How Do I Pick a Money Market Account?

If you have a significant amount of cash to stash, a money market deposit account might make sense. It's better than putting it on a racehorse or storing it under your mattress. Depending on the particulars of the account, a money market account can serve you well compared with a general savings account, checking account or certificate of deposit.

Step 1

Ensure that the amount of money you have is appropriate for a money market account. A vast majority of money market accounts require that you maintain a minimum balance. If you don't, your bank will charge you a fee. Minimums vary from firm to firm, but minimums of $25,000 or more are not uncommon.

Step 2

Shop around and compare interest rates. Generally, the more money you have to invest, the better the interest rate you can receive with a money market account. Often, money market accounts offered by brokerages in conjunction with a brokerage account or money market accounts provided by wholly or primarily online banks offer slightly better rates than ones put forth by traditional brick-and-mortar banks. The former can market more competitive rates because they have lower overhead than banks with lots of branches.

Step 3

Evaluate the ways and the frequency with which you can access your money. Most money market accounts provide check-writing privileges and ATM access. The catch, however, is that you'll pay a fee if you exceed a certain number of monthly transactions.

Tips

  • Money market funds are distinct from money market deposit accounts. A money market fund is a mutual fund that holds low-risk investments. Unlike a bank money market deposit account, money market funds are not FDIC-insured and, although they generally don't, they can lose value.
  • If you don't have enough money to meet the minimum balance requirement of a money market account, consider a simple savings or interest-bearing checking account. If you don't need access to the cash, a certificate of deposit, particularly one with a long term, should provide a better return, but you'll pay a penalty for early withdrawal.

About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.