If you’re looking for a new bank account that allows you to easily store as well as access your cash, you might be thinking about opening a money market account or checking account. But how do you know which to choose? Decisions, decisions. Both types of accounts have unique advantages, depending on your savings and spending goals.
âThink about how you will be using the money within the account,” says Jill Emanuel, lead financial coach at Fiscal Fitness. “Is this money for daily, weekly or monthly use? Or is it money that will not be needed regularly?”
You’ll probably need a little more to go on before answering the question, “How do I decide between a money market account or checking account?” No worries. Our roundup delves into the features of both types of accounts to help you determine which one could be right for your financial plans, or if there’s room for both in your money mix.
Get easy access to your funds with a checking account
In simple terms, a checking account allows you to write checks and make purchases with a debit card from the money you deposit into the account. That debit card can also be used to withdraw cash from the account via an ATM.
When deciding between a money market account or checking account, Emanuel says most people use a checking account for the primary management of their monthly income (i.e., where a portion of your paycheck is deposited) and daily expenses (often small and frequent transactions). âA checking account makes the most sense as the account where the majority of your transactions occur,” she adds. This is because a checking account typically comes with an unlimited number of transactionsâwhether you’re withdrawing cash from an ATM, transferring money to a savings account or swiping your debit card.
While a checking account is a good home base for your finances and a go-to if you need to easily and quickly access your funds, this account type typically earns little to no interest. Spoiler: This is one key difference when you compare a money market account vs. a checking account.
âIf you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use.â
Grow your balance with a money market account
When you’re comparing a money market account vs. a checking account, think of a money market account as a savings vehicle that allows you to earn interest on the balance you keep in the account.
“A money market account is an interest-bearing bank account that typically has a higher interest rate than a checking account,” says Bola Sokunbi, certified financial education instructor and founder of Clever Girl Finance.
With some money market accounts, you can even earn more interest with a higher balance. Thanks to its interest-earning potential, a money market account can be the way to go if you’re looking for an account to help you reach your savings goals and priorities.
If you’re deciding between a money market account or checking account, you may think that a money market account seems like a typical savings account with your ability to earn, but it also has some features similar to a checking account. With a money market account, for example, you can withdraw cash from an ATM and use a debit card or checks to access money from the account. There are no limits on ATM withdrawals or official checks mailed to you.
Before you decide to use this account for your regular bills and your morning caffeine habit, know that federal law limits certain types of withdrawals and transfers from money market accounts to a combined total of six per calendar month per account. If you go over these limitations on more than an occasional basis, your financial institution may choose to close the account.
Don’t need regular access to your funds and want your money to grow until you do need it? Then the benefits of a money market account could be for you.
Deciding between a money market account or checking account
Still debating money market account or checking account? Here are some financial scenarios to help you determine which account may best suit your current needs and goals:
Go with a checking account if…
You want to keep your funds liquid. If you’re thinking money market account or checking account, know that a checking account is built for very regular access to your funds. âIf you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use,” Sokunbi says. Think rent, cable, utilities, groceries, gas, maybe that morning caffeine craving. You get the idea.
You want to earn rewards for your spending. When you’re comparing money market account vs. checking account, consider that with some checking accountsâlike Discover Cashback Debitâyou can earn cash back for your debit card purchases. The best part is you are earning cash back as you keep up with your regular expensesâno hoops to jump through or extra account activity needed. Then put that cashback toward fun things like date night, lunch at your favorite spot or a savings fund dedicated to something special.
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You want to deposit and withdraw without the stress of a balance requirement. If you do your research when comparing money market accounts vs. checking accounts, you’ll find that some checking accounts don’t require a minimum balance (or much of one). However, you may be required to maintain a minimum balance (and potentially a higher one) with a money market account in order to avoid a fee. If you’re accessing your money frequently and need to make large withdrawals, a checking account with no minimum balance requirement is a convenient option.
Go with a money market account if…
You want to earn interest. âIf your money is just sitting there, it should be earning money,” Emanuel says of the money market account or checking account question. âI spoke with a woman recently who told me she’d had around $50,000 sitting in her checking account for at least the last 10 years, if not longer. If that money had been in a money market account for the same period of time, she would have earned thousands of dollars on it. Instead she earned nothing,” Emanuel says.
You want to put short-term savings in a different account. If you have some short-term savings goals in mind (way to go!), you may benefit from keeping your savings separate from your more transactional checking account so you don’t dip into them for a different purpose. That whole out of sight, out of mind thing. âA money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund [a.k.a. rainy day fund], a vacation fund or a place to park money after you’ve received an inheritance or proceeds from selling a home,” Emanuel says.
You need an account to fund your overdraft protection. If you’re comparing money market account vs. checking account, consider that a money market account could also cross over to support spending goals. One way is in the form of overdraft protection. If you enroll in overdraft protection for your checking account, for example, you could designate that funds be pulled from your money market account to cover a balance shortfall.
âA money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund [a.k.a. rainy day fund], a vacation fund or a place to park money after you’ve received an inheritance or proceeds from selling a home.â
Using both accounts to achieve your financial goals
Speaking of crossover. Both spending and saving are vying for your attention, right? Consider leveraging both types of accounts if you have needs from the checking and money market account lists above.
“Personally, I use my checking account for bill payments, my day-to-day spending, writing checks and for any automatic debits I have each month,” Sokunbi says. She’s added a money market account to the mix “because of the higher interest rateâto store my savings for short-term goals, for investing or for money I’ll be needing soon,” she explains. Maybe it’s not about deciding between a money market account or a checking account, but getting the best of both worlds.
Before opening a money market account or checking account, do your research and compare your options to see which bank offers the best package of low or no fees and customer service, in addition to what you need from an interest and access to cash perspective.
The post Money Market Account or Checking Account: Which Is Best For You? appeared first on Discover Bank – Banking Topics Blog.
Saving money in a place like a money market account can assure that the money will be there safely when you need it. A money market account is an alternative to savings account, and usually pays more interest rate than a savings account.
See, Money Market Vs. Savings Accounts: What’s The Difference.
Overall, money market accounts are worth it, especially if you’re saving for a short-term goal. However, like any investments, there are some disadvantages to money market accounts.
In this article we will address three main things: what is a money market account and what are the advantages and disadvantages of money market accounts.
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What is a money market account?
Before we get to the advantages and disadvantages of money market accounts, it’s best to define what a money market account is.
A money market account is an interest bearing account that you can open at a bank or credit union. It is more like a savings account, though there are some key differences.
Money Market Accounts Advantages and Disadvantages.
Advantages
Let us consider the advantages of money market accounts.
Interest rate: The main benefit of a money market account is that the interest rate is much higher than that of a regular savings account. For example, CIT bank offers a money market account with 1.00% APY. Whereas the interest rate for a typical savings account is anywhere around 0.10%. MMAs interest rates are similar to those of certificate of deposits. The main difference, however, with a CD you earn a fixed interest for a fixed amount of time. And CD rates are higher than MMAs. And a penalty may apply if you withdraw your money early.
FDIC Insured. One of the benefits of money market accounts is that they are FDIC insured. Your money is secured by the federal government of up to $250,000. If you have more money than that, then you will need to open another account so all of your money can be protected.
To recap, money market accounts are FDIC insured, they offer higher interest rates than savings accounts, and they permit check writing privileges. Despite these many advantages, money markets also have disadvantages.
What are the disadvantages of a money market account?
Minimum balance: Most money market accounts require a minimum deposit account of $1,000. Although, that’s not a big amount, it may not be feasible for a young saver. Plus, a penalty will apply if your balance falls below the minimum requirement.
Limited check writing: While MMAs offer check writing privileges, there is a limit. With a money market account, you can only write six checks per month against your balance, which can be a disadvantage if you pay a lot of bills every month. So, money market accounts are a disadvantage for those who need to write more than six checks per month.
Account fees: Another disadvantage of money market accounts is the fee. If you donât maintain the required minimum balance, a fee will apply. So, maintaining the minimum balance is important because any fee will eat out your interest or earnings.
Taxes: Taxes are another disadvantage of money market accounts. You will pay taxes on whatever interest you earn in a MMA.
Inflation: just like taxes and account fees can reduce your interest, inflation can do the same thing. Let’s suppose you generate a 3% return on your money market account per year, and the inflation is 4%. That can impact your total return significantly.
Best Money Market Accounts
CIT Bank Money Market Account
The CIT Bank money market account is one of the best ones out there. Currently, the money market account offers a 1.0% APY.
This is very competitive comparing to other MMAs. Moreover, CIT Bankâs MMA has a required account minimum of only $100.
Open a CIT Bank Money Market Account.
Bottom line:
While money market accounts offer several benefits, there are disadvantages as well. The main disadvantages are that the minimum balance can be high for a young investor. Moreover, taxes and account fees can eat away whatever interest you might earn.
Related:
7 Best Short-Term Bonds to Buy in 2020
Vanguard CD Rates: How Much Can You Earn
Grow Your Money: Mutual Funds & CDs
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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CIT Bank Money Market
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Review
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Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
The post Advantages And Disadvantages of Money Market Accounts appeared first on GrowthRapidly.
Money market accounts and savings accounts have a lot of similarities than you may think. Among other things, both allow you to achieve your saving goals risk-free or very low risk.
However, the choice between money market vs savings accounts often boils down to interest rates and fees. So, before you decide on which account to open, it’s important to compare many of their features.
Money Market vs Savings: Overview
Money market accounts and savings accounts have a lot in common.
Both types of accounts allow you to deposit a certain amount of money with a bank and you get some type of interest on your money in return.
Your money in a savings account and a money market account are FDIC insured. There are some key differences, though. Money market accounts offer a higher interest rate than savings accounts.
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Most savings accounts require no minimum balance, while money market accounts usually require a high minimum balance–around $1,000.
Savings accounts are very liquid, meaning that you can easily transfer money between checking and savings accounts.
On the other hand, money market accounts, while also liquid, will penalize you if you fall below the minimum required deposit.
Money market accounts have check writing privileges, while savings account have none.
Click here to open a money market account today.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK
OFFER
REVIEW
CIT Bank Money Market
1.00% APY
Review
CIT Bank Savings Builder
0.95% APY
Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
Money Market vs Savings: Table
This table below compares some of the features found in savings and money market accounts.
Money Market Accounts
Savings Accounts
FDIC-insured
Yes–up to $250,000
Yes–up to $250,000
Checks
6 check per month
No
Minimum balance
Yes –usually $1,000
None
Transactions
6 per month
6 per month
Interest rate
Yes
Yes
Best Account
CIT Bank Money Market Account
CIT Savings Builder
Money market vs savings
What Is A Money Market Account?
A money market account or MMA is a type of bank savings account, but with some additional and different features than a regular savings account.
The interest rate on money market accounts are better than that of savings accounts. Moreover, they offer check-writing privileges.
That means you can write checks to 3rd parties, typically up to 3 per month, against your balance. They even offer debit card privileges as well.
Lastly, the FDIC insures MMA up to $250,000, just like a savings account.
One thing to note is that you should not confused MMAs with money market funds.
While they are great place to park your money as they invest in short-term investments such as certificate of deposit, treasury bills, and other government securities, they are not the same thing.
Pros & Cons of Money Market Accounts
Pros
1) Interest rates
One of the reasons most people prefer an MMA is the fact they offer a much higher interest rate than savings accounts.
2) Check writing and debit card privileges
MMAs offer check writing and debit card privileges. But there is a limit. You can only write six checks per month against your balance.
So, MMAs are best for those who do not need to write more than six checks. Also, there is no penalty when withdrawing your money.
3) FDIC insured
The Federal Deposit Insurance Corporation (FDIC),an independent federal agency, insures money market accounts, just like savings accounts, up to $250,000.
Cons
1) Account minimums
MMAs generally require a deposit minimum amount to open the account and requires you to maintain a minimum balance to receive the best interest rate.
So MMAs are a good choice for those investors and savers who can maintain a high daily balance in the account.
2) Account fees
Another drawback of MMAs is the fee. If you don’t maintain the required minimum balance, a fee will apply.
So, maintaining the minimum balance is important because any fee will eat out your interest or earnings.
What is a savings account
A savings account is a deposit account that you can open at a bank or other financial institution. This account pays very little interest.
However, it is very safe and it is a good option to save your money.
Savings accounts are generally good for students or those with very little money and those who want easy access to their funds without penalty.
They are a good place to save money for short-term goals such as saving money to buy a house, or building an emergency fund.
You have unlimited money withdrawals. However, you can only make six withdrawal transactions.
Click here to open a savings account now.
Pros and Cons of Savings Accounts
Pros
1) FDIC insured
Savings accounts are FDIC insured-or NCUA insured (if offered by a credit union)
2) Liquidity
Savings accounts are very liquid. That means you get quick access to your funds at any time without any penalty.
3) Minimum balance
Unlike money market accounts, savings accounts typically have no initial deposit or minimum balance requirement.
However, a high-yield savings account may require a minimum balance. And a maintenance fee or a penalty may apply if your balance falls below the required minimum.
Cons
1) Interest
A regular savings account pays interest just like a money market account, though the interest paid by a savings account is very, very low.
Money Market vs Savings: which one should you choose?
Best Money Market Accounts
CIT Bank Money Market Account
The CIT Bank money market account is one of the best ones out there. Currently, the money market account offers a 1.0% APY.
This is very competitive comparing to other MMAs. Moreover, CIT Bank’s MMA has a required account minimum of only $100.
Open a CIT Bank Money Market Account.
Best Savings Accounts
CIT bank Savings Builder
The CIT Bank Savings Builder is among the best savings accounts where you can a very competitive interest rate.
In fact, you can earn a better rate with CIT bank Savings Builder than most money market accounts. The Savings Builder is currently offering a 0.95% APY.
To get this competitive rate, you can 1) open the account with a minimum of $100 and deposit at least $100 per month afterwards.
Or, (2) open an account with a minimum of $25,000.
Open a CIT Bank Savings Builder today.
What should you use a money market account and savings account for?
Both MMAs and savings accounts are great places to park you hard earned cash safely. Indeed, they are great places for short term goals like:
Emergency fund: If you’re saving money for a rainy day such as a loss of job, paying medical bills, major car repairs, an MMA or savings account is a good place to do it. The reason is because the money is safe there and you have quick and easy access to it. According to experts, you should have at least 3 to 6 months of living expenses in that fund.
Down payment: Savings accounts and money market accounts are great places for a down payment on a house.
Other popular reasons for saving money in a savings accounts and MMAs are for large purchases such as a car or vacation.
Money Market vs Savings: the bottom line
Deciding on a money market account and a savings account depends largely on what is important to you. For example, are you looking for a better interest rate? If so, an MMA is a better choice.
However, if one of your concern about whether you choose an MMA or a savings account is liquidity, then a savings accounts may be appropriate.
Another factor to consider is how frequently you will need to access your funds. Both accounts however are safe. They are both insured by the federal government up to $250,000.
One thing to keep in mind, however, these accounts generally offer interest rates that are inferior to other investments such as mutual funds or stocks are offering.
For that reason, use these accounts for short-term solutions.
Related:
CIT Bank Savings: How Much Can You Earn
7 Short Term Bonds to Buy in 2020
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK
OFFER
REVIEW
CIT Bank Money Market
1.00% APY
Review
CIT Bank Savings Builder
0.95% APY
Review
CIT Bank CDs
0.75% APY 1 Year CD Term
Review
CIT Bank No Penalty CD
0.75% APY
Review
The post Money Market Vs Savings: What’s The Difference? appeared first on GrowthRapidly.
