Money market funds are available at many credit unions and banks. They’re not just available to corporations and pensions funds; you and I have access to them as well. You can apply for an account at institutions across the nation and check the money market rates to ensure you get the highest rate of interest too.
There are different minimum balances to open a money market account. Sometimes, the initial interest rate is different to the one that your account will receive long-term. There are also other conditions that must be met to either open a money market account or to keep it open.
Here are a few of the benefits of using a money market account.
FDIC Insurance
The U.S. government protects savings and some types like money market ones with FDIC insurance. This is federally insured protection against the savings institution, bank, or other financial company going bust. The FDIC steps in to reimburse you should that happen, even if the bank goes under.
Not everyone realizes that money market funds are protected by FDIC coverage, so look for the logo and information to confirm it before signing up to be sure.
Fund Availability
Depending on the account, you’re able to make a number of withdrawals of funds from a money market account each year. Most institutions allow up to six withdrawals a year either via a bank card or a bank transfer. When you have access to a withdrawal through an ATM, this isn’t always counted as part of the allowance.
The greater level of access to money market funds is one of the market benefits over a traditional CD savings account that locks your money away for a period of months or years with either no access to it or serious penalties to break the CD.
Debit Card or Writing Checks
It depends on the institution where the money market account is held, but some accounts provide a debit card or some checks to make or issue payments more easily. With checks, it makes it easier to mail one off with a bill and not have to worry about it. Paying for items through your debit card is also easier than having to fill out paperwork to do so. There may also be some other benefits given to card holders too.
Ideal for Short-term Cash Holding
Whether you’ve recently sold your house and have the previous equity sitting in cash in your checking account earning zero interest, or you’ve had a recent windfall or inheritance, a money market fund is a great place to stick short-term money to earn some interest while you figure out what you want to do with the funds. Making one percent or more on your money is a better way to combat the threat of inflation than receiving a paltry return on a checking account.
Money market funds are extremely useful when you want to make a bit of interest on your money and still maintain easy access to it at the same time. The FDIC insurance on the balance lets you sleep at night too.
