Are you looking to make extra money from your bank account? Only earning 0.10% on your current brick and mortar bank deposits is far from sufficient to pass muster. With the best money market accounts, your cash can earn up to 1.75% APY–17 times the national average–and still have instant access to your money too.
If you’re looking for a good place to park your cash or start an emergency fund, a money market account can be just the place you’re looking for.
A money market account is very similar to a high-yield savings account where you earn “above average” interest, but you can also get a debit card, write checks, or enroll in online bill payment directly from your account too.
You might consider a money market account to be a hybrid checking-savings account. However, you will still need a separate checking account because you’re limited to six monthly withdrawals just like a high-yield savings account.
Money Market Account vs. Money Market Funds
It’s also important to distinguish the difference between money market accounts and money market funds.
This article is only focusing on money market accounts. You don’t need to invest in the stock market to have a money market account. You might decide to open one of these accounts as an alternative to a regular savings account and they are also FDIC insured for your first $250,000 in deposits.
Money market funds are where your noninvested cash is stored in your investment brokerage account until you decide to invest it in a stock, ETF, or mutual fund. These funds might only yield 0.01% or up to 1.50% depending on what the fund invests in.
Unlike money market accounts, money market funds aren’t FDIC-insured and while they are considered a safe investment you can still “lose everything” in the stock market crash.
The Best Money Market Accounts
Not every money market account is the same. You need to pay attention to some of the following details before you open an account:
- Minimum balance requirement to open an account
- Annual Percentage Yield (how much interest you earn on your deposit)
- Does the highest APY apply to your entire balance?
- Does the money market account earn a higher yield than a high-yield savings account
If the below recommendations can help you make more money, you should strongly consider moving your money over to a money market account.
1. CIT Bank
Maximum APY: 1.75%
Minimum Deposit: $100
CIT Bank is one of our favorite money market accounts because you earn 1.75% APY on your entire deposit and the minimum initial deposit is only $100. You can also send money to family and friends, or pay your bills effortlessly with People Pay.
At 1.75% APY, CIT Bank offers one of the highest annual yields for any money market account. You won’t have to pay any annual account fees so you get to keep every penny of your interest earned.
2. Ally Bank
Maximum APY: 1.00%
Minimum Deposit: $0
Do you invest with Ally Invest? If so, you might prefer to keep all your money under one roof. Ally Bank offers a money market account yields 0.90% when your balance is $24,999 or less. Once your balance reaches $25,000, your entire balance yields 1.00% APY.
You can deposit your checks by snapping a picture with your mobile device. Ally also reimburses the first $10 in monthly ATM fees if you can’t find one of the 43,000 fee-free Allpoint ATMs nearby.
If you don’t want a debit card, Ally will mail you a checkbook for free too.
3. UFB Direct
Maximum APY: 1.60%
Minimum Deposit: $5,000
With UFB Direct, a high-yield money market account yields 1.60% on all deposits. You’ll get the usual benefits of a money market account including an ATM card, free checking, and online bill pay, but you might also enjoy their FinanceWorks money management tool that looks at all your financial and investment accounts to track your monthly spending and saving goals.
One of the only downsides to UFB Direct is that you must have $5,000 to open an account, so this isn’t an option if you want to invest your first $100.
4. Sallie Mae
Maximum APY: 1.55%
Minimum Deposit: $0
You probably don’t associate Sallie Mae with money market accounts, but they have one of the highest yields. Sallie Mae might offer one of the best money market accounts to make money as a college student because your student loans and savings can be in the same place. Sallie Mae doesn’t have a minimum balance requirement either which is even more appealing for a cash-strapped college student or a parent looking to build a nest egg for their child.
A Sallie Mae money market account offers free limited checking that lets you pay bills and withdraw money up to six times each month.
Maximum APY: 1.40%
Minimum Deposit: $2,500
If you can meet the $2,500 minimum account balance requirement, a money market account from Discover Bank can earn 1.35% APY on all balances less than $100,000 and 1.40% APY on your balance that exceed $100,000. You will also receive an ATM card that lets you make fee-free deposits at more than 60,000 ATMs across the United States.
Discover will charge you a $10 minimum balance fee if your daily account balance dips below $2,500 at any time during the monthly statement cycle.
6. Bank of Internet USA
Maximum APY: 1.05%
Minimum Deposit: $0
As you might infer from its name, a Bank of Internet USA is an online-only money market account that currently yields 1.05% on your entire account balance. You can earn a slightly higher yield with the Smart Savings account, but you won’t get free access to these benefits:
- Online bill pay
- Free check writing or ATM card
- Free online check images
If you already shop with Ebates to get cash back on nearly every online purchase, you can also earn additional cash rewards with your Bank of Internet USA debit card. Just remember that you can only make up to six withdrawals per month with any money market account.
7. Synchrony Bank
Maximum APY: 1.05%
Minimum Deposit: $0
Although Synchrony Bank only yields 1.05% on all deposits, which is lower than some of the other recommendations on this list, you only need $1 to open a money market account. You also get access to ATMs and paper checks, if desired.
There are zero account opening or ongoing maintenance fees that you must pay.
8. Capital One 360
Maximum APY: 1.50%
Minimum Deposit: $0
Capital One 360–formerly ING Direct–yields up to 1.50% APY when you account balance exceeds $10,000. Until then, your balance will net 0.85% APY which makes several of the other recommendations a better option to store your cash until your balance reaches the $10,000 requirement.
If you still prefer banking at a brick-and-mortar location, Capital One 360 can be a decent option as you can make deposits at any Capital One Cafe in addition to mobile and mail-in deposits. Despite having local convenience, you’ll have to open your money market account online.
Capital One 360 money market accounts don’t come with ATM or check writing access either.
Maximum APY: 1.41%
Minimum Deposit: $5,000
EverBank pledges to always remain in the top 5% of competitive accounts. So if there are 100 money market account options to choose from, EverBank will have one of the highest-paying yields. At the moment, their annual money market account yield is 1.41% which is very competitive.
However, that rate is only for the first year of account ownership and the rate can drop to an ongoing 1.01% APY for account balances less than $10,000 after your one-year account anniversary. This yield is still higher than many high-yield savings accounts, but since you need at least $5,000 to open a money market account with EverBank, you might prefer another bank that has a lower account balance requirement.
Complimentary benefits of owning an EverBank account include:
- Mobile check deposits
- ATM fee reimbursements
- IRA-eligible deposits
- People Pay instant money transfers to family and friends
Maybe this is the first time you’ve ever heard about money market accounts and you still have a few questions. After all, when’s the last time “money market accounts” was trending on social media or made the first page of the newspaper?
Is a Money Market Account Considered a Checking or Savings Account?
Most money market accounts take the best features from traditional checking and savings accounts.
Money market accounts are very similar to savings accounts because you earn the highest interest rates possible and still have instant access to your bank account. The one tradeoff is that you can only make six monthly withdrawals, but make unlimited deposits.
What distinguishes money market accounts from high-yield savings accounts is that the bank lets you write paper checks or make ATM withdrawals directly from your money market account. If you want to use the money in your savings account to pay a bill, you first have to transfer the money to your checking account where you can make unlimited withdrawals, but your checking account deposits probably won’t earn interest.
If you make more than six withdrawals a month from your bank account, it’s still a good idea to get a free checking account, but you might choose a money market account over an online savings account if the interest rates are comparable because of the additional flexibility.
Money Market Accounts vs CDs
Many people think the only way to earn potentially more interest from your bank deposits–other than checking and savings accounts–is to hold Certificates of Deposit (CDs). The only problem with CDs is that your money is locked up for the next three months to five years. If you need to withdraw the money early, you need to pay an early withdrawal penalty that can actually cause you to lose money.
Even though there hasn’t been serious talk of CD ladders or investing in CDs period since Great Recession started because CD interest rates are usually lower than saving account and money market account interest rate yields, CDs are starting to become more attractive again.
In most cases, you will still earn more interest with a money market account and you have instant, penalty-free access to your money if you need to make a withdrawal. The only restriction is that you can’t make more than six withdrawals a month per federal regulations.
Why Are Money Market Accounts Better Than CDs?
If you need a quick example, CIT Bank offers a money market account with a 1.75% APY. To get the same yield with a CIT Bank CD, you need to invest at least $1,000 for 18 months. If money market account yields increase during those 18 months, you’re going to make less money long-term.
At the moment, CD yields and money market account yields are nearly identical. Because the potential upside of locking your money away for at least one year with a CD isn’t notably higher than a money market account that lets you make a deposit today and penalty-free withdrawal tomorrow–if necessary–the instant liquidity is well worth the trade-off in most cases.
If CD yields were at least 1% higher, it might be worth investing some of your cash into a CD to diversify your savings, but until then, money market accounts are almost always the better savings option.
Are Money Market Accounts Safe?
Money market accounts are as safe as your savings account or checking account. Your first $250,000 in deposits are FDIC-insured. If your bank fails, the FDIC guarantees your deposit and they will reimburse you the account balance up to $250,000.
As we discussed earlier, if you invest in a money market fund in your 401k, IRA, or taxable brokerage account, that money might never be reimbursed if the fund liquidates.
Do Money Market Accounts Pay Interest Monthly
Interest rates can be confusing if you’re new to the world of saving money. Your money market account earns interest each day based on your daily account balance. At the end of each month, the bank deposits the monthly interest earned into your money market account.
If you deposit $1,000 into a money market account that earns 1.75% annual percentage yield (APY) or .14% interest each month, you’ll earn approximately $1.45 in interest each month or $17.50 for the year.
Of course, you’ll earn more interest if you keep making additional deposits, and you also earn interest on your monthly interest income too. If you earn $1.45 in interest the first month, you will earn interest on the $1.45 interest plus the original $1,000 deposit; this is called compound interest.
What are the Benefits of Money Market Accounts?
Money market accounts have been around since the early 1980s as a way for savers to earn more interest on their deposits than they can in a regular savings account. A lot has changed in the financial world since then thanks to the Internet and online banking.
Having a money market account in the 21st century is just as valuable today as when they first originated:
- Earn savings account interest
- Enjoy free checking account benefits like online bill pay, check writing, and ATM withdrawals
- No account fees
- Some banks don’t require a minimum account balance to earn the highest APY
If you’re looking to move your savings to an online bank account, compare money market accounts to online savings accounts interest rates. It’s very easy to find a money market account with a higher APY and a very low minimum account balance that can help anybody earn more money each month.
Money market accounts don’t get a lot of attention compared to other bank account types, but they are a safe and reliable way to earn passive income with minimal effort. With so many potential benefits with zero account fees, what’s there not to like?
What type of bank account do you keep most of your money in: savings, checking or money market account?
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