The current economic climate is making it difficult for savers to earn a decent return on their cash. Interest rates have been historically low for a prolonged period, and some banks barely offer any interest on savings accounts. Many people are settling for these low interest rates, but they don’t have to. An upgrade to a money market account may be a better option for those looking to boost their returns.
A money market account is like a hybrid of a savings account and a checking account. It offers a higher interest rate than a standard savings account but also allows more access to funds than a certificate of deposit (CD). Think of it as a savings account that pays you a better rate for keeping a higher balance.
Money market accounts are typically offered by banks, credit unions, or brokerage firms. They are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, just like traditional savings accounts. They typically have minimum balance requirements and may charge fees if the balance falls below the minimum.
So, why upgrade to a money market account? The main reason is the higher interest rate. Money market account rates are generally higher than savings account rates, and many offer tiered interest rates based on the balance maintained. For example, a bank may offer 0.05% interest on balances up to $10,000, 0.10% on balances between $10,000 and $50,000, and 0.15% on balances over $50,000.
Money market accounts also offer more flexibility than CDs. While CDs have a fixed term and often have penalties for early withdrawals, money market accounts enable you to access your funds at any time. They also usually come with check-writing and debit card capabilities.
Before opening a money market account, it’s crucial to research the interest rates, minimum balances, fees, and other terms and conditions. Some money market accounts may require a minimum deposit to open, while others may incentivize customers for opening an account with a bonus.
In conclusion, savers don’t have to settle for low-interest rates. An upgrade to a money market account may be a better option for those looking to boost their returns. Money market accounts offer higher interest rates, tiered rates, and more flexibility than traditional savings accounts, while still providing FDIC insurance. Research and compare different accounts to find one that suits your needs and goals.