How Do Money Market Accounts Work?

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There’s no shortage of ways to save your money. And if you’re willing to be relatively hands-off with it in exchange for some perks, you have a few options to reach your financial goals.

Perhaps you’ve opened both a traditional checking account and a savings account, and are exploring other ways to safely grow your money. Maybe you’re leaning toward another type of savings account in particular.

When it comes to adding another account for your personal finance arsenal, consider a money market account. And not just any money market account — check out a Quontic Money Market Account, which requires a low opening deposit, provides you with six free withdrawals per statement cycle and boasts a high APY.

Here’s an overview of money market accounts, how they work and the benefits of opening one.

What is a Money Market Account?

A money market account (MMA) is an interest-bearing account. It’s similar to a savings account, although it functions like a checking account in some ways, too. At its core, you fund a money market account, follow a few rules (more on that next) and then earn a higher interest rate than you would with a regular bank account.

You can find money market accounts at a bank, credit union or other financial institution. Online banks sometimes offer higher interest rates because of less overhead (and can therefore pass along those savings to account owners).

How Does a Money Market Account Work?

In exchange for following certain guidelines — typically, maintaining a particular account balance and other stipulations — consumers benefit from a higher annual percentage yield (APY). However, if a consumer doesn’t meet these qualifications, they may not earn this higher rate. Some accounts also have monthly and other maintenance fees, though these can sometimes be waived.

Money market accounts are another option for people to store money and grow their balance, in addition to high-interest savings accounts, certificates of deposits (CDs) and other savings vehicles.

Money Market Account Rates

The days of higher interest rates are in the past. (But that doesn’t mean they’ll be gone forever.)

The Federal Reserve cut interest rates in 2020, which affected everything from mortgages to savings accounts — not the best news for super-savers. The national average for money market accounts is now 0.09% APY, according to the Federal Deposit Insurance Corporation (FDIC). Comparatively, APY for standard savings accounts is 0.06%1 on average, so you’ll see a slight bump-up with money market accounts. Not to mention, you’ll see even higher rates with a Quontic Money Market Account, which offers APY beginning at 0.30%2.

While interest rates aren’t their highest, it still makes sense to safely store your money in a protected account — not to mention one that can earn you a little more on your balance. There are also plenty of perks associated with money market accounts… if you’re willing to be hands-off with your money for a period of time.

What You Should Look for in a Money Market Account

Now that you have an idea of how money market accounts work, it’s important to know what you should look for in an account.

In general, there are several items to look out for before opening a money market account. You want to know the following:

  • The annual percentage yield and if there are different tiers.
  • If there is a minimum opening deposit required.
  • If you get a (free) debit card.
  • If there are any monthly fees.
  • If there are any maintenance fees.
  • The number of withdrawals you’re entitled to per statement cycle (typically six per one month-long period).
  • If there is a monthly minimum deposit required.
  • If there are minimum balance requirements.
  • If there are free ATM withdrawals.

This isn’t a complete list, but it’s a good overview. Depending on your needs, you might want to look for a bank or credit union that offers other banking products, such as credit cards, an IRA, a high-yield savings account, etc., too.

How Quontic Bank’s Money Market Account Works

Like we mentioned earlier, the national average for money market accounts is 0.09% APY1. Not bad. But, by comparison, Quontic Bank offers up to 5x that rate.

The digital-first bank offers a Money Market Account where you can earn up to 0.40% APY.

APY is earned on the account daily balance. Here’s how it’s earned:

  • 30% APY on balances between $0 and $4,999.99.
  • 35% APY on balances between $5,000 and $149,999.99.
  • 40% APY on balances of $150,000 and higher.

To open an account and qualify for the corroborating interest rates, you need to:

  • Be at least 18 years old and have the essential items (photo ID, etc.) you need to open a bank account.
  • Have a minimum opening deposit of $100.
  • Fund the account with money from your Quontic or other bank account.

You can open a money market account with Quontic in approximately three minutes. You’ll also receive a debit card. Per the APY, interest is compounded daily based on your posted daily balance and is credited to your account each month at the end of your statement cycle.

Money market account owners are entitled to six withdrawals per statement cycle. They also have access to other Quontic features, such as remote check deposit, bill pay and more.

Money Market Account FAQs

Here are some common questions and answers regarding these types of accounts.

Is a Money Market Account Good to Use for an Emergency Fund?

The short answer is, it depends.

An emergency fund is an account that typically holds three-to-six-months worth of living expenses. Personal finance experts have mixed opinions on the “right” amount this fund should have, but it’s a good idea to have several months of runway to cover your bills.

A money market account could be a good choice for you if you have a sizable amount of money and can meet the other conditions of the account. If you’re just getting started or prefer to have easy access to your money, then a traditional savings account might be a better option for you for an emergency fund.

Can You Lose Money in a Money Market Account?

As long as you open an account that’s FDIC-insured3 (if it’s a credit union, backed by the National Credit Union Administration or NCUA4), then no, you cannot lose cash in a money market account; it’s federally protected. Your account will be secured up to $250,000, per eligible depositor and account.

Is a Money Market Account the Same Thing as a Money Market Mutual Fund?

No. MMMFs are a type of mutual fund that invests in short-term debt securities. Unlike money market accounts, money market mutual funds are not risk-free; meaning, there’s a possibility you could lose money in volatile market conditions.

Is it Better to Open a Money Market Account Over a Traditional Savings Account?

One type of account isn’t necessarily better than the other. In fact, if your bank, credit union or financial institution offers both, you can open one of each!

While you can earn more interest with a money market account, you may be beholden to a higher minimum balance for your account and other qualifying factors. If you’re OK with a lower interest rate but more account accessibility, then a traditional savings account might be better for you.

Earn More With a Money Market Account

Money market accounts are another avenue you can pursue to reach your personal finance goals. They provide a secure way to manage and save your money.

If you’re ready to open one and start saving, consider Quontic’s Money Market Account, and earn up to an impressive 0.40% APY2.

Footnotes:

2Money Market Account – This is a tiered variable account wherein 0.30% annual percentage yield applies to balances of $0.01–$4.999.99, 0.35% APY applies to balances of $5,000.00–$149,999.99, and 0.40% APY applies to balances over $149,999.99. 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 preauthorized 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. APY means Annual Percentage Yield. Information is as of December 2, 2021.

3FDIC insurance is applicable to eligible deposit accounts and up to the maximum allowed by law . Learn more at FDIC: Deposit Insurance https://www.fdic.gov/resources/deposit-insurance/.

4Learn more about NCUA insured accounts, which are applicable to eligible accounts and up to the maximum allowed. https://www.mycreditunion.gov/share-insurance

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