A money market account grows more quickly than a savings account, but not as quickly as investing in stocks. Money market accounts are like savings accounts in a lot of ways. The benefit is a safe way to put money away. The lower rate of return is not a good thing. Read on to learn more about advantages of money market account and become the subject matter expert on it.
Money saved for emergencies can be kept in a money market account. Even though money market accounts have low interest rates, they may be better than traditional bank savings accounts.
Advantages of Money Market Account
A money market account is similar to a savings account. There could also be a debit card or monthly checks. Most offer good interest rates on deposits and balances that are higher than the minimum amount needed. In this article, we will discuss about advantages of money market account in brief with examples for your better understanding.
Instant Transaction Processing
With a money market account at a local bank or credit union, you can get to your money right away. When you put money in the bank, it will start to earn interest right away. You will get settlement on the day of the transaction, except for those that happen on weekends or overnights.
How long you get this benefit depends on the institution. Financial institutions usually ask for a hold of one business day. A money market account is the best way to be sure of your money in the short term.
Federally Insured Money
Accounts in the money market that are insured by the government are safe. The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) will cover deposits up to $250,000.
Improved Money Access
You have more access to your money than in other savings options. When you buy a CD, you give the bank your money for a certain amount of time. If you took the money out early, there would be a fee, and you might even lose some of the money you put in.
Money market accounts usually only let you take money out once a month in exchange for a higher annual percentage yield. At most branches, you can get cash. You can also use a check, and with some jumbo accounts, you can use a debit card up to the limit of the account.
Safety
Money market accounts that are safe can be found at banks that have been insured by the FDIC. Your money will be safe in one of these accounts. Money market accounts and money market mutual funds are not the same thing. Unlike savings accounts, money market funds invest their money in short-term debt instruments.
MMAs Earn Interest
The money that has been put into money markets is now being used. Grows. Bankrate says that the average rate of interest on a money market account is 0.09%. It would be smart to look around. Most of the best money market rates are currently above 1% and can go as high as 1.85%.
Convenient Cash Access
It’s easy to take money out of a money market account. You shouldn’t completely change how your money is set up. You can make online transfers if you link your current checking account to the money market account at your new bank.
Money market accounts often come with debit cards and access to ATMs. But most accounts only let you take out money six times a month. Set aside money on a regular basis so you can reach your long-term or short-term goals.
A money market account is a good choice if you don’t need your money right away. A high-interest, limited-access savings account can earn more money over time than a regular savings account. As you save money for a rainy day or a down payment on a house, you can keep adding to your balance.
When used with other types of investments, money market accounts are a great way to spread out your income and lower the risk of your portfolio. Talk to your financial counsellor about what you can do to improve your situation.
Low Minimum Balance Needed
Some families don’t have money market accounts because they need at least $25,000 in them. You’ll need to put down $100,000 for a “jumbo” account. That’s just too expensive for most American families.
Because of this, many financial institutions have made this option harder to get. A bank account can be opened with as little as one dollar. On average, vendors charge $250. Because of this, some families can get more out of their money.
Safe Fund Haven
In the United States, a money market account can hold up to $250,000. Even if the bank fails, your money is safe. With this plan, you can build your capital without putting yourself at risk of market changes.
Because this account is hard to get into, the interest rate is higher. This plan can help you keep more of your money in your pocket in 2020, when inflation is likely to be higher than the returns on money market accounts.
Flexibility
If you already have other accounts at the same bank, it’s easy to put money into a money market account or move money between linked accounts. It’s easy to pay bills, make big purchases, and cover unexpected costs when you can write checks and link them to a debit or ATM card. The money in a money market account can be used for both short-term and long-term goals.
Some Accounts Yield High Returns
Money market accounts don’t always have a low annual percentage yield. On a $5,000 deposit, this option from BMO Harris gives a return of 1.95 percent per year. On deposits of $25,000, UFB Direct gives an annual percentage yield of 1.9%. 1.75 percent is a rate that you can find from other providers.
NerdWallet gives the CIT Bank Money Market Account high marks for 2020. The rate of return on a $100 opening deposit is 1.85% per year. Even if you don’t invest in one of these areas, most local banks will add 0.003 percentage points or more to your savings account if you switch it to a money market account. Investing in real estate is a good choice when you have a money market account.
If you are a property manager or a landlord who owns and runs their own rental properties, you can link your money market account to those properties. Which means you can get to your money and still be protected by the Federal Deposit Insurance Corporation or the National Credit Union Administration. Some investors can keep up with inflation while limiting their exposure to risk because of this perk.
Brokerage Account Access
Money market accounts have some of the best interest rates out there. A better return on your savings is one with a higher annual percentage yield. With a money market account, you can save money and get a high interest rate without giving up access to any of it. When you link two brokerage accounts, you can access both of their money market accounts.
Some banks and other financial institutions offer the service of putting together brokerage and money market accounts. You need to save money over time if you want to invest in stocks, bonds, and treasuries. Even though some buys count toward your limit, they may still make you more money. If you have a money market account, please look over the terms and conditions for this feature. Talk to a financial planner about how to put this money to work for you in the best way.
Frequently Asked Questions
Which is Better, CD or Money Market Account?
Bank products like MMAs and CDs with low interest rates. MMA makes it easier to get cash and easier to take it out without having to pay fees. They are better than certificates of deposit because they earn more money. CDs are a type of long-term investment that pay more interest if the money isn’t taken out.
What is the Money Market Account Withdrawal Timeframe?
Depending on the time of day and the bank that is handling the withdrawal, it can take anywhere from three to four business days for the money to be in your account.
Can you Transfer Money out of a Money Market Account?
Since money market accounts are deposits, Regulation D of the Federal Reserve limits withdrawals and deposits to six per month. Withdrawals made at an ATM or bank teller do not count toward the limit of six transactions.
Conclusion
Read benefits of a money market account to go beyond the basics to gain a comprehensive understanding. MMAs are just like any other type of financial instrument in that they have both pros and cons. Depending on what you want to do, a money market account might help you get there. A checking account is the best way to pay for things you buy often. If you can let your money sit for a while, a certificate of deposit may be a better way to invest. To learn more, take a look at these advantages of money market account.