Money Market Account Deposit Rates
Money Market Account Deposit Rates
When signing up for banking services, most banks have a variety of account options. This includes more than the standard checking and savings account. There is also generally a money market account. These accounts, known as MMA, or possibly MMDA (money market deposit account) is a special account that works with different government and corporate securities. These accounts tend to provide a higher interest rate than standard savings accounts as the money is invested into these securities. However, many banks do require you to maintain a minimum balance before any interest is added. If the minimum amount is not found in the account, you do not receive any interest on the savings.
The MMA deposit account is like standard banking accounts, as it functions exactly the same. You are able to deposit and withdraw money at your choosing. However, when visiting an ATM, if you have a standard banking account and an MMA account, the MMA account is generally listed as either a “Secondary Account” or a “Secondary Checking Account.” You may want to ask your bank what the ATM listing for the account is. You don’t want to take money out of the wrong account, only to have one of the accounts overdraft, simply because you took money out of an incorrect savings account.
Before signing up for an MMA account, look over the fees carefully. Some banks don’t have fees, and just don’t give you any added interest once the funds drop down underneath what the minim required balance is. This minimum balance is different, depending on the bank you visit. It may be anywhere from $500 to several thousand dollars. However, other banks change you fees for dropping under this amount, in addition to not paying you the interest rate. There may also be transfer fees, if you transfer money out of the account more than the given amount. Many banks only allow you to perform a certain amount of transfers during a given month, and if you exceed this amount you are hit with a transfer fee. The fee is typically just a few dollars, but if you are hit with these fees over and over, the MMA may not be worth it, as all the money you make off the higher interest rate is neutralized due to the fees.
The interest rate on an MMA varies from month to month and often week to week (depending on how often the interest is compounded). Because the funds are invested in government and corporate securities, the percentage is going to fluctuate as the securities do. This is similar to a money market fund, which is offered by many investment brokerage firms. If the securities are not performing well, the overall interest you receive reduces, while if the security is performing at a higher than average rate, the interest also increases. It is possible for the interest rate to drop under what a standard savings account offers, but this is highly unlikely. The interest placed on a savings account is rather low, so the security would have to basically bottom out in order to reach these levels.
If at all possible, it is best to shop around before opening an MMA. Generally speaking, smaller local banks and credit unions offer the best rates and don’t have as many fees. However, many of these institutions are rather selective to who is able to open an account, so if you aren’t a local resident or don’t already know someone in the banking system, you may not be allowed to open an account. Larger banks take just about anyone with a job and some money (and often times, you don’t need one or the other to open an account) but there are more fees, and the fees are higher also. Because the bank has the recognized name it is able to charge more for services and get away with it. You do have the added convenience of more ATMs throughout the country and your area, and it may be worth going through the larger banks, as long as you are able to steer clear of the hidden fees. Regardless of what bank you go with, MMAs are a valuable investment asset.