higher rate, means better results.
Shop Around for the Best Money Market Account
Once you know what you want, it’s time to start comparing different accounts. The best money market account for you will offer a high interest rate, little to no monthly fees, and a minimum balance that fits your budget.
There are numerous websites where you can look at different financial institutions’ money market rates and requirements and compare them side by side. These websites may also have pros and cons or other helpful information about each money market account. If you prefer to do the research on your own, visit their websites or call to speak with their team members to get the details. As you weigh your options and compare rates, keep in mind that rates fluctuate with the current market. So they won’t stay the same throughout the life of the account.
When you choose the best money market account, you’re also choosing to save with a specific financial institution. So factor that into your decision as well. Consider the quality of the customer service and the other benefits they offer their account holders. Look at banks and credit unions.
If you decide to open an account with a credit union, look at those in your area. Usually, where you live, work, or go to school is the only requirement to become a member. If you’re in upstate New York, for instance, shop for the best money market accounts at a trusted financial institution such as Mid-Hudson Valley Federal Credit Union.
Will Your Money Market Account Be Kept Safe?
When you open a money market account, your balance is secure. It’s rare for a money market account to lose money, and it typically only happens if the fees become higher than your earnings.
As we mentioned above, money market accounts are also insured, so if your financial institution fails, you are guaranteed the money in your account. Banks are insured by the FDIC. If you open a money market account with a credit union, it would also be insured federally. The difference is that credit unions are insured by the NCUA (National Credit Union Administration). In both cases, money market accounts are insured up to $250,000 per account.
Once You Find the Best Money Market Account, Then What?
Open your money market account sooner rather than later so you can really start saving. Apply to open the account either online or in person. When you apply, you will need to provide specific information and documentation. This typically includes your Social Security number, contact information, and some form of government ID, such as a driver’s license or a passport. If you’re opening a joint account, both parties will have to provide that information.
If it’s necessary, make sure you have proof that you have enough to make the required minimum opening deposit. Typically, this is done by depositing cash or a check, with an ACH, or by sending a wire transfer.
Once you’ve opened your account and made your first deposit, congratulate yourself. You’re already closer to achieving your financial goals.
