One of the safest investments for most people who don’t have much money to take risks is a money market account. As long as the FDIC backs the bank, it should protect your money. To accumulate interest, you need to make sure the bank guarantees a rate that matches or exceeds the average money market return.
So, what is that average percentage? As of March 2021, the FDIC reported a national average of .06% APY for money market accounts with deposits less than $100,000. For accounts with higher amounts, the average is .11% APY. Keep in mind that this includes actual physical banks and not necessarily online or partly online banks.
Financial institutions that do most – if not all – of their operations online are better able to give their customers a higher APY. It’s not just banks that offer money market accounts: credit unions offer it and often offer a decent average money market return. Overall, if you want to start an account online, you can expect the APY% to be at least .35%.
Other factors will be necessary, such as the minimum deposit amount, fees, withdrawal limitations, and whether or not there are perks for loyal customers. For instance, depending on the bank or credit union, your average money market return may go up if you open up another account with that same institution and link your accounts together.
Average Money Market Return of a Bank and Mutual Funds
You probably already know the difference between a money market account with a bank and a money market mutual fund. Still, just in case you don’t, the former is federally insured in an account that accumulates interest.
The latter is a type of investment you put your money into that goes towards highly liquid, near-term instruments, such as cash equivalent securities, debt-based securities (with short-term maturity), or cash itself. An investing fund company sponsors this type of MMA. While relatively low risk, it still has no guarantee of principal.
When choosing an online bank, make sure the sign-up and deposit process is easy and straightforward. You should be allowed to access your money easily just in case there is ever an emergency.
All of these criteria are available with CIT Bank. It also offers a higher than average money market return, which is currently 0.45%. Customer service is good, and there are no monthly service fees or unnecessary maintenance fees.