Strategies for securing the highest interest rate on a money market account
In today's economic climate, finding ways to maximise your savings is more important than ever. One such avenue is through money market accounts (MMAs), a type of savings account that offers higher interest rates compared to traditional savings accounts, while still maintaining the accessibility features of checking accounts.
Most banks limit certain types of withdrawals to six per month, though this restriction was lifted by federal law in 2020 and varies by institution. This flexibility makes MMAs an attractive option for those seeking a balance between savings and accessibility.
Online banks, in particular, offer the best MMA rates, up to seven times higher than traditional brick-and-mortar institutions. Online-only banks consistently offer the highest MMA rates, often around or above 4 percent, due to lower overhead costs.
However, it's essential to consider how often you'll need to access funds and through what methods, as MMAs offer check-writing and debit card access. Monthly fees can quickly erode earnings, with many accounts charging $10-$25 monthly fees if minimum balances are not maintained. To compare MMAs effectively, calculate your true earnings by factoring in any fees.
For instance, a $10 monthly fee costs $120 annually, equivalent to losing 1.2 percentage points on a $10,000 balance. Therefore, it's crucial to choose an account with minimal fees or waived fees for maintaining a certain balance.
It may be a smart idea to open a MMA sooner rather than later due to the expected rate cuts. The Fed is widely expected to start cutting rates in the near future. However, MMA rates are currently elevated by historical standards, despite recent Fed rate cuts.
To make an informed decision, review new account requirements, such as minimum opening deposits, ongoing balance requirements, and any relationship requirements with other bank products. Many competitive MMAs require a minimum balance of $1,000 or more.
When deciding which MMA to open, consider your typical account balance when choosing, as high-yield accounts may have tiered rate structures with fees for balances below the required minimum.
For those seeking the best MMA rates, Bankrate's 2025 interest rate forecast can provide guidance on timing your decision. Additionally, comparing Bankrate's best MMA accounts can help you find current rates.
Lastly, ensure the institution offers FDIC insurance up to $250,000 per depositor, per bank, to protect your savings. By taking these steps, you can make the most of your savings with a high-yield MMA.
