Money market accounts (MMA) are bank deposit accounts and similar to savings account in some respects. Like regular savings accounts, MMAs are insured by the FDIC and may limit the number of withdrawals from the account each month. Unlike regular savings accounts, money market accounts pay a higher rate of return and often require a specified amount of money to open a MMA. Banks, in turn, lend the money deposited in these accounts to customers at a slightly higher rate than the amount of interest being paid to the money market accounts.
One of the most important and strongly suggested steps in opening a money market account is to shop money market rates being paid because the rate varies from bank to bank. Most money market account funds pay interest that is compounded daily and paid monthly. Also think of interest rates as a commodity – the rates can and often do change from day to day based on money markets. Current money market rates are published every day on several financial websites.
The highest money market rate is not necessarily the best money market rate. The amount of money required to open an account, check writing privileges, fees and access to the account are all as important as the interest rate being paid. It is also important to note that the more money that is in the account, the higher the interest rate paid.
As of July 6, 2012, the highest money market rates were being paid by the following three banks according to Google Adviser:
Clearly, the highest money market rate on July 6th was offered by BCU. What makes this money market account even more attractive is that there is no minimum deposit required and there are not any fees. This would be a bank worth talking to.
Money market accounts have many benefits. The rate of return is higher than a regular savings account and they are more liquid than higher paying CDs. MMAs are the perfect middle ground between traditional savings and CDs that offer the best of both.