Are you looking for a reliable place to put your hard-earned money? Chances are you’ve considered a savings or checking account. After all, both have long been touted as the basic “building blocks” of banking.
But now that you’re a little further along in your financial journey, you might be interested in something that offers even greater potential for stability, growth, and liquidity. If this sounds intriguing, then you might consider a money market account. The question now becomes: Is a money market account the right move for you? Let’s find out.
What is a money market account?
A money market account is a type of deposit account. that combines the features of a savings account (like interest and liquidity) with the transactional features of a checking account.
Why should you care about money market accounts? Because they can empower your financial decisions with the ability to meet your savings goals while also having the flexibility to access those funds as needed.
How does a money market account work?
Before you jump wallet-first into a money market account, it might be helpful to understand how a money market account works and that your business can open a business money market account as well. While a money market account combines a lot of the familiar features commonly associated with traditional savings and checking accounts, there are a few differences to consider.
- Opening/Minimum Balance: Like a savings or checking account, a money market account requires a minimum opening balance. However, that balance requirement is typically higher than a traditional savings or checking account and will vary depending on the financial institution.
- Interest: Much like a savings account, a money market account earns interest on the deposited balance. However, that interest is typically higher than a regular savings account and it is often variable.
- Checks: Much like a checking account, a money market account may also offer account holders the ability to write checks. However, in many cases there may be monthly limits in place regarding how many checks can be written.
- Debit Cards: Some money market accounts allow you to request a debit card, which may also be subject to monthly withdrawal limits.
Are money market accounts FDIC insured?
Yes. Money market accounts are typically FDIC insured. This means your money is insured up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
Can you lose money in a money market account?
Even though “market” is in the name, there’s no need to worry about losing money in a money market account like you might by investing in the stock market or in a money market mutual fund. Also, with a money market account, you aren’t required to lock your money in for a certain amount of time and there’s no risk of being assessed a penalty for premature withdrawal.
Please keep in mind, however, that if your money market account balance does happen to fall below the minimum requirement set by your financial institution, or if you incur too many fees, you might be at risk of losing money.
What’s the difference between a money market account and a money market mutual fund?
Perhaps the best way to tell the difference between the two is by simply understanding what a money market mutual fund is not.
- A money market mutual fund is not a savings or checking account. It is an investment fund and often carries more risk than a money market account or savings account.
- Money market mutual funds are typically offered by brokerage firms or fund companies.
- Money market funds are not insured by the FDIC. They are insured by the SIPC, which requires them to follow completely different regulations.
- Money market funds are not typically viewed as an ideal long-term investment but as a place to momentarily hold money until it is ready to be invested elsewhere.
- Funds in a money market fund may not allow as much access and often require one or more business days to transfer from a brokerage account to your bank.
Why choose a money market account over a traditional savings account?
When it comes to saving money, there are plenty of savings accounts to choose from — and a money market account or a traditional savings account are both great options to help you save. However, depending on your financial ambitions, each has unique capabilities that may tip the scales one way or the other.
- Functionality: Money market accounts and savings accounts both work in a way that allows you to make deposits and earn interest. However, unlike a savings account, a money market account is often equipped with transactional spending tools, like checks, bill-pay features, and even debit cards, making it more functional for routine use.
- Earning potential: As a higher-yield savings option, a money market account often offers higher earning potential when compared to a traditional savings account, making it a slightly more competitive option. As such, opening with and maintaining a higher minimum balance may be required, as well as the possibility of monthly service charges and/or fees.
- Accessibility: Money market accounts offer easy access to your cash through the transactional spending tools mentioned above. While some account holders may find this accessibility extremely beneficial as needs arise, others may be more interested in storing their money in an account that isn’t as readily accessible so that it can remain untouched and continually growing.
Ultimately, choosing one type of savings account over the other simply depends on where your financial interests lie. And who says you can’t have both? After all, both a money market account and a savings account are great for saving, earning, and working toward a financial goal — like starting an emergency fund, saving for a down payment on a house or paying for that dream vacation.
Zions Bank is here for you every step of the way
To learn more about Zions Bank’s money market accounts or the many personal banking resources and business banking services, visit Zions Bank online or stop by a local branch and speak with one of our experienced bankers today.
