If you’re planning to move your money from a regular savings account to a money market savings account, you will benefit a lot from knowing their differences.
Interest rates and earning potential
The money deposited into a money market account earns interest in the same way as a regular savings account does. In money market accounts, interest rates vary. The higher the amount there is in the account, the higher the interest rate is.
However, the money market account performs slightly better than the regular savings account. Money market savings accounts yield an income of around 1% to 6%, while basic savings accounts give about 0.1% to 3%.
Security is one reason why money market accounts attract some people. The funds in this type of account are invested only in financially stable securities. Moreover, all the investments mature at an average of 120 days or less. As a result, the funds go into various government issues such as state, municipal, and federal debt securities. The yield is higher than a regular savings account, though lower than the average market.
Money market accounts allow withdrawal of money anytime—but with limitations. You can withdraw only three to six times a month. Banks usually charge about $5 to 10 for every withdrawal beyond the maximum the bank sets every month.
Funds from the money market account are as liquid as that of regular savings, and both accounts are designed for people who want easier access to their money.
However, the money market account requires a higher minimum balance and has higher interest rates. If you fail to maintain your minimum balance, the bank will charge you around $5.
A small book called the register is issued to new account holders of money market savings accounts. This is where you indicate your initial balance or the amount of your first deposit, as well as your deposits and withdrawals in the future. The register serves as your record of all your transactions and the amount of money in your account.
You will also receive a monthly statement of your account either through mail or online. Like the register, the statement contains all your transactions, extra fees, and the interest you earned.