Posted on January 13, 2010.
How to choose a money market account If you have decided to use a money market account to benefit from higher interest rates and avoid the risks associated with investing in others, your next decision is to decide what the money market account to open. money market accounts are like savings accounts in that the money you deposit is insured by the Federal Deposit Insurance Corporation (FDIC), even if the bank holding your money is going bankrupt - the government guarantees that you will not lose your money. The government guarantee makes money market accounts of the safest option to invest money with a guaranteed return and the ability to access your money whenever you want.
When you choose a money market account to save your money, there are a number of things you'll want to consider to make the best choices for your particular situation.
1) Number of withdrawals allowed
Money market accounts usually set up a limit to the number of withdrawals you can make each month. If you plan to use the account frequently, you'll want to look for money market accounts with a number of limitations to withdraw, to not get into trouble when you reach your limit before the month is over.
If your goal is to deposit a sum of money and make withdrawals very limited when you run out of cash in one month, you probably do not need to worry about the limitations of withdrawal. On the other hand, if you want to use your money market account more like a checking account, you want to be sure you select one that offers enough monthly withdrawals if you do not pay fees for transactions too.
2) Minimum Balance Required
Although you can open a standard savings or checking account with almost anything these days, money market accounts require much higher minimum balance if you want to avoid the "minimum balance fees. Make sure you have enough money to keep in the account to ensure you are always above the minimum balance required, or you could end up paying more than the interest you earn in monthly fees .
If you think you can still below the required minimum balance, you may want to consider saving your money in a high interest savings account online until you have enough to meet the requirements of minimum balance.
3) account fees
Like any other deposit account, a money market account may have a variety of costs associated with it. Typical charges include making withdrawals over a month, or not having enough money in the account to meet the minimum required balance.
Keep an eye on other fees that the bank may require, including fees for checks and monthly service fees or maintenance fees, ATM withdrawal, etc. Consider how you intend to use the account and determine how much you will be charged to your account before you choose.
4) Interest rate
The main reason people use money market accounts is to take advantage of higher interest rates than they could get with a traditional economy or checking account. To maximize your interest income, you want to compare all the options available to money market accounts and choose the one with the best combination of high interest rates and low commissions based on how likely you are to use the account.
When you consider these four factors, you'll make a good choice for a money market account that maximizes the amount of money you earn on your savings by reducing the amount you pay taxes.
