Money Market Accounts: 6 Things You Should Know Before You Open One

Barbara Marquand | guest writer for GoTalkMoney

With CD rates having nowhere to go but up, you might be skittish about locking your money up in a certificate of deposit. If that's the case, a money market account could be your best best for earnings and safety.

Money market accounts typically offer higher interest rates than regular savings accounts and rival short-term CD rates. Here are six things you should know before you open an account:

1. Money Market Safety: FDIC Insurance

Are you investing in a money market account or a money market fund? Both are low-risk, liquid investment vehicles that let you write checks from the account and withdraw money at ATMs. You can find both at some banks. So what's the difference? Money market accounts are interest-bearing accounts and qualify for FDIC insurance, now at $250,000 per person per financial institution. That means if the bank fails, your money is safe up to that amount.

Money market funds are mutual funds that invest in short-term fixed-income investments. They tend to feature slightly higher rates than money market deposit accounts, but they don't carry FDIC insurance.

2. Money Market Rates

Compare money market rates among banks in your town and online. Sometimes banks offer bonuses for opening an account, higher introductory rates, and tiered rates depending on the balance you maintain. Understand which rate will be in effect after the introductory period and for the balance you plan to maintain, and make apples-to-apples comparisons between financial institutions.

3. Money Market Access Limits

Money market accounts let you write checks against them, but they're not intended to substitute as checking accounts. Typically these accounts limit withdrawals, transfers to other accounts, and checks to no more than six a month. If you need greater check-writing capability, then consider an interest-bearing checking account. Some high-interest checking accounts rival what you can earn on savings accounts as long as you meet requirements, such as making a certain number of debit card transactions per month.

4. Minimum Deposit and Balance Requirements

Some accounts have no minimum balance requirement, while others require fat balances to qualify for interest earnings. Narrow your choices to the banks offering accounts that fit the amount you plan to invest.

5. Money Market Account Fees

Read the account fine print to get the low-down on fees. Some banks charge a monthly maintenance fee, but waive the fee if you meet certain conditions, such as maintaining a high balance or linking to a checking account with that institution. Check whether there are any fees for transferring money in or out of the account or writing checks.

6. Bank Safety and Service

Consider the financial institution's reputation before you hand over your money. Ask friends and read customer reviews online. Visit a branch to get a feel for customer service if you like banking in person. And comb through the Web site if you plan to bank online. How easy is it open and monitor an account online? What kind of response do you get when you call the customer service number?

Besides offering a safe place to stash your cash while you're waiting for CD rates to rise, a money market account is a good destination for your emergency savings fund, offering greater liquidity than CDs. Shop carefully to find the best account for your investment, and then watch your money grow.

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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