There are several options for gaining a little extra while you keep your money safe. You’ve likely heard of savings accounts and CDs, but have you ever heard of a money market account (MMA)? An MMA is another way to make interest on your deposited money at a bank or credit union.
A Happy Medium
Think of an MMA as a happy medium between a checking account and a savings account. It takes the simplicity of a checking account and combines it with the interest-earning possibility of a savings account. In other words, higher interest rates and accessibility. Most MMAs offer higher interest rates than traditional savings accounts so that you can earn more interest on the same amount of deposited money.
Easy, But Limited Access
One huge benefit of an MMA versus any other savings account is easy access to your money. MMAs usually come with a debit card, atm card, or checks, so there’s no need to transfer money between accounts if you need to make a purchase or payment.
MMAs aren’t just fancy checking accounts, though. There are almost always limits on the number of transactions during a specified period (typically between three and six per month). So, what’s a transaction? Things like payments, certain transfers, and other ways you access your money. You can face penalties and fees for exceeding the transaction limits. Check with your bank or credit union for specific regulations regarding MMAs
While you may like the idea of the higher interest rate, you should know that MMAs often require a larger initial deposit when opened. Another area with a higher threshold is the minimum required balance, or how much money must remain in the MMA if you don’t want to get charged fees. These restrictions can make opening and maintaining an MMA more challenging than traditional savings accounts with lower thresholds.
Fun But Not a Fund.
The names may be similar, but a money market account is not the same as a money market fund. A money market fund is a type of mutual fund or a shared investment between multiple people. Investors purchase shares, or sections of the portfolio, or total amount. Money market funds typically focus on short-term investments that are relatively low risk. Keep in mind that unlink a money market account that functions like a savings account, it is possible to lose all the money you invest in a money market fund.