Open A Money Market Account TODAY: A Complete Guide to Money Market Accounts for Beginners
Money market accounts are bank accounts like the savings accounts you have. Around 98% of Americans have a traction deposit account, such as a passbook savings account. However, money market accounts are not as popular as they should have been. Read this article for money market account requirements.
However, the federal institution noticed that more people are opening money market accounts now. So, I thought a complete guide on money market account requirements would be the best for readers.
Money market accounts are becoming popular for their higher interest rates. You can expect better interest than usual savings accounts. But that’s not the only thing. The money market account also offers check-writing facilities along with debit cards.
None of these features come with your usual passbook savings account. Therefore, money market accounts are more flexible than checking or saving accounts.
What is a money market account?
In 1980, the US government decided that banks could not offer more than unlimited interest to customers through savings accounts.
Most banking companies started offering customers free gifts like a toaster or iron as an incentive. They could not attract them with their interest rates only.
Since then, people have started shifting to higher-interest accounts like money market mutual funds. However, the mutual funds were operated by the same banks. Other than banks, there were brokerages and private mutual fund organizations.
However, the money market mutual funds are not as safe as the money market account. In 1982 Congress had to pass the Depository Institutions Act of 1982. This act was revolutionary from the angle that it allowed the banks and credit unions to open money market accounts.
What’s special about money market accounts?
The federal institution allowed the banks to offer high money market account rates to customers through these accounts. Something that was not possible with the normal savings accounts. In fact, this time, the rate was capped much higher here. You can easily allow a customer up to 6% office APY through money market accounts.
But you won’t find any usual deposit account offering more than 4.3 to 4.5% annually.
Moreover, the same banks and credit unions are offering money market accounts to customers. Hence, the safety of FDIC insurance is also important. But that’s not the special part about these accounts. With money market accounts, you get higher interest as the first thing. Secondly, you get the flexibility to deal with your money like you would with no other account. Almost 90% of the top 20 to 25 money market accounts offer check writing and debit card facilities to draw money anytime you want.
Secured deposits through MMAs
The Federal Deposit Insurance corporation secures the money market accounts. It is an independent agency considered by the government for insuring up to 2.5 million USD for each customer per account for each account type.
It means you can have two different kinds of accounts with the same bank, and you will receive a total Insurance of up to 5 million. The rules are more lucrative for joint accounts. These accounts can get a direct Insurance of up to 5 million.
The NCUA Insurance
Have you created your money market account with a Credit union? The same is possible now. But don’t think credit unions won’t offer you the insurance that banks offer. The accounts opened through credit unions are insured by the nationality union administration. The insurance amount remains the same for each customer.
It is one of the prime Money market account benefits.
When you want a higher insurance limit, it is better to open multiple High-yield money market accounts with banks and credit unions.
Similar funds like money market mutual funds do not enjoy such coverage. No government institution allows insurance against mutual funds.
Money market account requirements
Money market accounts offer the best-ever return rates among deposit accounts, without a doubt. But there are certain requirements you need to follow with this account. Experts say that these requirements and regulations help the bank make a good turnover of your money. Therefore, they can offer you such high interest rates. So, what are the requirements now?
Firstly, there are transaction limits. You can do up to 6 transactions for free every month with most of the money market accounts. In addition, you can do extra transactions for a fine every time. The fine depends on the bank or credit union from which you open your account.
Secondly, MMAs need you to deposit a minimum value at first to open your account. In a few cases, that is as low as $0.01. but the more rewarding money market accounts may require you to deposit up to $2500. However, it should not be a problem for you.
If you have financial leverage, then go for the high minimum deposit accounts. Otherwise, you can choose the zero balance minimum deposit account.
This flexibility is what I like the most about the money market accounts.
Other fees charged
Certainly, money market accounts charge monthly operations fees. But that is not something you can’t pay. Barely, it will go above $10. There are service charges along with it. But all money market accounts do not impose service charges on your account. However, I feel that the additional fees are better than the charges being imposed on your account.
Some accounts, like checking accounts, impose charges on your account that reduce your ultimate earnings in the form of interest at the end of the day. The same can be said about mutual funds in the money market.
These mutual funds take the main fee from you as for the expense ratio. It is the amount paid to the funding company for paying the fund manager along with other operating expenses.
Fees and fines
The money market accounts charge various fees. But I have discussed the normal fees already. If your account is regular, you don’t have to pay anything additional. However, some people have to pay more when they reduce their balance below the minimum cut off accidentally. It is not something you can do out of physical instability. But it may happen anytime as you might not be aware of your minimum balance in the bank.
Some creative unions charge fees to regulate your money, no matter how low your balance is. However, most banks and credit unions do not charge this compulsory fee.
What some other banks do is waive the fees if you make a minimum direct deposit in your bank account every month.
It is not possible to state a statutory amount here. The amount varies from one bank to another. The rules regarding the charging of fees also keep varying from one financial institution to another.
Unique service fees
Regarding fees, I would like to mention one last thing. It is the check writing fees. Your account has a limitation to the maximum number of checks that you can write for a month. After that, you have to pay extra for every check you get, right? The check would itself cost a minimum. At the same time, you have to pay extra to write additional checks above the highest limit.
Other requirements: interest rates
The money market account requirement doesn’t end here. Remember, you have to maintain the minimum account balance if you want to enjoy the full swing of the interest rate. You will see most accounts offering up to 5.25% APY. But that is not the flat rate you should expect.
Meanwhile, there are several reasons for your interest rate to go as low as 0.61% APY. In fact, that is the median interest rate of money market accounts in the US. But on a deeper look, you will find that the first 20 to 25 most popular money market accounts offer an average of 4.5 to 5% APY.
Therefore, the problem lies in not operating your account properly. If you constantly incur fines and charges on your account, the interest rates will keep falling equally. At the end of the day, you will receive an aggregate of 2.5 to 3% APY from a bank that offers the highest interest rate of up to 5.5%.
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