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Best Money Market Account Rates for 2021
The best money market accounts (MMAs) can be a great low-risk investment for your emergency fund or extra cash. They offer better interest rates than personal savings accounts, but are more liquid than certificates of deposit (CDs). You can find the best money market account rates available using our tool below.
The best money market accounts in 2021
- Sallie Mae Money Market Account
- TIAA Bank Yield Pledge Money Market Account
- Capital One
- Discover Bank, Member FDIC
- BMO Harris Bank
Sallie Mae Money Market Account Rate
TIAA Bank Yield Pledge Money Market Account Rate
Capital One Money Market Account Rate
Discover Bank, Member FDIC Money Market Account Rate
BMO Harris Bank Money Market Account Rate
Synchrony Money Market Account Rate
What is a money market account?
A money market account (MMA) is a low-risk savings vehicle that banks and credit unions offer. Banks like MMAs because, unlike personal savings accounts, they can invest that money in other low-risk places including certificates of deposit (CDs) and bonds. The only thing they can do with the cash in your savings account is loan it to others. Also, unlike many personal savings accounts, you may need more cash to open an MMA, particularly at brick-and-mortar banks. Common account minimums are $1,000, $2,500, or even $10,000. Depending on your account, you may be able to write a limited number of checks. Federal regulations will limit you to no more than six electronic, check, or telephone withdrawals from your MMA per month.
In exchange for your larger balance and restricted withdrawals, you’ll receive a better interest rate than you would get with a personal savings account. Overall, an MMA can be a good choice if you want low-risk savings with a slightly higher interest rate as long as you can meet the minimum balance and will need only moderate access to your cash. If you can sock away your cash for a long period, be sure to compare your return from an MMA with what you’d earn from a CD. A CD may have a slightly higher interest rate, but you can’t withdraw cash early without a hefty penalty.
In practice, money market accounts and personal savings accounts can be quite similar when it comes to online, high-yield banks that may offer similar interest rates for each product. You’ll see more of a difference at most local banks, where MMA rates will be substantially higher — this is where the choice between the two becomes more compelling. However, you may run into higher minimum deposits, too. Ultimately, both are excellent places to keep your emergency funds or short-term savings.
Money market accounts vs. money market funds
Be careful not to confuse money market accounts with money market mutual funds (MMFs). You can find an MMA at just about any bank, but a money market fund is a more serious investment product offered by brokerages and the like. MMAs are insured against losses by the Federal Deposit Insurance Corporation (FDIC); MMFs are not. (If you open an MMA at a credit union, your money is insured by the National Credit Union Administration.) Your bank guarantees a certain rate for your money market account, but the interest a money market fund earns will fluctuate along with the market. Bottom line? MMAs make sense for savings you need to keep in a liquid, low-risk account; MMFs do not.
Though seasoned investors might not blink an eye before putting their money into an money market fund, here’s another cautionary tale to illustrate how MMFs are different than MMAs. In 2008, during the subprime mortgage crisis, there was a run on MMF deposits after one such fund “broke the buck,” returning only 97 cents for each dollar invested. The panic stemmed from the fact that MMFs try to keep their share prices at one dollar with no fluctuation. Traditionally, your principal is all but guaranteed, and the only question is how much interest you’ll earn. Later studies have shown that dozens more money market fund could have broken the buck if not for regulators’ quick intervention. Though reputable MMFs are still considered very low risk, choosing an MMA that is backed by the FDIC can ease a lot of your worries.
How to pick the best money market account
Most savers choose a money market account instead of a savings account because they want a higher interest rate. Looking for banks with the highest money market rates will mostly limit your search to online banks.
However, if you prioritize a firm handshake, face-to-face relationships, and more reliable service, don’t overlook local banks in your search for money market accounts. There are plenty that fared well in J.D. Power’s 2018 Retail Banking Study. Just remember that you’re probably going to get a much lower interest rate than you would online.
The factors I considered in my search for the top money market accounts were:
- No or low minimum deposit: While some MMAs are out of reach for average customers because of their high minimum deposits, many online banks have made MMAs more accessible by easing this common requirement.
- High APY: Online banks tend to offer the highest yields.
- No or low maintenance fees: Some banks charge a monthly account maintenance fee regardless of your balance. Others waive it if you maintain a certain balance, and the best money market accounts don’t charge one at all.
- Other fees are reasonable: Note whether a bank is comparable to its competitors when it comes to fees on overdrafts, wire transfers, and the like.
- Miscellaneous other perks: These include everyday things that make banking easier, such as check-writing privileges, unlimited ATM withdrawals, remote check deposit, online bill pay, and 24/7 account access.
We welcome your feedback on this article and would love to hear about your experience with the MMAs we recommend. Contact us at firstname.lastname@example.org with comments or questions.