What is a money market savings account?
A money market savings account is a safe, highly liquid investment for your money. Also known as a money market account (MMA) or money market deposit account, this kind of account is ideal for conservative or balanced savers who want to get the better interest rates than savings rates for their cash.
A money market savings account, offered by banks and credit unions, is a type of savings account with some of the same features as a checking account. You may add money to your money market account at any time--something you can't do with a certificate of deposit.
Additionally, you may withdraw money from or write checks against your money market savings account. Oftentimes there are limitations to the number of transactions you can perform in a month--for instance, perhaps you can make six transactions per month in all, three of which may be in the form of written checks.
Money market savings accounts usually have a minimum balance requirement. But because money market accounts aren't really the place for day-to-day expense money anyway, this minimum balance will curb your temptation to withdraw too much of your funds and use them frivolously.
Money market savings account key features and benefits
As with savings accounts, balances in a money market savings account earn interest. With money market savings accounts, the interest rates tend to be higher on average than savings rates. Typically, interest is compounded daily and paid monthly, though you can check on the terms with the particular bank you choose. Sometimes, depending upon the financial institution, money market accounts with balances of $100,000 or higher (also known as "jumbo" deposits) earn higher money market rates.
Money market savings accounts, like other deposit accounts, are federally insured--by the Federal Deposit Insurance Corporation if the account is at a member bank or the National Credit Union Administration if it's at a member credit union. This is a great reassuring benefit because if the banking institution fails, you don't lose your money up to predetermined limits.
When a money market account is best
A money market account is ideal for large lump sums in savings that can meet many banks' minimum balance requirements and that you don't need to access every day. Consider money market accounts for funds that you:
- have earmarked for upcoming investments (or have received from the sale of recent investments)
- are saving up for a home downpayment
- tap for occasional home repairs or renovation
- maintain as the conservative cash portion of your retirement portfolio
- keep around for emergency expenses
With so many uses for money market savings accounts, these lesser-known variants of traditional savings accounts deserve a look. Compare money market account rates to see how much you may be able to yield from your cash savings.