How Safe Are Money Market Accounts? Are They a Good Place to Stash Your Cash?
If you’re looking for somewhere to park your cash, a money market account (MMA), an interest-bearing account available at many banks and credit unions, may be a good option. To help you decide whether this type of account suits your unique situation, we’ll explore the ins and outs of MMAs below.
What Is a Money Market Account (MMA)?
A money market account usually earns a higher interest rate than a traditional savings account. It is a blend between a checking account and a savings account.
You may receive a debit card or enjoy check-writing privileges depending on your specific MMA. In most cases, MMAs limit the amount of withdrawals you can make per month, similar to most savings accounts.
Where to Find the Best Money Market Accounts
Compiling the list below, we’ve made finding the bank with the best money market account to meet your goals easy. Explore our listing and find the best money market account for you.
How Does It Work?
Once you open an MMA, you can watch your savings grow at a higher rate than it would with a traditional savings account. You can also withdraw funds through a debit card, check, ATM, electronic transfer, or in-person banking.
It can be beneficial if you need a place for your emergency fund or have a short-term savings goal because your cash will be easily accessible, unlike a CD or a retirement account.
How Does MMA Differ From a Money Market Fund?
Even though an MMA and money market fund sound the same, there are quite a few noteworthy differences between the two products. While an MMA is designed for an emergency fund or short-term financial goals, a money market fund is for investors looking for a place to store their cash.
Also, an MMA is insured by the Federal Deposit Insurance (FDIC) or National Credit Union Administration (NCUA). In contrast, a money market fund is not backed by insurance, so you risk losing your principal.
How Safe Are They?
You can open an MMA with peace of mind, as it will be protected by insurance if a bank or credit union fails.
The FDIC insures up to $250,000 per customer for any MMA deposits made at a bank. If you open an MMA at a credit union, the NCUA will also insure up to $250,000 per depositor.
If you choose a reputable bank or credit union, you can keep your money safe and sound.
Misconceptions About MMAs
There are several common misconceptions about MMAs that you should be aware of, including:
MMAs Shield Against Inflation
There’s no guarantee that an MMA will help you hedge against inflation. Its purpose is to grow your savings faster than you’d be able to with a traditional checking or savings account.
All I Need Is One MMA Account
While an MMA can be a wise place to park your emergency fund or save for an upcoming expense, don’t put all your eggs in one basket. Diversifying your money through other products like bonds, annuities, and life insurance policies is a good idea.
MMAs Have High Minimum Deposit Requirements
Every bank and credit union imposes minimum deposit requirements. Fortunately, some financial institutions don’t have them, while others allow you to open an account with as little as $100.
A Glimpse at Some MMAs
More banks are offering money market accounts. Here are a few to explore.
CIT Bank
With the CIT Bank MMA, you can lock in a competitive interest rate plus no monthly fees, including minimum balance and maintenance fees. You may open it quickly online if you have at least $100.
UFB Direct
The UFB Direct MMA offers a high APY, regardless of your balance. Also, you don’t have to worry about minimum balance requirements and can enjoy access to security tools like fraud protection and automatic log-outs.
Discover® Bank
If you have a balance of more than $100,000, Discover Bank’s MMA will reward you with an attractive APY. In addition, there are no fees, such as monthly maintenance fees, minimum balance fees, excess withdrawal fees, and insufficient funds fees.
Vio Bank
Vio Bank offers an attractive MMA option to customers with lower opening balances. You can open an account with only $100. The interest rate on the Vio Bank MMA is highly competitive and much higher than the national average.
Zynlo Bank
The money market account at Zynlo Bank pays an interest rate that is over 10 times higher than the national average. You get unlimited transactions, unlike most savings accounts where you can only withdraw six times during the month without incurring a penalty. There are no penalties, fees, or account minimums associated with Zynlo Bank’s MMA.
Are MMAs Worth It?
Whether an MMA is worth it depends on your particular goals and preferences. It may be a good fit if you’d like to maximize the interest you earn on your savings. This is particularly true if you’re seeking an account for your emergency fund or trying to grow your savings but prefer easy access to your cash.
Money Market Pros and Cons
Before you go ahead and open an MMA, keep these benefits and drawbacks in mind.
Pros
- Competitive APYs: MMAs are known for high annual percentage yields (APYs). Typically, you can earn much more in interest than you’d be able to with a traditional savings account.
- Easily accessible cash: MMAs usually come with checking account features, like debit cards and physical checks. You’ll be able to access your money with ease.
- Insured deposits: Depending on your chosen financial institution, your MMA will be insured by the FDIC or NCUA for up to $250,000. This means you won’t lose your hard-earned money, even if the bank or credit union fails.
Cons
- Minimum deposit requirements: To land the highest APY, you may be required to deposit a significant amount of cash. This may be an issue if you don’t have thousands of dollars at your disposal.
- Withdrawal restrictions: Some banks and credit unions limit how often and how much you can withdraw from your MMA. You may want to pull money out more than you’re allowed to, especially if you have a lot of unexpected expenses in one month.
- Monthly fees: It’s not uncommon for MMA accounts to charge monthly fees. These may be service fees, overdraft fees, and excessive transaction fees. Familiarize yourself with all fees, or you may face surprise charges.
Frequently Asked Questions (FAQs)
While an MMA usually has checking account features like debit cards and checks, its interest rates tend to be much higher than a checking account. It’s created to help you save money, so you shouldn’t use it like a traditional checking account.
Both MMAs and savings accounts are great places to save money. However, MMAs differ from savings accounts because they typically have higher minimum balance requirements and checking account features, such as check-writing privileges.
