Banks and credit unions are battling it out to offer higher rates and better terms for people who want to use a money market account. That’s great news for savers, because you have several strong options for the best account to build your savings.
It’s important to note that, unlike certificates of deposit (CDs), you do not lock in a fixed interest rate when you open a money market account. The annual percentage yield (APY) is variable, since it’s based on what the Federal Reserve does. So while it’s smart to look at interest rates when comparing money market accounts, it’s not the be-all and end-all.
In this article, we picked the best money market accounts right now. Each of these account is insured by the FDIC and appropriate for modest and super savers alike.
- Best Money Market Account Rates
- Can you Lose your Money in a Money Market Account?
- What is a good Interest Rate on a Money Market Account?
- Which is Better a High Yield Savings Account or a Money Market Account?
- Which is better CD or Money Market Account?
- What are the Disadvantages of a Money Market Account?
- Where can I put my Money to earn the Most Interest?
- Are Money Market Funds Safe in a Recession?
Best Money Market Account Rates
We evaluate money market accounts based on their annual percentage rate (the interest you receive), the minimum balance requirements, and the terms and conditions of having the account.
Read Also: Best Low-interest Credit Cards
Based on that, here are our recommendations of the best money market accounts.
1. CIT Bank
The CIT Bank Money Market Account is one of our top money market picks because they consistently have one of the highest interest rates offered to consumers.
Also, their platform in incredibly easy to use, with the ability to sign up and get started in minutes.
You can currently get 0.50% APY if you meet the requirements (whether balance or deposits).
There are no gimmicks with CIT Bank – you earn interest on your entire balance, and you have a low minimum to get started.
2. Discover Bank
Discover Bank has been around for a long time online, but not many people realize they have a bank beyond their credit cards.
They do pay a higher interest rate on balances over $100,000 – so they operate much like a traditional money market account. And best of all, they are fee free!
Right now, you can earn 0.45% APY on balances over $100,000 and 0.40% APY for balances under $100,000.
3. Axos
Axos is another top-notch online bank that has historically been known for competitive checking accounts, but they also have a great money market account!
They pay a solid rate and don’t have a super-high balance requirement – just $1,000 to open the account. After that, there are no minimum balance requirements.
Right now, you can earn 0.60% APY on all balances.
4. Marcus
Marcus is another online bank that has been gaining real traction. Marcus is the online bank run by Goldman Sachs, and they offer extremely competitive yields on their banking products.
They have no minimum deposit and no transaction fees, which is great considering that they are usually always one of the top yielding accounts available.
Right now you can earn 0.50% APY.
5. Nationwide
Nationwide is best known for their insurance products, but in the last year they’ve rolled out a suite of competitive banking products, including the Nationwide Money Market Plus account.
They do have a $1,000 minimum to open, and you must maintain a $1,000 daily average balance to avoid monthly maintenance fees.
Right now, you can earn 0.50% APY.
6. Barclays Bank
Barclays Bank has a fairly standard online savings account that’s highly comparable to other money market accounts on this list.
Unlike others on this list, there is no minimum balance required to open an account with Barclays. They are about as traditional a bank as you get. Plus, they also don’t charge any monthly fees as well.
You can currently get 0.50% APY.
7. BMO Harris
BMO Harris Bank is a new-comer to this list, but it’s an established bank that’s working to grow market share online. As a result, it’s offering an incredibly high yield online savings account.
Right now you can earn up to 0.40% APY. You do need to maintain a minimum $5,000 to get this APY.
8. Capital One 360
Capital One 360 is another online bank that has been around for a long time. This one is more recognizable for being a bank, but they are still very well known for their credit cards.
They have a good yield on their account (which they actually call their Performance Savings account), and they also are offering bonuses for opening a new account. With no monthly fees, this is a solid choice.
You can currently get 0.50% APY on any balance!
9. UFB
UFB Direct is a popular online bank and they consistently have a top yielding money market account.
The only drawback to this account is the higher balance required. You do have to have $25,000 in the account to earn interest. Also, if you don’t maintain at least a $5,000 balance, you’ll be subject to a $10 per month maintenance fee.
Right now, you can earn 0.40% APY on balances over $25,000.
10. TIAA Bank
TIAA Bank offers a solid account paying a great interest rate. They offer a variety of online banking options, and are consistently near the top of the list. They have a “yield pledge” where they consistently pledge to have their rate in the top 5% of all rates out there.
There is a $500 minimum to open an account.
Right now you can earn 0.55% APY. APY Variable and Subject to Change. This is also an introductory rate that is only guaranteed for one year.
Can you Lose your Money in a Money Market Account?
Money market accounts are sometimes called money market deposit accounts or money market savings accounts.
Like a regular savings account, a money market account at a bank is insured by the Federal Deposit Insurance Corporation (FDIC), while one at a credit union is insured by the National Credit Union Administration (NCUA).
You cannot withdraw money or make payments more than six times a month from a money market account by check, debit card, draft, or electronic transfer. Withdrawals or payments by ATM, in person, by mail, messenger, or telephone check (where payment is made by using your checking account number and bank routing number) do not count against the six-transaction limit.
Your bank or credit union may also have a minimum deposit that it requires to open a money market account.
A money market account is different from a money market mutual fund, or a money market fund. Money market funds are offered by investment companies and others. Money market funds are not insured by the FDIC or the NCUA, which means you could possibly lose money investing in a money market fund.
What is a good Interest Rate on a Money Market Account?
| Bank | Editor’s rating (out of 5) | APY | Next steps |
| NBKC Bank | 4.55 | 0.50% APY | |
| Affinity Plus Superior Money Market Account | 4.41 | 0.70% to 1.50% APY | |
| Sallie Mae Money Market Account | 4.23 | 0.55% APY | |
| CIT Bank Money Market Account | 4.06 | 0.55% APY | |
| Premier Members Credit Union Money Market Account | 4.00 | 0.15% to 2.00% APY | |
| Northern Bank Direct Money Market Account | 3.91 | 0.60% APY | |
| CFG Bank High Yield MMA | 3.43 | 0.62% to 0.72% APY |
*As of November 2020, the national average APY on money market accounts is 0.07% according to the FDIC.
Which is Better a High Yield Savings Account or a Money Market Account?
Because near-zero interest rates have been the norm for some time, you have probably been conditioned to accept rates on your liquid cash that barely register on your account statements.
According to bankrate.com, the average money market account (MMA) rate in the nation was 0.15% when we checked on May 28, 2020, which would earn $15 on a $10,000 deposit after the first year.
You can find better rates by shopping and comparing. If you’re willing to do your banking on the Internet, you might find money market account rates topping 1.5%.
However, there’s another option that can have even better rates: high-interest checking accounts. These can pay in the 3% to 4% range and are usually found at smaller community banks, credit unions, or online banks.
It is easy to become captivated by the comparatively alluring rates they offer, but, with all the caveats involved, they may not be for everyone.
If you’re willing to manage your account actively, a high-interest checking account can generate significantly higher interest earnings than a typical MMA.
If in the normal course of a month, you expect to make the required number of debit transactions and have at least one bill you can set up on automatic bill payment, a high-interest checking account shouldn’t be much to manage.
One of the drawbacks of high-interest checking accounts is the cap. To optimize your interest rate earnings, you need to make sure that the amount on deposit doesn’t exceed the cap since you won’t earn a higher rate for going over it.
However, depositors will likely earn more with the checking account if they can meet the requirements. For example, a $10,000 deposit in a high-interest checking account earning 2.5% interest equates to $250 per year interest.
On the other hand, a $10,000 deposit in a money market account paying a 0.20% interest rate equates to $20 per year in interest.
Both high-interest checking accounts and money market accounts can earn you more in interest than a traditional savings account. Also, both accounts still give you access to your money when you need it.
The right account for you largely depends on the number of monthly banking transactions and whether you could meet the minimum requirements for each account.
Which is better CD or Money Market Account?
Money market accounts and certificates of deposit are types of federally insured savings accounts that earn interest. But their rates and ease of access differ.
- CDs generally offer higher rates and less access to your money. In fact, your money gets locked up for a set period of months or years. If you withdraw early, there is a penalty, such as a couple months of interest earned.
- Money market accounts generally offer more access and comparable rates to regular savings accounts. You can withdraw money six times a month. They generally have larger minimum balances and sometimes offer checks. MMAs differ from money market funds, which are a type of investment.
When to choose a money market account over a CD
- You want flexibility to withdraw money regularly. MMAs have the same withdrawal restrictions as regular savings accounts — six per month, not counting in-person or ATM withdrawals (some banks may charge a penalty for going beyond six).
- You’re looking for checking account-like perks. Some MMAs also offer debit cards, ATM access and check-writing abilities — features often reserved for checking accounts.
- You prefer the balance of a solid rate plus easy access. Some MMAs stand out for a strong interest rate, though it’s a good idea to compare with regular savings accounts.
When to choose a CD over a money market account
- Your goal is a high rate. CDs tend to have the highest yields among bank accounts. They carry little risk as investments and none of the fluctuating value that stocks have.
- You don’t mind putting some funds out of your reach for months or years. A CD requires you to forgo any withdrawals until its term expires.
What are the Disadvantages of a Money Market Account?
Money markets typically give their owners easy access to cash, a high level of safety and even check writing in some cases. However, compared to other investments, money markets have their share of disadvantages.
Depending on your financial objectives, the costs and risk of money markets may make them unsuitable for you.
1. Minimums And Fees
Money market accounts often need a minimum balance to avoid a monthly service charge, which can be $12 per month or more. While you may get various services for that fee, many alternatives, such as savings accounts, are often free, especially if you work with a discount or online bank.
If you have a small balance, the fees alone may eat up all of your earnings. You could also suffer from a tiered interest rate system where you’ll earn a lower rate on your money than if you deposited more cash.
2. Low Interest Rate
Compared to other investments, money market accounts pay a low interest rate. While the long-term average return for the stock market is about 10 percent per year, money markets and other so-called “cash equivalents” have an average annual return of closer to 6 percent.
Over time, that vast disparity in earning potential will get you far less money than you could have earned from stocks or bonds.
3. Inflation Risk
Inflation is a real concern when it comes to money market funds. Inflation makes money in the future less valuable than money today. Since money market funds earn a low rate of return, they are more susceptible to inflation risk.
For example, if you earn 2 percent per year on a money fund, but inflation runs at 3 percent, you’re actually losing purchasing power on your investment. If you invest $100, the $102 you have at the end of the year won’t buy you as much as the original $100.
4. Capital Risk
While money market funds are typically secure investments, some funds have “broken the buck,” or fallen below $1 per share in value. Although the risk overall is small, money market funds don’t carry the same FDIC insurance as savings accounts and CDs. This gives money market funds a slightly more aggressive risk profile than similar investments.
Where can I put my Money to earn the Most Interest?
So what can you do to earn more interest on your money? If you won’t need to withdraw the funds for several years, investing it in the stock market may offer the highest potential return. Market volatility, however, makes most stock and fund investments too risky for money you may need soon.
If you’re looking for a low-risk place to park your cash that pays more interest than your existing bank account, you have options. Here are six strategies worth considering.
1. Open a high-yield savings or checking account
If your bank is paying anywhere near the “average” savings account interest rate, you’re not earning enough. Today, many online banks and even some traditional banks offer high-yield savings accounts with yields that are considerably higher than average.
And many of these accounts don’t charge service fees and have low minimum balance requirements.
Some financial institutions even offer high-yield checking accounts that may offer significantly higher interest rates than the typical savings account. With checking accounts, you don’t have to worry about monthly transaction limits.
Some of the best checking accounts even offer rewards, which further increases how much you can earn on your money.
2. Join a credit union
On average, credit unions tend to offer slightly better interest rates than banks.
Since credit unions are owned by their members, they tend to have lower fees as well. To join a credit union, you’ll typically need to live or work in a certain geographic area or work for a certain employer.
3. Take advantage of bank welcome bonuses
While not necessarily a way to earn interest on your money, bank account bonuses are a way to earn money with your money. Many banks are currently offering cash bonuses of $300 or more for customers who open new checking accounts.
For perspective, it would take you two years to earn that much money in interest on $10,000 in deposits at a 1.50% annual yield.
You may need to set up direct deposit and/or keep your account open for a certain number of months to earn the bonus. But it could still be a great way to boost the income you earn on your bank deposits.
4. Consider a money market account (MMA)
Unlike money market funds, money market accounts (MMAs) are FDIC-insured deposit accounts offered by banks.
Money market accounts are similar to traditional savings accounts in that you can’t make more than six withdrawals or payments from the account per month. But they may come with debit card and check-writing privileges as well.
Most importantly, some banks may be willing to offer higher interest rates on an MMA than their traditional savings accounts.
5. Build a CD ladder
Certificates of deposit (CDs) offered by banks or credit unions tend to offer higher interest rates than their savings and money market accounts. And those interest rates are fixed.
But in exchange for these benefits, CDs require that you keep your money in the account until its maturity date, which could range from a few months to several years. And if you withdraw your funds early, you’ll typically be charged an early withdrawal penalty.
This lack of liquidity can make CDs seem like a less attractive choice for savers. However, with a CD ladder, you divide your total deposit amount into smaller deposits that are invested in multiple CDs with varying maturity dates.
With a CD ladder, you can take advantage of the higher rates that CDs offer without tying up your entire savings balance for multiple years.
6. Invest in a money market mutual fund
If you’re looking to gain exposure to other low-risk investments like Treasury bills or bonds, you may want to consider investing in a money market mutual fund. Money market funds are a special type of mutual fund that only invests in short-term, highly liquid securities.
With a heavy portion of these funds invested in cash equivalents, they aim to keep a net asset value of $1 per share. But while money market funds may offer low volatility, it’s important to understand that they are not insured by the FDIC like bank deposit accounts.
However, their returns could exceed the average checking or savings account. And their focus on government securities could offer tax advantages.
Are Money Market Funds Safe in a Recession?
“The advantage of a money market fund during a period of high volatility or even a recession is it offers investors a safer, less risky option to put their money into while riding out the downturn,” says Joshua Simpson, an investment advisor with Lake Advisory Group in Lady Lake, Florida.
Simpson says money market funds yield returns while giving investors the flexibility to move back into the market once a recession begins to reverse. Compared with other mutual funds, risk levels are lower in a money market fund, which can be reassuring during periods of prolonged stock volatility.
It makes sense to ask this question if you’re concerned about how stock market volatility might play out in your portfolio.
Compared with traditional mutual funds or individual stocks, money market funds are less susceptible to the ups and downs of the market. However, there’s no such thing as zero money market risk.
Rixse points out that even though these are cash-focused investments, they’re not insured by the Federal Deposit Insurance Corporation, known as the FDIC, like a money market savings account at a bank. And, he says, it’s theoretically possible for money market funds to lose value.
“In 2008, we saw one major money market fund go under when Lehman Brothers went bankrupt and the debt the fund was holding from Lehman eroded in value,” Rixse says.
For that reason, it’s important to consider the quality of the money market funds in which you choose to invest during a recession if managing risk is a concern.
“Investors need to know that not all money market funds are created equally,” Farberov says. “When choosing a money market fund, investors need to focus on the funds offered by the most reputable companies with large assets under management, rather than chase yield.”
Think Carefully Before Going All-In
Money market mutual funds can be a safe option for a recession, but they can’t match the performance of stocks. Farberov says investors should consider how holding money market funds may affect overall portfolio returns in the short term and what trade-off they may be made by avoiding stocks.
Something else to consider is the potential for missed opportunities when you shift away from equities.
“Market downturns create opportunities for investors to buy stocks at a discount, which can help improve long-term returns,” Rixse says.
While money market funds may look attractive when the market flips and flops, avoiding stocks completely may not be the best strategy. When you can follow Warren Buffett’s advice to be greedy when others are fearful, you could be poised to scoop up quality stocks at bargain prices when the market is down.
Plan an Exit Strategy
Recessions, though painful and seemingly never-ending, do eventually fade as the market and economy move into a new cycle. If you’re investing in money market mutual funds during the interim, it’s important to think ahead.
Read Also: Money Market vs CD: How to Choose the Best Investment for you
“The biggest downside to investing in money market funds in a recession is that they have zero upside,” Farberov says. “Equity markets typically bottom halfway in a recession, and investors with assets parked in money market funds will likely miss the upside appreciation in their portfolios.”
Investing experts tend to agree that trying to time the market is a fool’s errand, but you should be watching closely for signs of an impending upturn. It’s also important to keep the factors that lead to a recession in mind, as those can affect the timing.
For instance, Simpson says recovery can come quickly if a recession is driven by things other than economic issues, such as a global health crisis. But, he cautions, the important thing is not to reinvest too soon.
“Waiting until you see some clarity and some sustained recovery, even if you miss out on the first 5% or so of the recovery, is better than reinvesting too soon and watching your money go down another 10%,” he says. “Cash is an asset, and there’s nothing wrong with being patient and waiting until you’re comfortable to move money back into stocks and other investments.”
