As you decide which type of money market account is right for you, if any, look at the potential fees and expenses that can eat away at your investment:
- Penalties for falling below the minimum balance requirement
- Fees for writing too many checks
- New account fees
If you invest in a money market mutual fund, look for one with low annual expenses that won’t drag down your rate of return.
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| Tip: Know Your Minimum Investment Amount |
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Every type of money market account requires a minimum investment, which is likely to be much higher than with a typical checking account. Your account might be closed if you fall below this established minimum. Furthermore, the money market deposit account through your bank is likely to pay higher interest rates as you deposit more money.
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Tip: Lock in High Interest Rates with CDs, Instead of Money Market Accounts |
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Money market accounts and funds are viewed as less risky than many other investments. If you want to lock in a high rate of interest, though, you might be better off with a Certificate of Deposit (CD) or a security you buy directly from the U.S. Treasury.
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| Tip: Write Checks on Your Money Market Account |
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If you only write a few checks per month, you might be able to utilize a money market account or fund as a checking account. However, some accounts and funds require that the check be above a certain amount.
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Common Mistake: Viewing a Money Market Account as a Long-Term Investment |
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Your typical money market investment pays a higher interest rate than a savings account. However, as with a savings account, it should generally not be viewed as a long-term investment.
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| Common Mistake: Getting a Promotional Rate |
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Make sure the interest rate isn’t a come-on to attract new customers. If it is, you may find it will drop after a few months.
Getting Started >>
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