Are you ready to open a money market account but don’t know where to start? Here’s how to choose, apply for and open an MMA easily so you can focus on what’s most important: building your savings.
What Is a Money Market Account?
Money market accounts (MMAs) are a type of savings account that makes it easier to access cash when you need it. MMAs combine savings and checking account features, allowing you to earn interest and access cash with check-writing and debit card privileges.
Unlike checking accounts, you often can’t make more than six monthly withdrawals from a money market account, though many banks and credit unions stopped enforcing this rule during the Covid-19 pandemic.
Money market account annual percentage yields (APYs) are higher than checking accounts but similar to savings accounts. The best high-yield savings accounts may offer higher rates than the best money market accounts, but it’s not as easy to access cash.
How To Open a Money Market Account
Money market accounts are available at most banks and credit unions. Here’s how to open one.
1. Shop around
Money market rates and features vary by financial institution, so weighing your options is crucial. Here’s what to look for when comparing money market accounts.
- Annual percentage yield (APY): APY is the total interest you earn on your savings over the course of a year, expressed as a percentage rate. Banks may offer different APYs depending on the size of your balance, with higher balances generally earning higher APYs.
- Fees: Limiting money market account fees is important, as they can eat into your earnings. Watch out for monthly maintenance fees, ATM withdrawal fees and fees for falling below a minimum balance requirement.
- FDIC insurance: Deposits you make at an FDIC member bank are insured up to $250,000 per depositor per account category. That means you won’t lose your savings if the bank goes under. For credit unions, the equivalent of FDIC coverage is National Credit Union Association (NCUA) coverage.
2. Gather the necessary documents
Whether you’re applying for a money market account online or in person, the bank will need to collect basic information to determine your eligibility. It will ask for a valid government ID, such as your driver’s license or passport, as well as your address and Social Security number.
If you’ve had banking issues in the past, it’s a good idea to order a copy of your ChexSystems report. The report includes a detailed history of your banking activity, including overdrafts and unpaid balances. This helps ensure there are no delays in processing your money market account application.
3. Make an opening deposit
Some banks require you to deposit money when you open a money market account, while others let you open the account and deposit money later. Minimum deposit requirements vary widely, with some banks not requiring any upfront deposit and others requiring $1,000 or more. If you can swing a larger deposit, you may receive a higher APY.
Where To Open a Money Market Account
Banks
Many traditional brick-and-mortar banks offer money market accounts, making these MMAs a great option if you want access to branches and ATMs. Citizens Bank has its with no minimum balance requirements. There’s a monthly maintenance fee on balances less than $2,500, but the charge is waived if you have a or ..
Credit unions
Credit unions are another option to consider for money market accounts. Connexus Credit Union offers its with no monthly maintenance fee, but it has a minimum deposit requirement. It’s also worth checking out local credit unions, especially if you prefer in-person banking services.
Online banks
Online banks tend to offer higher APYs than traditional banks and credit unions. The money market account at Ally Bank currently offers a generous APY on all balance tiers and charges no monthly service fees. Remember that APYs are variable, which means they could go up or down based on market conditions.
How Much Money Should You Put in a Money Market Account?
How much money to save in a money market account depends on several factors. If the money market account has a balance requirement, you should save at least the minimum to avoid fees.
If you’re using a money market account to save for emergencies, most experts recommend having six to 12 months of living expenses saved up. If you don’t have a large amount to deposit at once, make your initial deposit, then set up automatic transfers into the money market account to grow your savings.
What Is a Good Return on a Money Market Account?
A good return on a money market account is any rate above the national average. According to the latest data from the FDIC, the national average money market rate is 0.29%. Many online banks offer rates that are more than 10 times higher than this average.
Bottom Line
If you want to earn interest while still being able to access cash on the go, a money market account may be the right fit. Once you’ve found an account that meets your needs, opening an MMA is easy and can be done online.
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