Best Money Market Accounts (MMA) and High Yield Bank Rates
Published 2/2/09 (Modified 9/12/11)
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.