Understanding and using banks

Money market accounts

Banks allow you to have checking accounts that pay higher interest rates than regular checking accounts. These accounts are known as money market accounts. They come with stipulations as you would imagine. The tradeoff (the reason you get paid more interest) is that they also require you to have higher balances at all times. These accounts typically limit you to writing only three checks a month.

While the interest rates are higher than other checking accounts, it might only be around 1-3% more. So keep this in mind. If you earn 1% on you regular checking account, you might earn around 4% on a money market account. However, you may have to keep a balance above $10,000or even higher to get the rate.

Banks are not the only place you can acquire a money market account either. The main advantage of a money market account through a bank is that it would be covered by FDIC insurance.

If you have $10,000 or even $25,000 in your emergency fund, your new car fund or other account like that, there might be better choices than a bank money market account. You should consider whether a CD might be a better idea because it probably pays an even higher interest rate. On the other hand, if you want immediate access to the money, a money market mutual fund would be better.

Be certain to speak with your bank rep for more details on rates and fees that apply to all of these banking options – especially when you have this much money saved. AT this level of finances in your life, you can really see your money perform for you at higher rates so be sure to get all you can out of this situation. It is your hard earned and hard saved money, so be sure you get all for your money that you can.

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