Saving money is important for your financial wellness. Where and how you save it are equally important. Utilizing a savings account at your local credit union or other financial institution is a good start and is much smarter than storing cash under your mattress or in a shoebox at home. That’s because you will earn dividends for having your money on deposit, without the risk of losing the physical cash.
There are three main types of accounts used for savings: Savings Accounts, Certificates, and Money Market Accounts. The dividends on basic savings accounts are usually the lowest rates offered amongst savings products, and they continue to stay low even in rising interest rate environments. The average rate on savings accounts was 0.22% APY in August 2023.
Certificates are a good savings tool with competitive rates but they generally require you to lock your money in the certificate until the end of the term. There may also be a penalty if you close the certificate early. If you’re looking for savings and accessibility with your hard-earned money, the best bang for your buck is a Money Market Account, or MMA.
In this blog, we will share some general information on what you need to know about Money Market Accounts.
What is an MMA?
A Money Market Account is a type of savings account that offers higher dividends and more ways to access your funds, making it a good, flexible alternative to regular savings accounts. Unlike Certificates, there are no terms with Money Market Accounts. Instead, your funds remain liquid and accessible if you need them.
Benefits of an MMA
Along with a higher dividend rate, the benefits of an MMA are that you will be able to write checks directly from your account so you can access the money as needed, just like a checking account. Some financial institutions also provide a debit card with their MMAs for faster access to your money. Many Money Market Accounts allow you to make unlimited withdrawals or transfers. You can view your MMA online or make inquiries at a branch for more hands-on access.
Saving with an MMA means your money is safe and insured. Money Market Accounts at credit unions are federally insured up to $250,000 per account by the National Credit Union Administration, a federal agency. Likewise, MMAs at banks are federally insured at the same amount by the Federal Deposit Insurance Corporation.
Potential Limitations of an MMA
While an MMA is an effective way to grow your money, there are a few things to consider before opening an account:
- Some financial institutions may require a minimum balance with their MMAs. This could be $100, $500, $1,000 or more, depending on the rate and the term offered to open the account.
- Select an MMA that does not charge fees or penalties if you close the account before the term ends. Read the account disclosure information for details.
- With so many Money Market Account products available, it takes time to find the right one for you. Start with the credit union or bank you are currently using. Next search for other financial institutions in your area and review their websites to check their MMA rates and terms. Some may allow you to open the account online.
- Some financial institutions may limit the number of transactions per month, which may be a problem if you would like to access the money in your MMA. Be sure to ask about Regulation D, a federal rule that limits the account holder to making transactions on the account of six per month. During the recent pandemic, the government suspended the withdrawal limitations, but some financial institutions may have reimplemented it at this point.
MMAs Compared to Other Accounts
When comparing Money Market Accounts to other savings products, an MMA can earn more than a traditional savings account. As mentioned earlier, Certificates are another good savings tool to consider but they usually require that the money deposited be locked in for the length of the certificate term. A Money Market Account is different than a Money Market Mutual Fund Account, even though mutual funds may offer the ability to write checks, too. Instead, mutual funds are considered an investment product and not a savings account. That’s because mutual funds are offered by brokerage firms and follow different federal regulations.
Who Should Open an MMA?
Anyone who wants to earn a good rate on their savings should considered a Money Market Account. If you are saving to buy a car, a home, an emergency fund, or for some other purpose and want a convenient way to save, a MMA is an excellent choice.
Because MMAs offer higher interest rates than basic savings, you will be making your funds work for you faster. Plus, Money Market Accounts allow you to access your funds whenever you need them, unlike Certificates which lock in your money for that term and may charge you a penalty if you close the account.
How TCU Can Help
Travis Credit Union knows financial wellness starts with a strong savings plan. Our Money Market Accounts provide you with the flexibility, terms, and competitive interest rates you need to achieve your savings goals.
Also, saving money is one of TCU’s four financial pillars toward financial wellness. We can provide you with information and resources so that you can Plan, Save, Spend and Borrow better. Travis Credit Union can also provide you with a financial health assessment to help you identify where you are and what your financial goals should be.
There has never been a better time to become a member of TCU and opening an account is quick and easy online. Or, one of our friendly and knowledgeable representatives can help you with your financial needs at a branch. Make an appointment today so you don’t have to wait in line when you visit us.