What is a Money Market Account?
There are different kinds of accounts that banks offer—savings account, deposit account, etc. Many, together with the pros and cons tagged to each, know the details of these accounts. But have you heard of a money market account? It is a kind of deposit account that you open with a bank. However, there is a lot more to it–the specifics are detailed below.
The first thing you need to know about a money market account is that it offers very high interest rates and this is to your advantage. Though the rate of interest will depend on the situation in the money market, you can expect it to be highly attractive. There is a catch though; you need to make an initial deposit that is higher than average. The minimum is on the upper side, which could be as much as $2500. There is no maximum limit though, so you can deposit your entire fortune without worrying about inhibiting regulations. The advantage to investing large amounts is that you get even higher interest rates. The more you invest in your money market account, the more interest you attract.
A money market account does not have monthly fees mainly because of the high minimums the accounts operate on. The absence of the charges means your money is given a chance to grow, and coupled with the interest rates, the growth can be tremendous. For the money market account to be worth your while, you cannot rush closing it down. Some banks require the account be open for 6 months at the very least. Breaching this can lead to the account being shut down, or heavy penalties being incurred.
Withdrawals are limited on a money market account and for understandable reasons. The account is meant to increase your money, and when you make repeated withdrawals, it defeats that purpose. Depending on the financial institution you are dealing with, the allowed withdrawals could be three, or even six. On the brighter side though, you are allowed to write checks. You should take caution not to go below the minimum balance; otherwise, you will be predisposed to incurring fees.
A money market account is the best opened when you have a pool of funds that you do not intend to use. They could be from a second car you sold, or from liquidating some of your assets. As much as the stock market offers a good place to invest, there are many uncertainties, coupled with the fact that you could run a risk of getting a loss. A money market account shields you from that by assuring high interest when all the regulations are adhered to.
When opening a money market account, be sure to understand all the specifics including how bank calculates the interest, its minimum balance, etc. Given the large sum of money that you are likely to invest in such an account, it helps when you understand all the details.
Best Money Market Accounts Rates And Returns
Well money market accounts return rates to seeing low, it will still pay to shop around before opening a new account. Be aware of new accounts the splashy offerings promising added benefits that might only be short-term once the account is started. The main idea was most money market accounts is to have you leave your money in the account over a longer period of time. For any money market account you might be considering check the history of the bank for its rate of return over the last quarter of or even the last year. This will give you an idea of whether a new sign-up bonus is short-term or will stick with your account over a longer period of time.
Many individuals are finding that their money market accounts are paying a higher interest rate than a standard savings account. What interest rates have been low many people are switching their savings into money market accounts. The federal government does want to stimulate the economy and is offering to provide banks with lower interest money to increase their lending power for individuals and small business. The return rates for any money market accounts can be considered a safe alternative compared with stocks or other investment plans. The small swings in interest rates will gradually settled down and it is predicted money market accounts might be paying 5% within a year has the economy starts back up.
The FDIC will guarantee coverage on your savings up to $250,000 for each account. This coverage is for checking, savings and money market accounts. While banks are eager to supply loans and rebuild their lending power they are not specifically interested in paying out a higher interest rate to the individual supplying loan capital. Because of government shortfalls across the globe there can still be the chance of inflation which will drive up interest rates. If you are lucky enough to be able to secure your money market accounts with a promising interest rate that might grow. This might be the best time you will have to secure a long-term safe rate of return. Normal savings accounts come with lower interest rates and offer fewer means for transferring money as the market might change.
All investors have been through hard times over the last few years because of the volatility of the markets. And it appears that low market interest rates are punishing the investors while rewarding borrowers, this will change in the future. The interest rates from money market accounts will slowly increase as the economies of the world rebuild and look for means of expansion. As new business growth expands the demands for business capital will increase. This new search for loans and capital will make the banks keener on paying a higher interest rate to build their cash capital and meet the new demand. Interest rates will also grow with this new demand. Investors will once again earn a higher interest rate on their investments.