“Money Market Accounts vs. Savings Accounts: Which is Better?”

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Do Money Market Accounts Earn Interest?

Money market accounts (MMAs) are a type of savings deposit account that often pay interest, similar to other savings accounts. However, MMAs may require a higher minimum opening balance and have higher monthly balance requirements to avoid fees or earn interest. Additionally, MMAs come with checks or a debit card, making it easier to access your funds.

Pros and Cons of Money Market Accounts

Pros

• Many options available: You can find MMAs at many banks and credit unions.
• High APYs: Earn more interest than you might with other types of checking or savings accounts.
• Easy access to your money: You can easily spend your money using the account’s checks or debit card.
• Covered by deposit insurance: MMAs are generally covered by insurance at banks and credit unions, guaranteed up to $250,000 per account holder and account category in case the financial institution fails.

Cons

• High balance requirements: There may be high balance requirements to open the account, receive a good APY or avoid monthly maintenance fees.
• Potential limitations on withdrawals: Your financial institution might limit you to six withdrawals each month. But in-person, mailed, phone and ATM transactions don’t typically count toward that limit.
• Don’t always offer the best rates: Some regular savings accounts have higher APYs than MMAs.

Money Market Accounts vs. Money Market Funds

Money market accounts and money market funds (MMFs) are often confused due to their similar names, but they are quite different. MMFs are mutual funds, a type of investment that you can buy within a brokerage account or certain retirement accounts. These funds invest in government-backed assets and may provide monthly dividends, similar to earning interest from a savings account. However, unlike MMAs, MMFs are not insured, and you may need to sell your investments and transfer the money from a brokerage account to your bank account before you can spend it.

Is a Money Market Account Better Than a Savings Account?

MMAs and savings accounts are both types of savings deposit accounts, and neither is universally better or worse. An MMA might be a good fit if you have enough savings to qualify for a high APY or you want easy access to the money you keep in your interest-bearing account. However, if you find a savings account with a higher APY, that might be a better place to keep your savings. And if you have a checking account at the same institution, you might be able to quickly transfer money between the accounts and then use a debit card or checks.

Keep Reviewing Your Options to Find the Best Rate

Regularly opening and closing savings accounts can be a hassle, but you may want to keep an eye on the options as rates change. Even if the account you open today offers the best rate, that might not be the case in a few months. And if you have a lot of savings or interest rates keep rising, setting aside time to make a change could be worth it.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you find the best financial solutions!

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