If you want something more than a traditional savings account, there is always a money market account. It is because the high annual percentage yield, or money market rate of return, is often higher than that of a regular savings account – especially if you open the account with an online bank.
Whatever your savings goals might be, it’s pretty easy to get started. With an online bank, there might or might not be a high minimum deposit requirement. If you don’t have much, to begin with, there should at least be one good bank with a low deposit requirement. Also, make sure the one you choose is insured by the FDIC so that your money will be safe.
Some myths are associated with a money market account, so it’s essential to clear a few things up. For starters, a money market fund and an account are two very different things. A fund is a type of investment that has no backing by the FDIC. Its rate of return fluctuates depending on the state of the financial markets.
However, a money market account can be described as a hybrid between a savings and a checking account, and depending on the exact bank, may even have a declared interest rate that does not fluctuate. Therefore, the FDIC also protects it. Some credit unions also offer this type of account online.
Money Market Rate of Return Numbers
The money market rate of return is often higher than that of typical savings or checking account. In Sept. 2021, the rate varied from around 0.06% – 1.25%. Online banks and credit unions are usually able to afford to give back higher APYs than traditional banks.
Already have a savings account? The idea that only one savings account is enough is another myth. There are many reasons to open up more than one savings account and have a goal with each. For example, one account could be for long-term goals while another could be for short-term goals or emergencies. Also, a money market account has the benefit of check-writing privileges, debit cards, and higher interest rates. The potential downsides are that there are still limitations on the number of transactions. A fee could incur if that number is exceeded.
Which bank should you choose? Right now, CIT Bank is offering a decent money market rate of return at around 0.45%. While it might not be the highest, keep in mind that you only need $100 to start an account, which is significantly lower than other online banks require. Also, CIT Bank is known for its reliability and financial stability. Everything is FDIC insured.