When it comes to saving cash for the future, you’ve got lots of options: checking accounts, savings accounts, the stock market; a wad of cash under your mattress. (We really don’t recommend that last one!)
A money market account, or MMA, is an often-overlooked savings vehicle. This type of account could be a great way to put your money to work, earning low-risk interest over time. But what, specifically, makes these accounts stand out from the crowd?
First things first: What is a money market account?
A money market account is an interest-bearing bank account that functions sort of like a hybrid between a checking and a savings account. Although it’s subject to withdrawal restrictions, like savings accounts are, you may still be able to access the funds using a debit card or checkbook, by making ATM withdrawals or check-writing.
Additionally, money market accounts sometimes offer higher interest rates than checking or high-yield savings accounts, though the highest rates may be reserved for those who meet certain minimum balance requirements and other additional requirements.
Finally, unlike investment accounts (including money market mutual funds, which MMAs should not be confused with), the funds in a money market account have the potential of being FDIC insured after meeting eligibility requirements1, which means they may be a low rrisk banking option. (If you’re working with a credit union, look instead for NCUA insurance.2)
5 Reasons to Open a Money Market Account
Might a money market account be right for you? You might consider one in the following scenarios.
1. You may want your emergency fund to earn interest.
Some recommend a minimum emergency fund of three-to-six months’ worth of expenses, which for most of us totals up to a tidy sum — one that might put you at the minimum deposit bracket you need to earn the highest interest rates from a money market account. Additionally, the ability to write checks or use a debit card to spend from a money market account might make it an ideal vehicle for holding your rainy day money, maintaining high liquidity all while earning you a small percentage back in interest over time.
Need help figuring out how much you may need in your emergency fund, check out Quontic’s free Emergency Fund Calculator.
2. You’re saving for short- to medium-term goals.
For long-term goals like retirement, some may say investing is the way to go. But if you’re saving for a financial goal closer to the immediate future, like purchasing a car or making a down payment on a home, a money market account may be able to get you some minor returns without putting your hard-earned (and hard-saved) money at risk.
Let Quontic’s free Savings Goal Calculator help determine how much you may need to save to reach your target.
3. You want easier access along with earnings.
As mentioned above, money market accounts work like savings accounts in that you’re likely limited in how many monthly withdrawals you can make.
But they also work similarly to checking accounts in that you may be able to access the funds with a debit card, which means you could have some money in cash in a snap if you need it just by visiting the ATM. That kind of access isn’t always available with a regular savings account — and it’s definitely not available with a certificate of deposit.
4. You have a lower risk tolerance.
You want to invest in your future, but the idea of putting your money at risk sounds… well, risky. Maybe you’re retiring soon, and you already have a substantial nest egg you don’t want to lose.
In cases like these, a money market account may provide both positive interest earnings (even if the trend line is shallow) and eligible accounts may be FDIC insured1.
5. You already have a checking and savings account.
A checking account may be a great financial home base: the pool from which you pay bills and make everyday purchases. A savings account may also be an excellent way to save for the future, especially if you’re just getting started.
But if you already have both of these types of deposit accounts, adding a money market account into the mix could help you boost your savings and enjoy the unique benefits only MMAs confer. Quontic’s money market accounts offer earnings of up to 0.60% APY (annual percentage yield)3, and interest accrues daily. If you’ve got questions, we’re standing by with answers!
This is not financial advice, nor should it constitute or be construed as instruction for any individual reader, or group of readers, to act or make a decision in any financial capacity. Seeking independent, professional consultation from a qualified and licensed expert is always the optimum avenue in making financial decisions.
1FDIC insurance is applicable to eligible deposit accounts and up to the maximum allowed by law . Learn more at https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/index.html.
2Learn more about NCUA insured accounts, which are applicable to eligible accounts and up to the maximum allowed. https://www.mycreditunion.gov/share-insurance
3Money Market Account is a tiered variable account wherein 0.40% annual percentage yield applies to balances of $0.01–$4.999.99, 0.50% APY applies to balances of $5,000.00–$149,999.99, and 0.60% APY applies to balances over $149,999.99. Minimum opening deposit of $100. Ask for details. Additional terms, conditions, fees & exclusions may apply. Rates may change without notice. There is a $10.00 excess transaction fee for every transaction over six for pre authorized withdrawals, automatic or telephonic transfers, checks, drafts, and debit card or similar transactions from your account per account statement cycle. If the account is closed before interest and/or bonus is credited, accrued interest and/or bonus may be forfeited for that statement cycle. Fees could reduce earnings. Information is as of April 5, 2022.