How Does a High Yield Money Market Work?

Low-risk, high-yield money markets are a safe and smart way to save for the future.

Low-risk, high-yield money markets are a safe and smart way to save for the future.

Save money, earn interest, write checks ... money markets are the one-stop shop of the banking world. Given the explosion of online banking interests, high-yield money market accounts with higher-than-average rates of interest are in plentiful supply. With a little research and attention to the inevitable fine print, investors can secure the best mix of security and return with little risk.


Featuring higher interest rates and the ability to write a limited number of checks, money market accounts typically wed the best of the familiar personal saving and checking accounts into one attractive package. High-yield money markets are simply money market accounts offering higher rates of return than competitors. These better-than-average interest rates often come with extra requirements, like higher required minimum balances or less frequent ability to access funds.

Finding the Best Rate

Forget your traditional bricks-and-mortar bank and check out the high-interest money market options available online. Virtual banks tend to offer higher interest rates with many of the same features customers have grown to appreciate from their hometown establishments. While traditional banks often pay far less than 1 percent on savings accounts, high-yield money market accounts from online banks and investment companies can pay between 2 and 3 percent interest or more. That translates into a lot of extra cash in your pocket.

Understanding the Fine Print

Similar to savings accounts, money markets are low-risk investments that are unlikely to lose value. But security comes at a price. Beware of account limitations before committing. Most money markets -- especially the high-yield, higher interest variety -- require a minimum opening balance and limit the number of withdrawals that can be made in a certain period. Customers must often maintain a minimum balance. Violating predefined rules can result in fees that will mitigate the higher return.

Risk and Reward Tolerance

Know thyself when selecting a money market. Understand how often the money in your high-yield account will need to be accessed and how much can be comfortably squirreled away without impacting day-to-day living expenses helps enormously in selecting the best banking partner. And be sure the limitations imposed work within the larger financial picture. Evaluate upcoming expenses -- be it a new mortgage or additional education expenses -- to avoid overcommitment. Successful investors know exactly how much they can afford to invest and remain disciplined.


About the Author

Since 1990, Laura Barten has been writing about health care, marketing, finance, work life, travel and the arts for industry-leading companies, nonprofits, newspapers and websites, including and As president of a marketing consulting firm, she's developed business/marketing plans, books, magazines, press kits and more. Barten holds a BA in journalism and an MBA in marketing from the University of Wisconsin-Madison.

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