Interested in upgrading your savings? Many people start out with the basics in regards to bank accounts – a standard checking and savings account for quick access to your funds with the potential for some growth over time. These accounts can be a great foundation for your finances. But when is time to branch out and move beyond the basics? Which account should you choose?
Money Market Account — Let’s Start with Some Definitions
If you’re looking for other savings routes, you may want to consider a money market account, sometimes referred to as a money market deposit account or a money market savings account. A money market account is like a traditional savings account in many respects. It usually offers a higher interest rate than a basic savings account, but often requires that you have a higher minimum balance. While you may not earn as much as you could on riskier investments like stocks, funds in a money market account with a bank are insured by the Federal Deposit Insurance Corporation (FDIC).
When researching a money market account, make sure not to confuse it with money market funds. A money market fund is a separate investment option that is a type of mutual fund rather than a savings account, and it is not insured by the FDIC.
Consider Money Market Savings if you have a Higher Account Balance
One reason you can receive a higher interest rate on a money market account is because you are giving banks access to a higher amount of funds that they are able to loan or invest. Many banks require a higher minimum balance to open or maintain a money market account. You may be able to have less in the account, but depending on the bank you might be subject to a monthly fee, or miss out on qualifying for a higher interest rate.
At Santander Bank, you only need $25 to open a Santander Money Market Savings account. If you have an average daily balance below $10,000 you will be subject to a Monthly Fee, however this fee is easy to waive. All you need to avoid the fee is a Santander Bank consumer checking account. You may still want to keep a balance of $10,000 in the account, though, as you may be eligible for a more competitive rate.
Consider Money Market Savings if you are looking for Some Flexibility
There are other options to consider when looking for higher savings yields. One popular option is a Certificate of Deposit (CD). While CDs may offer attractive rates of return, when you open a CD you are usually unable to access those funds during the term of the CD and you are often locked into the rate for the term of the CD. If you choose to withdraw funds early from a CD, you could face steep penalty fees. Although there are limitations on certain withdrawals and transfers with a money market account, a money market account allows for more flexibility to withdraw your funds.
While some money market accounts do offer limited check-writing and ATM capabilities, it may not be as flexible as checking accounts. Like traditional savings accounts, money market account transfers and withdrawals are limited to six per month by federal law, and some banking institutions may have even tighter restrictions on the number of transactions. Additionally, if you are trying to maintain a certain average daily balance to avoid monthly fees, you may not want to withdraw funds regularly from your account.
If you’re ready to move forward with a new savings account, it makes sense to choose from the best. NerdWallet has named the Santander® Money Market Savings account one of the “Best accounts at brick-and-mortar banks” for 2016.1 NerdWallet cites Santander Bank’s competitive interest rates and highly-rated mobile banking options as its distinguishing factors.
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