Money Blue Book

Review Of TurboTax and TaxCut Online Tax Preparation Software

According to some news statistics, more than half of all Americans hire a professional tax preparer to file their taxes. In this day and age, those kinds of stats frankly surprise me. I would have thought by now that the vast majority of Americans would have finally embraced the benefits of online tax preparation and the added cost saving advantages of utilizing do-it-yourself tax software products. Chalk it up to the continuous complexity of our marginal tax bracket system with all of its intricate income tax deductions and tax credit varieties or blame it on the tendency of people in general to outsource their financial responsibilities – but many people still stubbornly prefer to depend on professional tax experts to take care of their annual income tax filing obligations instead of doing it themselves.

For many people, filing income taxes is a painful, expensive, and dreaded task – but it really doesn’t have to be. While I’m not suggesting the filing of one’s income taxes will ever become an enjoyable experience (that will never happen), there are mitigating ways to make the process much more bearable. In the past, when April 15 tax day drew near, the only way to avoid having to flip open the bulky U.S. tax code or pour over the volumes of tax regulations and detailed tax commentaries, was to go out and pay $200-300 for an overpaid accountant or professional tax preparer to fill out the appropriate tax forms for you. But now, with the availability of very affordable discount tax preparation packages from major tax software developers like Intuit and H&R Block, and the prevalence of user-friendly and comparatively lower cost online tax preparation solutions like TurboTax, TaxCut, and TaxAct – preparing and filing your own simple tax returns without the pricey services of an overrated accountant is a very realistic option. With the help of top of the line tax preparation websites and software, filing your own taxes can be an easy and affordable experience. For those that qualify, there are even ways to file taxes online for free.

File Your Own Taxes With The Help Of Online Tax Software and Save Money

The process of preparing one’s own taxes, even with the assistance of highly automated tax software and online tax preparation programs, is a highly educational and financially empowering experience. In this age of advanced computer software and electronic E-filing via the Internet, there is little need to fiddle with paper income tax forms anymore. Unless your tax return involves complex business tax issues that require a tax lawyer’s legal advice, most ordinary returns can be prepared by the taxpayer without professional supervision or assistance.

Those that insist on hiring a local third party tax preparation expert to do the brunt of their taxes for them may be surprised to learn that many of these so-called tax experts frequently rely on the same tax preparation software tools to do your taxes that are freely available to you as well. As someone who attended law school with subsequent experience working as a volunteer tax preparer for low income people, I’ve witnessed this first hand in many cases. Oftentimes, when you hire a tax professional to prepare your taxes for you, all you are doing is paying a lot of unnecessary money for some lowly entry level tax preparation agent to perform simple data entry into a completely automated tax software program.

So instead of shelling out $300-400 for what often amounts to nothing more than glorified data entry, why not strive to perform this simple task yourself? The reality is that the vast majority of income tax returns do not require the expensive services of an accountant or tax lawyer to prepare – most can be performed efficiently and accurately from the privacy of your own home.

Comparing The 2009 Online Tax Preparation Software Versions Of Intuit’s TurboTax and H&R Block’s TaxCut For Tax Year 2008

The tax preparation market is filled with hundreds of choices as competition for your business is very stiff. However, sitting at the very top are two of the most established and expertly developed online tax software products – online and desktop brands that have withstood the test of time and consumer review scrutiny – Intuit’s Turbo Tax and H&R Block’s TaxCut. Together, TurboTax and TaxCut enjoy the biggest market share among consumers looking for an affordable online and software driven tax preparation alternative to hiring an expensive tax professional. While TurboTax is the preferred choice for most people, with TaxCut being a close runner up second, they are very similar and both offer the same primary benefit – the ability to do your own taxes, conveniently, accurately, and affordably.

TurboTax and TaxCut are similar in so many ways that consumers frequently get the two confused and can’t decide which of the two popular tax preparation software packages offers the best tax preparation deal. Overall, you can’t go wrong with either one of the 2009 versions of Turbo Tax or TaxCut for tax year 2008 as both products have already gone through a tremendous amount of research and development, and subjected to numerous product testing upgrades. Both tax software products offer all of the tax filing features you’ll need to generate accurate returns and file your taxes electronically without hassle. Both TurboTax and TaxCut also feature top notch user-friendly designs that walk you through the income tax preparation process, without requiring you to deal with the the complexity of income tax law. With the ability to automatically save your carryover tax information for future year’s tax returns as needed, it’s important to pick a favorite online tax preparation brand and stick with it as you’ll likely end up going with the same online tax preparation company again year after year, due to brand familiarity.

While I highly advocate taking advantage of online TurboTax or online TaxCut for your tax preparation needs, there are still those who shun the Internet in favor of the less identity theft-prone traditional desktop software versions. The biggest difference between filing your taxes online vs. software used on your computer – is who holds your personal confidential data. Do you trust Intuit (the maker of TurboTax) and H&R Block (the maker of TaxCut) with all of the details of your life and personal finances? If you think their websites and databases are 100% safe from data theft, then stick with the more versatile and convenient online route – otherwise, buy the desktop software versions. Personally, I overwhelmingly prefer going with the online option as I have full confidence in the abilities of these reputable software makers to keep my online information safe and secure. Both products have been around for many years and both are run by legitimate companies with tremendous financial and professional backing. Besides, the ability to archive info online and import your prior year’s tax data automatically onto the following year’s tax forms as needed is an extremely convenient and invaluable bonus for me. Importing the previous year’s tax data automatically cuts down on data entry mistakes and gives a tax reference point during the interview questions for the current year’s tax return. Both TurboTax and TaxCut also offer support for importing data from other financial software packages such as Quicken 2009, QuickBooks, as well as Microsoft Money.

In terms of features, both TurboTax and TaxCut were designed with tax newbies in mind as both software tools provide a significant amount of hand holding and pre-chewing. For the benefit of tax beginners, both programs walk you through the various tax topics using a very easy to understand interview process, breaking complicated tax topics such as tax deductions, sole proprietor income, and capital gains income into more manageable bite-size steps. Having used both TurboTax and TaxCut before, the experience with filing your online taxes with either one can be likened to an actual question and answer interview with a live tax preparation expert. As the online program moves you along subject by subject, your various answers to its direct questions will cause relevant numbers to be automatically dropped into the correct fields on your tax form as required. Both Turbo Tax and Tax Cut also feature a handy federal and state income tax refund counter display that cycles up and down as you proceed along the tax interview process, updating you on where you stand refund-wise at all times. Stumped by a particular tax issue or want to get into the nitty gritty about a particular tax subject? Both TaxCut and TurboTax feature helpful tax explanation tabs throughout the entire tax preparation process for those that want to learn more about the relevant tax regulations behind the interview questions.

When you’ve completed the step by step consumer friendly tax interview, both Turbo Tax and Tax Cut offer a free error checking feature that scans your completed tax return for potential tax errors or possible accounting issues that may trigger a tax audit flag (such as clerical mistakes like indicating a stock purchase or sale on a government holiday when the stock markets were closed). Having an automated system effortlessly scan your tax return for mathematical and preparation errors beats having to double check your own tax numbers manually if you were doing things by hand. Both tax software programs also offer audit risk assessments and provide a comparison of your tax numbers to the U.S. averages, an interesting feature for those who like to know where they stand in relation to the population at large.

The bottom line is that both Tax Cut and Turbo Tax crunched out the same exact tax refunds when supplied with identical information, based on my own tests of both programs. Both tax preparation software algorithms proved to be highly accurate and very user friendly. Most of the slight differences between the two programs are primarily graphically based and center around how the respective websites lay out their tax interview content. TurboTax gets a slight edge in this department as it’s a bit easier to get started with and get going for the first time user of online tax preparation software, but the differences in comparison to TaxCut are rather minimal.

Both TaxCut and Turbo Tax come in separate online basic and premium business editions, with TurboTax differentiating its editions by taxpayer-type, and TaxCut differentiating its editions by the level of tax advisor support desired. Cost-wise, TurboTax is the more expensive tax application between the two top choices, but in my opinion, its online program is a bit more well put together and performs sleeker than its biggest competitor, TaxCut. If you are a new beginner to online tax preparation programs, I’d recommend trying out online TurboTax over HnR Block’s online TaxCut software due to TurboTax’s slightly more user friendly and more graphically intuitive website interface. However, both are equally capable of helping you prepare and file your taxes accurately without breaking the bank.

Review Of Intuit TurboTax Online 2008

Compared to H&R Block’s TaxCut, Intuit’s TurboTax program offers a slightly more graphically pleasing and informatively complete tax preparation experience. TurboTax also offers greater in depth tax explanations and extra hand-holding guidance as you work your way through its tax interview process. Where TurboTax really shines however is in the area of automated data importation. Unlike HR Block TaxCut, TurboTax allows you to import tax data and payroll information directly from employers who use ADP, PayChex, or ProBusiness, which according to software maker Intuit, covers more than half of all U.S. employers. This is not a feature that is currently supported by TaxCut. While not an absolute deal breaker for those who like TaxCut, it is a pretty significant bonus in favor of TurboTax, at least in my opinion. A search through web reviews will also review a nearly unanimous agreement that TurboTax is indeed an overall better online product than TaxCut, if only by the slimmest of margins. At least one reviewer, PC Magazine, has selected TurboTax 2008 as its editor’s choice as the number one online tax service provider for 2009.

TurboTax 2008 comes in a multitude of editions including the free edition, the deluxe edition, the premier edition, the home & business edition, and the feature-filled business edition for corporations, partnerships, and limited liability companies (LLC). I recommend taking a look at the provided TurboTax price comparison chart to find the right tax package for you.

• TurboTax 2008 Free Edition - Intuit’s free online tax preparation package is appropriate for those with simple 1040 EZ tax returns. While the federal edition is indeed free, the state portion will cost extra.
• TurboTax 2008 Deluxe - Most popular version – used by the vast majority of people. It’s targeted at those in the middle ground with some degree of tax complexity, such as those who own a home, have made donations, or have some medical expenses to deduct. Best of all for returning customers, this version permits data transfer from the prior year’s return.
• TurboTax 2008 Premier - This TurboTax version helps you with maximizing deductions and is specially suited for those who own stocks, bonds, mutual funds, and most notably, rental properties.
• Turbo Tax 2008 Home & Business – Specially geared towards the income tax and deduction complexities of sole proprietors, consultants, independent contractors, and single owner LLC businesses.
• TurboTax 2008 Business - This package is the most full service complete version, designed for those who run a corporation, a partnership, or a multi-member LLC business.

Price-wise, TurboTax is more expensive than TaxCut, but I think the higher quality cost is worth the higher comparative price – which is why I use TurboTax to handle the bulk of my online tax preparation needs. As a heavy user of Quicken 2009 and Quicken Online products, I prefer sticking by the same software maker who designed these products as I anticipate greater future cross compatibility some day.

Review Of H&R Block TaxCut Online 2008

Brought to us by the popular U.S. tax preparation chain, H&R Block’s TaxCut is a worthy online tax preparation alternative to TurboTax. TaxCut offers a highly similar user-friendly tax preparation experience as TurboTax with the same hand holding help and customer friendly explanations during the entire tax preparation process. However, TaxCut’s biggest selling point perhaps is its lower product cost and online editions geared towards providing extra live tax adviser support. Tax Cut product editions are generally a bit cheaper compared to their TurboTax edition counterparts but they offer nearly the same features, including data importation functions and the ability to automatically download data from prior tax returns into the current year’s tax forms. One of the only significant features offered by TurboTax that’s not provided in TaxCut is the ability to import 1099, 1098, or W-2 tax data automatically from a database of employers without resorting to manual data entry. This is certainly a very convenient feature offered by TurboTax not available in TaxCut, but one has to wonder if this online perk is worth TurboTax’s much higher comparative price.

While on the whole, TaxCut’s online interface, online tax descriptions, and help search features are not as aesthetically pretty or extensive as that offered by TurboTax, these rather mild and slight drawbacks do not detract from the fact that H&R Block’s TaxCut program is a very user-friendly and accurate online tax preparation tool. Those wanting more extensive live tax advisor support from a real person may want to consider H&R Block’s TaxCut program over TurboTax, as TaxCut is backed by a greater network of actual brick and mortar tax preparation branches.

TaxCut’s various editions are broken down based on the level of customer and live tax advisor support desired – ranging from 1 free included session of tax advice, to unlimited support from a live tax professional agent from one of H&R Block’s many tax preparation offices.

• TaxCut 2008 Free Edition – The Free edition is the most basic online TaxCut package – best suited for those with simple 1080EZ tax returns. While this product supports most income tax forms, you will get very little guidance or assistance in filling them out.
• TaxCut 2008 Basic – The Basic version supports the same tax forms as the Free edition but with this edition, you can transfer data from past TaxCut tax returns and even import data from rival TurboTax.
• TaxCut 2008 Premium – The Premium TaxCut version offers the same features as the Basic level edition, except it also throws in an “Ask a Tax Adviser” session with a live H&R Block tax preparation professional. This edition is recommended for most taxpayers as it offers the option to ask a live agent a more complex tax question for free should the need arise.
• TaxCut 2008 Signature – With the nearly full service TaxCut Signature edition, you will get all of the tax preparation assistance you’ll need in the form of unlimited tax advice from an actual H&R Block professional who will not only personally review and edit, but also sign and e-file your return for you.
• TaxCut 2008 Online Office – With this complete full-service tax preparation edition from H&R Block, the company will do all of the tax preparation work for you. If your income tax return or financial situation is pretty complex, this edition may be recommended.

Tax Cuts, Social Spending, and New Jobs – But What About Stimulus Checks?

A second economic stimulus package for 2009 is on the way and from the looks of things in the news, it appears newly minted President Barack H. Obama and his Democrat controlled House of Representatives and U.S. Senate are determined to ram the lucrative spending proposals through the legislative meat grinder no matter what, much to the chagrin of skeptical and deficit-weary Congressional Republicans.

As Congress debates the wisdom and intricate details of the current version of the 2009 economic stimulus package, it’s clear that something needs to be done very soon to jumpstart and save our suffering economy before we spiral into a full blown economic depression. The unemployment rate is rising fast and everywhere you turn, there seems to be a never ending stream of unemployment and layoff news being announced everyday. The stock market has already shed more than half of its value since its peak in 2007, and billions to trillions of dollars worth of wealth have already been eliminated from the economy. Major banks and financial giants like Citibank, Bank of America, and JP Morgan Chase, once the financial pillars of our economy and the lifeblood of our credit industry, are now clinging onto U.S. government bailout money for dear life – hoping to still be in business at the end of every quarter.

With its almost limitless resources, it’s clear the federal government must intervene somehow and put this broken economy and financial system back on track to prosperity. But the question is – what should be the government’s role in all of this? More specially, what method should the government take to effectively jump start the economy to life again and ease the suffering on Main Street and Wall Street? Should the 2nd economic stimulus package continue to focus directly on sparking consumer spending by featuring a second round of free stimulus checks to consumers – perhaps for amounts much higher than the previous 2008 economic stimulus checks? Or should the plan this time around focus more on longer term indirect measures like job creation, infrastructure investment, and tax credits?

Current 2009 Economic Stimulus Package Focuses Less On Stimulus Checks – And More On Job Creation, Infrastructure Projects, and Tax Cuts

Before Barack Obama was elected president and during his 2008 Presidential election campaign, he supported implementing additional economic stimulus measures in 2009 – and even whispered at the rumored possibility of a second round of stimulus checks for taxpaying consumers in 2009 before tax day.

Whether a second stimulus check was a real possibility or not, the mere mention of a second round of stimulus payments and the prospect of getting more free government money certainly made my greedy ears perk up, but much of my optimism and enthusiasm were quickly dashed when Obama finally came into power. Almost immediately, he signaled a different stimulus proposal shift that favored a more multi-pronged approach of using tax cuts, tax credits, and pet projects, rather than relying on the 2008 economic stimulus check tactics of his predecessor, George W. Bush. Instead of just distributing free bailout money to the masses and hoping the funds will naturally trigger a huge surge in consumer spending activity to put the economy back on its feet again, Obama’s stimulus package focuses more on middle class tax cuts and massive increases in government spending to fund various infrastructure investments, green energy projects, financial aid to states, and social education initiatives – designed to create jobs and put people back to work.

The current 2nd economic stimulus plan laid down by President Obama for 2009 is a whopping, super-sized $825 billion economic rescue package containing staggering spending initiatives and ambitious tax cuts, and sprinkled with dozens of pork-based proposals and suspect social initiatives within hundreds of pages of legislation. The current package contains $300 billion worth of aggressive construction projects designed to improve the country’s  infrastructure and create millions of new artificially generated jobs in areas like health care, renewable green energy, school upgrades and repairs, and transportation related improvements. The package also contains about $200 billion worth of state social assistance provisions designed to help keep state sponsored health and unemployment programs well funded – to offer a measure of cushion for those people who have been recently laid off due to the economic down turn. Along with the state assistance portion are other safety net type provisions to help fund and keep afloat local food stamp programs, food banks, state sponsored health care, and governmental health insurance plans for those suddenly unemployed.

The other primary feature of the current Obama economic stimulus plan is the series of tax cuts and tax credits offered to qualifying individuals and small businesses. Under the tax cut portion of the stimulus deal, small businesses suffering losses because of the economic downturn and recession would receive more favorable tax loss write off terms.

For individuals, the current 2009 economic stimulus package offers pretty generous tax cutting proposals. The plan highly favors low and middle-income working families since the idea is that these income groups are more likely to spend and invest their tax savings rather than save the money. In terms of stimulating the economy, increased consumer spending is good, and consumer saving is bad. Nicknamed the “Make Work Pay Credit” by President Obama, the proposed tax credit is supposed to reach close to 95% of workers, and benefit even working tax filers without any tax liability – typically very low income workers. Here is a basic overview of the stimulus plan’s Make Work Pay Credit:

• Middle Class Tax Credit: Under the plan, there would be a tax cut amounting to $500 a year for individuals, and $1,000 for couples. The economic stimulus would be issued in the form of a tax credit, and would be limited to those making $75,000 or less ($150,000 or less for married workers filing joint tax returns).
• Low Income Tax Credit: For low income taxpayers, there would be an increase and expansion of the Earned Income Tax Credit to provide a refundable tax credit for low income assistance. The expansion would affect even working tax filers without any actual net tax liability – typically very low-income workers – and allow them to potentially qualify for free stimulus tax refund credits.
• Child Tax Credit: For those who have children, a temporary increase in the child tax credit would result in larger tax refunds.

Should The 2009 Economic Stimulus Plan Be Re-Written Or Re-Packaged To Contain Major Provisions For A Second Economic Stimulus Check?

It’s too bad the eventual 2009 stimulus plan probably won’t contain another round of hefty stimulus check payments to ordinary consumers like the ones that were dished out last year. While the 2008 stimulus tax rebate wasn’t much (only a few hundred dollars in my case), some additional government handouts in higher dollar denominations would still have been greatly appreciated by individuals like myself and put to good use. Plus, as an American consumer who embraces the virtues of capitalism, I feel I would have made a better decision for myself as to how best spend my portion of the stimulus money pursuant to what’s in my own best capitalist self interest.

Overall, I think President Obama’s administration is probably right in its revised efforts to focus more on job creation, offering greater tax cuts, and enhancing safety net protections to help suffering Americans survive the economic downturn for the long term. Offering greater financial assistance to struggling state unemployment programs (many on them on the verge of running out of funds), and stimulating growth with more job building projects is a proven way to stabilize the markets and improve consumer sentiment. However, I’m still a bit disappointed that the President and Congress have not explored the prospect of an enhanced second stimulus check further.

At least for now, President Obama’s administration seems to have given up on the idea of using government stimulus checks en masse again to jump start the economy. Instead, Obama’s advisers have indicated that they would prefer searching for viable ways to get government stimulus money into the hands of American taxpayers quickly that would not require or duplicate the tax rebate checks of last year. Apparently the $150 billion spent in 2008 in the form of stimulus payments to consumers proved to be quite an economic failure and pointless exercise of futility in terms of actually stimulating the economy to any extended degree. But perhaps the reason it didn’t work properly the first time around was because too little money was given out to substantially change consumer spending habits to forcibly inject money back into the economy again (simply compare the $150 billion spent last year to the $800 billion-plus worth of spending being proposed for 2009).

Perhaps The Problem With The First Stimulus Checks In 2008 Was That They Were Too Little To Make Much Of An Impact

I have mixed feelings about the prospect of yet another around of direct stimulus checks to consumers. On one hand, I understand that there are many struggling American families getting hammered by higher living  costs, and suffering from the ills of unemployment and layoffs. However, I’m not entirely convinced that the idea of handing out free money to families will really solve all of our economic woes and jump start the economy at its core. But yet I still wonder if perhaps we gave up on the idea of stimulus checks too early and that maybe, the concept is still workable. Maybe the amounts issued in 2008 were simply to small to change anyone’s spending habits as initially intended – after all, only about $150 billion was spent in 2008, when the current 2009 economic stimulus proposal’s already ballooned to a whopping $850 billion.

I know when I received my tax rebate stimulus check in early 2008, the check only amounted to a few hundred paltry dollars – not really enough for me to go on a greedy spending spree. So instead of spending it and doing my part to stimulate the economy, I ended up doing what most people probably ended up doing with their tax rebate check – putting the money in a bank and depositing it into a high yield savings account. Of course, my plans for the money would likely have been very different if the amount wasn’t something low like $300, $600, or $1,200, but rather something as high as $10,000. If the stimulus check issued to me was indeed worth upwards of $10,000, I would very likely have saved a small portion of it but ended up plowing a sizable portion back into the economy by spending it on major expenditures like a new wide screen plasma TV set, new home appliances, or even a new car.

What If The Entire Economic Stimulus Bailout Package Went Towards 2nd Stimulus Check Payments? Would This Actually Stimulate The Economy?

Almost all polls among ordinary American consumers show overwhelming support for a second stimulus rebate check. After all, who would really oppose it? Who would be opposed to receiving free stimulus check money. Think the prospect of getting a second stimulus check worth as high as $10,000 as a consumer bailout is impossible? Well it’s probably unlikely, but it’s not out of the realm of financial or budgetary possibility, at least based on the fiscal numbers alone.

On CNN Money, a very interesting question was proposed in regards to the bank bailout and economic stimulus packages. If instead of bailing out these credit crisis-stricken banks (who probably deserve their fates due to the risky mortgage bets they greedily placed into subprime loans), we just gave all of the bailout money to taxpayers in the form of a massive consumer cash stimulus. How much would we each get if the entire current economic stimulus proposals were issued out to consumers as a second round of stimulus check payments? The second important question to ask is – would this actually stimulate the economy for the necessary extended period of time to get it going again?

To arrive at the figure, CNN Money took the total amount of the bank bailout package of $700 billion and added that to the proposed 2009 economic stimulus spending estimation at the time of $819 billion – resulting in a total bailout package of $1.519 trillion (that is quite a staggering figure). Dividing that number by 156.3 million, the total number of U.S. workers who filed federal income tax returns in 2008, that number equaled $9,718.49 per U.S. taxpayer, or roughly the equivalent of a juicy $10,000 cash bailout payment for each qualified tax payer. Now that’s stimulus with oomph! With $10,000 in our pockets in the form of instant windfall economic stimulus checks, it’s very likely that the tremendously high amount would be sufficient to incite a major change in spending activity than a measly $600 check ever could.  People would probably go out and actually start stimulating the economy by buying cars, purchasing TV’s, paying for college studies, and going on vacations.

As a dose of devil’s advocate inspired reality though, while it’s very possible that $10,000 checks in every working taxpayer’s hands would probably send the economy skyrocketing, it’s also possible the growth could be short lived and not actually get to the true root of our current economic problems. The massive surge in consumer spending probably won’t do much to solve the lingering fundamental issues surrounding our current credit crisis, which centers around a failed banking system and a failed home mortgage lending market. But then if repairing the banks and injecting confidence back into our home mortgage and credit lending markets are our primary objectives – I’m not sure the current economic stimulus proposals by President Obama, which are focused more on tax cuts and job creation and most prominently, aggressive social spending programs – will actually accomplish those goals. At least for stimulus checks, they could be able to help alleviate some of the immediate economic suffering being felt by ordinary consumers – many of whom are fighting to stay alive, with a great deal currently resorting to desperate emergency fund measures like 0% credit card offers, balance transfers, and risky high interest payday loans.

I’m curious as to everyone’s opinion on the wisdom of a second stimulus check (if it ever happened). What’s your take? Would substantially higher stimulus checks of $1,000, or possibly even as high as $10,000, actually encourage you to spend the money (thereby stimulating the economy) instead of merely saving the amount or using it to pay down debt? How would your decision compare to how you actually spent your previous 2008 tax rebate stimulus check?

Updated List Of The Best Money Market Savings Account Rates Below

Amidst the current economic recession and ongoing credit crisis, there is an active flight to quality as consumers flee risky and volatile investments in stocks and mutual funds in favor of safer asset choices like high yield savings accounts and certificate of deposits (CDs) with the nation’s best banks. But while bank deposit products all enjoy similar safety and security assurances under the auspices of the federal government, they are not all created equal, as certain deposit categories offer higher interest rates than others, while others afford greater comparative flexibility.

In the world of FDIC insured banking products, there is a natural give and take tension between the interest rate of return offered by any banking product and the degree of liquidity or flexibility afforded. The rate of return for any banking product refers to the annual percentage yield (APY) or interest rate offered in exchange for investing your money in a particular banking asset. Liquidity and flexibility of any bank account product refers to how quickly and easily you can tap into your money at will and convert it into immediate spendable currency. The general rule of thumb for bank accounts is that the higher the interest rate of return offered, the less flexible or liquid the account. Likewise, the more flexible and readily accessible the bank account product, the lower the interest rate offered as tradeoff.

When it comes to getting the best interest rate of return, the best CD rates easily beat out the best interest rate yields offered by checking and savings accounts most of the time. However, CD terms and conditions tend to be substantially more restrictive compared to the other mentioned bank deposit products. When you open a CD savings account, you agree to lock your money up for a predetermined fixed period of time in exchange for a higher than average fixed interest rate of return. Until the CD deposit term limit matures however, you won’t be able to access the interest bearing CD account early without paying a hefty early withdraw penalty fee. On the other far end of the interest rate/liquidity spectrum are checking accounts. Checking accounts offer the most flexibility and convenience for consumers, with the fewest number of restrictions if any. With checking accounts, you can access your money at any time, write as many bank checks as you wish, execute as many ATM transactions as needed, and generally fund your account with as little or as much money as you’d like. But the inevitable trade off for the more favorable account terms is an account that earns very low interest if any at all. Aside from a few high yield online checking accounts, retail checking accounts offer pretty pitiful APY rates. Don’t count on retiring with the minuscule interest income earned from your checking accounts.

Money Market Accounts Are Hybrid Mixtures Of Bank Checking Accounts and Savings Accounts

Those that want to capture the high interest rate benefits of restrictive banking products like CDs, but still be able to enjoy much of the account flexibility and cash accessibility of checking accounts may want to take a look at money market accounts. Money market accounts offer high yield savings account-type interest rates while also delivering checking account style features like free check writing and convenient access to brick and mortar bank ATM locations. The primary compelling reason to open a money market account is to avoid having to extraneously maintain both a checking account and a savings account. For efficiency sake, some people simply prefer having a single hybrid money market account rather than maintaining multiple specialized bank accounts. I personally don’t mind owning over 15 different checking and savings accounts, but not everyone is so amicable to such artful juggling of their money.

While money market accounts offer the best interest rate features of high yield CDs and savings accounts, they also suffer from a few of the same limitations that plague such higher rate of return bank accounts. Such limitations include a maximum fund transfer limit of 6 ACH electronic transfers per month (may be limited to anywhere from 3-6 ACH’s depending on specific money market account terms), as well as tiered interest rates that often require the account holder to maintain high bank balances to earn the maximum interest rate yield.

While money market accounts are available everyone and can probably be found at your local brick and mortar bank branch or neighborhood credit union, the best money market rates are usually found online. For Internet promotional purposes, many online banks restrict their best money markets to online customers only. Here is an updated list of the best MMA interest rate offers currently available.

List Of The Top High Yield Money Market Account (MMA) Rates

Don’t Confuse Bank-Based Money Market Accounts With Broker-Based Money Market Funds

Money market accounts and money market funds sound similar but they are in fact two different animals altogether. Money market accounts are generally run by banks and credit unions – functioning as FDIC insured deposit accounts that offer a variable interest rate of return. Money market funds on the other hand, are mutual fund investments run by premium and discount online brokerages that invest primarily in short term lower risk assets like U.S. Treasury Bills, bank CDs, short term high grade corporate bonds, and government-sponsored municipal bonds. Unlike bank run money market accounts that are usually fully ensured by FDIC insurance, money market funds are offered by brokers as security investments, and thus do not enjoy the same FDIC protections afforded to traditional bank accounts apart from any temporary governmental guarantee program in effect.

Full FDIC Insurance Protection For Money Market Accounts Up To $250,000

Like other FDIC insured bank products such as CDs and savings accounts, your investment in a money market account is insured by the Federal Deposit Insurance Corporation (FDIC), which protects bank deposit assets in the event of bank failure or catastrophic financial loss. Backed by the full faith and credit of the United States government, FDIC insurance currently offers full protection for accounts held at member banks up to the current FDIC coverage limit of $250,000. With exceptions for different account categories, so long as your total money market account balances remain below $250,000 at any one institution, your entire balance enjoys the maximum protection afforded under the law.