There Is More to Getting the Best Money Market Rate than a Percentage Number

For many years the money market account has been touted as a good way for entry level investors to start saving for their future. Finding the best money market rate may seem like right way to maximize your return on investment, however, the best rates may not always be the right answer as the requirements to obtain these rates can be difficult to maintain especially during a downturn in the economy.

What is a money market account? A money market account is very similar to your typical savings account that you can obtain through your bank or credit union with the exception that this type of account typically pays higher interest rates. However, this type of account comes with several very important restrictions that are put in place to help provide the best money market rate for each account.

Most banks will require that you deposit a minimum amount into your account when you open it, often far more than the standard savings account, with this the more you deposit past a predetermined figure the higher your interest rate will be. Banks will offer tiered interest rates in order to get you to deposit more into your account. These interest rates are tied to various key rates depending largely on what bank you use.

Many banks tie the interest rate that they pay on their MMAs to what the federal government is paying on treasury bills and as the interest is compounded daily, but paid monthly your rate can fluctuate greatly. Many times, if you withdraw your money before the end of the month, you will lose any interest that has been accumulated for that month. That typically is not the case for the best online banking money market accounts, and rightly so.

While the best money market rate may be similar for the best money market accounts and the best rated money market funds, the difference between the two is extremely important. Even the best money market funds do NOT offer FDIC insurance of $250,000 per account.

Among other problems that should be noted with money market accounts is that in order to get the best money market rate you need to be committed to leaving your money alone. A money market account is considered a deposit account and you are typically only going to be permitted a very small number of withdrawals within a designated time period, often 3-5 per month. If you make more than that you are going to be assessed a penalty and some banks have been known to close out such accounts.

Rather than simply looking for the best money market rate, you need to look carefully at the complete list of terms for each financial institution so that you can compare all of the features and requirements for each one. While interest rates are obviously important to advancing your financial future, you need to be aware of the fees and penalties involved as they can play a major role in the quality of your money market account and the security of your financial future.