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Money Market Accounts

5 Important Facts About Money Market Accounts

What is a Money Market Account? Simple answer – it's a hybrid checking and savings account that earns high interest.

Money market accounts work much the same as other bank deposit accounts except the bank pays interest on your balance periodically according to the terms of the account. Money market accounts are a very popular savings vehicle but they are not long-term investment vehicles.

With money market accounts you earn interest on your money and they are FDIC insured up to $250,000.

Banks and credit unions offering money market accounts may have minimum deposit amounts or minimum balance requirements.

Money market accounts offer a great addition to your financial accounts for their flexibility and high interest rates.

5 Facts About Money Market Accounts

1. Money market accounts pay higher interest.

Money market accounts generally offer better interest rates than you’ll get from a traditional savings account. The interest is compounded daily. Plus, if you open a money market account at an online bank, you'll likely get much higher rates than a traditional brick-and-mortar bank.

2. Money market accounts make it easy to access your money.

Because a money market account combines features of both a checking and savings accounts, customers can access funds the same way funds in a checking account are accessed. Most money market accounts allow you to write checks or withdraw cash, and some offer a debit card that you can use to make purchases. That means you can also add money to a money market account whenever you like, unlike with certificates of deposit (CDs.) Money market accounts allow you to earn interest on your money while keeping your money accessible.

Money market accounts are great for things like:

  • Emergency funds
  • Saving for a major purchase
  • Vacation funds
  • Tuition funds
  • Budgeting for quarterly tax payments

3. Money market accounts may require large minimum balance.

Because of their competitive rates are good for people with high account balances. You may need to maintain a certain balance in the account at all times in order to earn the highest interest rate or avoid paying monthly fees, which eat into your return. Opening a money market account can be worth the return, even with the minimum balance restrictions. For instance, the average savings rate is currently 0.09% according to the FDIC. While a money market account at UFB earns 2.00% APY on balances of $25,000 and greater – more than 20X the national average.

4. Your balance is safe with money market accounts.

The Federal Deposit Insurance Corporation (FDIC) insures money market accounts up to $250,000 per depositor. That means you won’t lose your money in the unlikely event of a bank failure. Money market accounts are not money market mutual funds although they have similar names. They are entirely different products. A money market mutual fund is an investment product that is not FDIC-insured.

5. Restrictions can eat into your profit.

Be mindful that money market accounts come with federal withdrawal restrictions like savings accounts. They are still subject to the same withdrawal limitations of Regulation D that restricts activity. You have access to cash in a money market account, but there are transaction limits. You won’t be able to make payments with your checkbook or debit card more than six times per month by law. However, there are some unlimited transactions that do not apply toward your limit of six. These include withdrawals with a teller at a bank location and withdrawing money from an ATM.

Who should open a money market account?

Even if a bank requires a high minimum balance, a money market is good for saving money. Everyone needs an emergency fund. You may as well get as much bang for your buck. If you want the flexibility to write a limited number of checks, access to an ATM card all while earning a higher than average savings rate, a money market account may fit the bill. Your money is not locked away, like in the case of a Certificate of Deposit.

Check out these 3 Money Market Accounts

CIT Bank – 1.80% APY

CIT Bank is an online bank that offers competitive annual percentage yields (APYs) on its savings accounts, with its Savings Builder in the top tier of APYs. CIT Bank's Savings Builder APY is actually higher than their money market account. The 1.80 APY is one of the highest APYs in the market. It only requires $100 to open and a $100 monthly deposit to earn 1.80% APY.

  • Earn one of the nation's top rates — More than 25x the national average.2
  • Make at least one monthly deposit of $100 or more to earn the interest rate.
  • No account opening or maintenance fees.
  • Daily compounding interest to maximize your earning potential.
  • A limit of six transactions per statement cycle.3
  • Deposit checks remotely and make transfers with the CIT Bank mobile app
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    UFB Direct – 2.00% APY

  • Earn 2.00% APY on balances of $25,000 and greater – more than 20X the national average.
  • No monthly maintenance fees with a $5,000.00 balance, otherwise fee is $10.00 per month.
  • Minimum opening deposit of $5,000.00.
  • Access your funds 24/7 with easy-to-use digital banking tools.
  • Enjoy peace of mind with FDIC insurance up to the maximum allowable limit – Certificate #35546.
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    BBVA Bank – 1.50% APY

    BBVA Money Market offers 1.50% APY. BBVA is a large, Alabama-based bank that operates online in ALL states as well as branch locations in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. The minimum balance required to earn 1.500% APY is $10,000 but there are no monthly maintenance fees and only requires $25 to open an account.

    • $25 minimum opening deposit.
    • Interest compounds and is credited monthly.
    • 24/7 online access with Online and Mobile Banking.
    • Option to link to your BBVA checking account for Overdraft Protection.

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    Money Market Accounts

    Best Money Market Rates 2019

    2019 has made finding the best money market rates far more easy. Banks, especially online banks are competing for your business and savings rates are on the rise.

    We like money market accounts because they allow you to save for the future while earning a great rate. But the most desirable feature to money market accounts is their liquidity.

    Money market accounts offer easy access when you need your money, without paying penalties for early withdrawal.

    The funds may also be more liquid: With checks and a debit card included, you can make transactions straight from your money market account, where savings accounts typically require you to transfer funds to yourself first.

    Both accounts, by law, have the same transaction limit, though — six per month.

    1. CIT Bank – 2.30% APY
    2. BBVA – 2.00% APY
    3. State Farm – 2.25% APY
    4. Sallie Mae – 2.20% APY
    5. UFB Direct – 2.15% APY

    Best Money Market Rates

    1. CIT Bank: 2.45% APY – $100 minimum deposit

    CIT Bank offers one of the best money market rates. The are primarily an online-only bank but available to residents in all states. With less overhead costs associated with banks with branch locations, they can return those savings to customers. CIT Bank consistently out-pays other top nationally available accounts. Earn a better-than-average-rate that only requires $100 to open and does not charge a monthly service fee. Learn more.

    2. BBVA: 2.00% APY – $25 minimum deposit 

    BBVA offers high interest with no fees plus a low minimum opening deposit of $25. The BBVA Money Market Account is a top contender at 2.00% APY. No monthly fees and daily compounding make this money market account one of the best options available. Customers also get quality mobile banking tools including mobile deposit capability to easily manage your money. Learn more.

    3.  State Farm Bank: 2.25% APY – $1,000 minimum deposit 

    State Farm LogoState Farm Bank pays a competitive rate as long as you maintain a $500 average daily balance or have a direct deposit (ACH credit) each statement cycle. If not you'll have to pay a minimum balance fee of $10 which can reduce your earnings. The State Farm Bank money market savings account has an ATM card available. Unfortunately, the 2.25% is an introductory APY for the first 12 statement cycles when opening a new consumer money market account. Learn more.

    4. Sallie Mae: 2.20% APY – $0 minimum opening deposit 

    SallieMae money market account offers a high rate of 2.20% APY and does not require a minimum balance to open and no monthly service fees. Account holders can write checks from their account and manage their account completely online at any time without talking to a banker. You can setup automatic transfers to grow your savings and deposit checks via your mobile device. Learn more.

    5. UFB Direct: 2.15% APY – $5,000 minimum deposit 

    UFB Direct's money market account is very competitive among high-interest money market accounts. In fact, its rate is currently more than 20X the national average. No monthly maintenance fees with a $5,000.00 balance, otherwise fee is $10.00 per month. Customers earn 2.15% APY on balances of $25,000 and greater. Learn more.

    Benefits of a money market accounts

    • Up to $250,000 is insured by the FDIC or NCUA for credit unions. Unlike investment accounts, earnings aren’t dependent on market fluctuations. You also don’t face penalties for accessing the funds, as long as you stay within the six-per-month limit.
    • Because a money market savings account is not an investment account, you run no greater risk for a higher yield.

    See how much interest you can earn with our savings apy calculator.

    Money Market Accounts

    Are Money Market Accounts FDIC Insured?

    If you're questioning are money market accounts insured? Yes, don't worry about your money in a money market account, they're insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum amount allowed by law – $250,000.

    This means that if your total account balances at a given bank (including money market, savings, checking and CD accounts) reach higher than this limit, only the first $250,000 is FDIC-insured.

    Money market accounts can be a valuable part of your savings strategy. These accounts offer higher interest rates than standard checking or savings accounts. Plus, most money market accounts come with limited check-writing ability, unlike a straight savings account.

    Money market accounts are a cross between a savings and checking account, however, deposit minimums tend to be higher. They are also subject to the Federal Reserve's Regulation D, which limits withdrawals to six per month.

    How are money market accounts insured

    The Federal Deposit Insurance Corp. is an independent agency of the U.S. government that protects the money you place on deposit account with banks. This insurance is put into place to protect you and your money in the event that your financial institution should fail.

    The FDIC pays insurance to you if the bank fails. This is generally completed in one of 2 ways:

    • FDIC opens a new account for you at another insured bak with the same insured amount you had at the failed bank.
    • FDIC may send you a check for the insured balance you had in your account at the failed bank.
    • The $250,000 FDIC-insured limit applies on a per-depositor, per-bank basis.

    Along with money market accounts, FDIC insurance also covers the following at participating institutions:

    • Checking accounts
    • Savings accounts
    • Certificates of Deposits (CDs)
    • Cashier's checks and money orders issued by a bank
    • Negotiable Order of Withdrawal (NOW) accounts

    Are money market accounts insured at Credit Unions

    Credit unions are not insured by the FDIC. Instead, the National Credit Union Share Insurance Fund (NCUSIF) insures money market accounts up to $250,000 of your total deposits at a given credit union. Insured money market accounts at credit unions works very similar to how bank-insured money market accounts. Your money is safe up to $250,000.

    5 Best Money Market Account Rates 2019

    You can save for the future while earning a great rate.

    1. CIT Bank – 2.30% APY
    2. BBVA Bank – 2.00% APY
    3. UFB Direct Money Market – 2.15% APY
    4. Sallie Mae – 2.20% APY
    5. TIAA– 2.15% APY

    Find more information on the best money market account rates for 2019

    Final thoughts

    Money market accounts are good and safe investment vehicles with shorter-term savings requirements. You can earn  a competitive APY (annual percentage yield) and enjoy liquidity if you need your money. There are other investments that may have higher rates of return, but they may also have potential risk of principal.

    See how much interest you can earn with our savings apy calculator.

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