It’s an unfortunate truism that most people aren’t making their money work for them, and we believe that’s largely since most aren’t familiar with how a money market account works. We encourage our members to consider the benefits of money market accounts by first addressing common questions such as “what are MMA’s?” and “is a money market account a savings or checking account?” The answers to these questions are illuminating, and they are often enough to clarify that money market accounts can benefit you. This guide discusses both those questions, as well as reviewing both the pros and cons of transitioning your funds to a money market account.
What is a Money Market Account?
In short, a money market account is an account that a bank or credit union uses to reinvest funds and return a dividend to the account holder. There are several ways that it’s similar to both checking and savings accounts, but there are also significant differences that are important to understand before investing your money. Below is a helpful summary to clarify what a money market is by comparing it to checking and savings accounts:
- Like savings accounts, money market accounts generate a return on the funds you deposit. When you invest your money into a credit union’s money market account, that money pays dividends that are redeposited into the account monthly.
- Like checking accounts, you can withdraw funds from a money market account. These withdrawals can occur whenever it’s most convenient for you and do not need to be scheduled with the credit union in advance.
- Money market accounts bridge the gap between traditional checking and savings accounts by combining several of their features. The result is more flexible than a certificate of deposit (CD) while still being much more financially beneficial than interest-bearing checking accounts.
Now that you have a basic understanding of what a money market account is and how we manage it, it’s time to address the several reasons that we encourage our members to consider this financial tool.
How a Money Market Account Can Benefit You
For many people, the most important considerations are how these accounts can benefit you. Often, potential clients ask us, “what are the typical money market account features?” There are several ways that a credit union-backed money market account reflects an improvement over bank-based checking or savings accounts:
- One of the biggest advantages is how flexible these accounts tend to be. For example, you can generate interest as if it were a savings account while using the account as if it were checking. This kind of flexibility means that you can keep all the funds you don’t use for investment purposes in a single account, meaning that you have full access to money whenever you need it while ensuring that it does not sit idle.
- These accounts offer a better return than you can get from a standard savings account. While you can receive minuscule returns in the 0.02% range on many savings accounts, you can instead secure dividends that range from 0.5% to 1.26% APY. These returns mean that you can immediately start generating money on funds that you can still use when and where you need to use them.
- These funds also offer security that isn’t available when investing in riskier assets. Rest assured if you’re someone who’s asking, “are money market accounts safe?” The answer is yes, as any deposits you make into your money market account are NCUA-insured for your protection. The NCUA (National Credit Union Administration) functions like the FDIC to protect credit union accounts, so you sacrifice nothing in terms of security when you make the switch.
- When you compare these accounts to bonds and other short-term or long-term investment accounts, you can clearly see another benefit. Where those accounts would charge you early withdrawal fees, you can freely withdraw from your money market account at any time without penalty. Enjoy the peace of mind that comes from complete control and access to your money any time you need it.
As you can see, money market accounts offer an effective, modern way to manage your money without losing anything in terms of flexibility and security.
The Limitations of Money Market Accounts
No matter how good these accounts are, there are still some limitations. After all, if there weren’t any drawbacks in specific situations, everyone would already be using them. We believe that our members should have a full understanding of their financial standing before making decisions to invest in a new account, so read the following limitations to see if they’re relevant to your situation.
- Although you can withdraw funds any time you’d like, you may only withdraw funds six times per month. We observe the Federal Regulation D requirements as they pertain to money market accounts, so we advise our members to plan ahead regarding withdrawals. Account-holders can easily navigate this limitation by merely making a smaller number of large withdrawals and using credit cards as a primary payment method rather than cash.
- Like checking and savings accounts, money market accounts have minimum balance requirements. Unlike those accounts, the minimums tend to be higher, and they’re tied both to dividends and maintenance fees. Our members must maintain at least $2,500 in the account to receive dividend payments and avoid the $10 monthly maintenance fee.
- The dividend rates also vary depending on the balance. To receive the maximum percentage rate, you must keep between $2,500 and $25,000 in your account. As the balance increases, you should invest excess funds into other assets to get the maximum return. If you need to have more than $25,000 in the account, there are no maximum balance limits, but be aware that the dividend payments will decrease in that case.
Many of our members can easily manage these limitations to maximize their return while having the full flexibility that they desire for their accounts. If you are concerned that these limitations may be difficult to maneuver around, we encourage you to speak with a Resource One Credit Union representative, as we can provide helpful information specific to your situation.
The Differences Between Bank Market Accounts and Credit Union Market Accounts
So far, we’ve addressed the concept of money market accounts in a general sense. As with checking and savings accounts, however, you can establish a money market account at either a commercial bank or a credit union. There are many differences between credit unions and commercial banks, and many of those same considerations carry over to how each institution approaches money market accounts.
In terms of how these differences impact your experience, that ultimately comes down to how the individual institution treats you as a member or a customer. Resource One Credit Union members receive exceptional service in several ways:
- Before opening your account, one of our representatives will walk you through the opening process and specific terms of your new money market account. You’ll never encounter any surprises, hidden fees, or account restrictions that you didn’t know from the beginning.
- We also provide ongoing service to address any questions that arise over the following months or years that you maintain the money market account with us. If at any time our terms of service change, we’ll provide advanced notice so that you can always make informed decisions regarding your account status.
- As a member-owned institution, we reinvest in the community around us. The money that you entrust to us via your money market account turns into dividends through safe investments and helps us to finance loans, mortgages, and other financial benefits for your friends, family, neighbors, and even yourself when you need it.
If you’re already a Resource One Credit Union member, then you’ve experienced the difference it makes firsthand. When you open an account with us, then you’ve already taken the right steps to invest in your success.
The Solutions That Resource One Credit Union Offers
Most people can benefit from opening a money market account as a safe way to generate moderate amounts of funds. Whether you’re saving up a down payment for a home, collecting money to pay for your children’s college, or simply holding onto the funds to pay for a family vacation without racking up credit card debt, a money market account can protect your assets while delivering a noticeable return on money that would otherwise sit still. When you’re considering your family’s financial future, you should keep your money as active as possible without risking your financial stability.
We keep the process to open and manage your money market account simple. You can view your balance, initiate a transfer or withdrawal, and review your account activity with online banking or using the Resource One Credit Union mobile app. To get started, visit one of our locations or call us at 866-226-3594 and start getting more for your money.