Accessibility and higher rates: Why a money market account makes sense for your savings

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When choosing an account to park your hard-earned money, the decision often comes down to greater accessibility or earning a higher interest rate. But a money market account (MMA), also called a money market deposit account (MMDA), may strike just the right balance between both benefits.

Here’s everything you should know before opening an MMA, and how it can factor into your savings strategy.

What is a money market account?

A money market account is a type of interest-earning savings account offered by some banks, credit unions, and online financial institutions. MMAs provide many of the conveniences of a typical savings account but with a major added benefit — they often offer higher rates than traditional or even high-yield savings accounts (HYSA).

Money market account interest rates can be similar or just slightly less than those offered through certificates of deposit (CD), but MMAs are much more liquid; CDs require you to hold a set amount of savings untouched in an account to obtain their higher rates, but with MMAs, you can withdraw and deposit money at any time without penalty fees.

Can I withdraw money from a money market account?

Withdrawals from MMAs had been limited to six per month, but in April 2020 the Federal Reserve Board announced a new regulation allowing financial institutions to lift the cap on withdrawals on all savings accounts. This announcement was introduced due to the Covid-19 pandemic to make it easier for customers to access their savings in a time of financial need.

A few months after the initial announcement, the Fed updated its Frequently Asked Questions on savings deposits to indicate that the Board does not have plans to re-impose transfer limits.

While banks and credit unions are not required to make these changes, MMAs opened through Raisin do not currently have any withdrawal limits.

What can a money market account be used for?

A money market account allows you to earn more interest on your savings while still having easy access to your funds when needed.

These features make MMAs great options for the following savings goals:

  • An emergency fund for unexpected costs, such as medical bills or car repairs

  • Major expenses, like a down payment for a new home or college tuition

  • Short-term wants and needs, like an upcoming vacation or new car purchase

  • Extra funds that you don’t need access to on a daily basis

What to look for in a money market account

Not all money market accounts are created equal. If you’re thinking of opening an MMA, here are several factors to consider.

APY: Annual percentage yield (APY) is one of the most important figures associated with a savings account because it dictates how much you’ll earn in interest on your money. The higher the rate, the more you’ll make over time. (Learn how to calculate interest earned based on APY here.)

Unlike that of a CD, an MMA’s interest rate is variable; it may change based on overall market conditions. For example, if the Federal Reserve raises interest rates, then the rates banks offer on MMAs may increase as well. The reverse also is true.

Security: MMAs are a type of deposit account, which means they are eligible for FDIC insurance through financial institutions. FDIC insurance offers government-backed protection on your money, up to $250,000 per depositor, per insured bank. Ensure your funds will be covered by choosing an FDIC insured account.

Minimum deposit: Different MMAs have different rules for the minimum amount required to open an account — varying from as little as $1 to as high as several thousand dollars.

Minimum balance: If an MMA requires you to maintain a minimum balance — say, $1,000 — you may incur a fee if the amount in your account dips below that threshold. So, if you’d rather be able to access all of your money, be sure to look for an account that requires a low or no minimum balance.

Fees (or lack thereof): Some financial institutions charge monthly maintenance fees, which can quickly eat into your savings. Make sure you understand any fees that are associated with an account — or choose one that doesn’t charge any.

Withdrawal limits: MMAs are considered liquid, which means you can withdraw or transfer funds when needed, without penalty. Just keep in mind, some financial institutions may restrict your withdrawals to the six-per-month limit, despite recent changes in Fed rules.

Money market accounts versus other deposit accounts

The table below compares common features found in money market accounts and other types of deposit accounts.

Compare different types of deposit accounts

Luckily, you can have MMAs and other deposit accounts at the same time. This allows you to spread your savings among multiple accounts depending on your needs.

Explore your saving options with Raisin

Raisin gives you the freedom to browse and select high-yield savings products — including MMAs, HYSAs, and CDs — through one easy-to-use platform. Our exclusive network of banks and financial institutions offers high-yield savings products that are all FDIC insured and can be opened with an initial deposit of just $1. Plus, there are no fees charged for MMAs available through Raisin, and there are currently no limits on withdrawals.

Ready to get started with high-yield accounts that meet all your needs? Find out how Raisin streamlines the process, making saving for your future easier than ever before.

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*APY means Annual Percentage Yield. APY is accurate as of {todayDate}. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.

Raisin is not an FDIC-insured bank or an NCUA-insured credit union, and does not hold any customer funds. Funds deposited through Raisin are exclusively held at federally insured financial institutions. FDIC or NCUA deposit insurance coverage covers the failure of partner banks and credit unions on the Raisin platform.

Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered through Central Bank of Kansas City (CBKC), Member FDIC, d.b.a. Central Payments is the Service Bank. CBKC, Lewis & Clark Bank and Starion Bank, each Member FDIC, are the Custodial Banks.