This helpful rate calculator quickly shows you where to find the highest interest rate on a money market account.
Money Market Rates: Finding the Best Accounts in 2016
Many people think of a money market account (MMA) as a type of investment. It’s important not to confuse a money market deposit account with a money market fund (MMF). While a money market deposit account is protected by either the FDIC or NCUA, a money market fund has no such protection. MMA’s and MMF’s are wildly different animals. If you want your money to grow safely, choose a money market account. If you want your money to grow aggressively, you’re a likely more suited to money market funds.
Overview of Money Market Accounts
While money market accounts can earn respectable interest rates, it’s better to think of them as a savings account with perks. Like a savings account, a money market account is a good place to park your money for a long period of time. But unlike a savings account, a money market account actually allows you to write checks. Some MMA’s even include a debit card.
You may be wondering why you shouldn’t simply use a high interest MMA instead of a checking account. That could work for some people. But very few.
Most people shouldn’t rely on an MMA for their checking goals. That’s because there are limits on how many withdrawals you can make each month. Federal Regulation D limits you to six withdrawals per month, per account.
The other main reason for limiting withdrawals on MMAs is to allow the financial institution you choose to invest your money efficiently. Institutions enjoy investing your money in vehicles like treasury notes, certificates of deposit (CD), municipal bonds, etc. If you keep pulling your money out, it’s hard for the institution to reliably invest the money and maximize returns. If they can’t reliably invest the money, the institution can’t justify giving you the high interest rate. So think of the capped withdrawals as a welcome restriction rather than one of inconvenience.
Read more: Money Market Rates: Finding the Best Accounts in 2016 | Investopedia http://www.investopedia.com/articles/wealth-management/030316/money-market-rates.asp#ixzz41sdUa6RD
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