What is a Money Market Savings Account?
A money market savings account is a type of savings account that typically offers a higher dividend (interest) rate than a standard savings account. In fact, depending on your balance, the rate can be several percentage points higher. This means your money earns significantly more interest compared to sitting in a regular savings account.
Benefits of a Money Market Account
The biggest advantage of a money market account is its higher earning potential. If you’re saving money (and you should), why not let it grow faster and work harder for you?
Another key benefit is liquidity. Unlike a Share Certificate (commonly called a CD), your funds aren’t locked in. If an emergency arises and you need access to your money, withdrawing from a certificate early can result in steep penalties — typically costing you several months of earned dividends, which could amount to hundreds of dollars or more depending on your balance. With a money market account, you maintain flexibility without sacrificing growth.
Potential Drawbacks
While money market accounts are generally a smart choice, there are two potential drawbacks to consider:
- Withdrawal Limits — Many institutions limit the number of withdrawals you can make within a certain period, usually monthly. For example, you might get two free withdrawals per month, with fees applying to any beyond that. This encourages you to keep your money in the account to maximize earnings. If you rarely dip into your savings or budget carefully, this likely won’t be an issue.
- Minimum Balance Requirements — Some accounts require you to maintain a minimum balance to receive the higher dividend rate. If you frequently use your savings for bills or expenses, this could be challenging. However, if you typically leave your savings untouched or plan your monthly budget, this requirement may not affect you.
Let Your Savings Grow
Whether or not a money market account is right for you, building your savings should always be a priority — every little bit helps. If you already have a savings account and rarely use it, consider saving with a money market account so your money can work smarter, not harder.
Learn more about Penlanco FCU Money Market Savings at penlancofcu.com/savings-and-certificates.