Most people have a checking account and a savings account and deposit all of their money each month into one or both of them. They pay their bills and if there is money left over they spend it on something they want or need. They earn minimal interest on the accounts, generally 1-2%, and end up with low savings amounts to use in an emergency.
Money Market Accounts can help end the cycle of spending all the money you have, and help you earn more as well. A Money Market Account is a special savings account, but it also works like a checking account.
Money Market Accounts are FDIC insured, and most can be connected to your regular checking account for overdraft protection. This enables you to put your paychecks into the Money Market Account, you usually have unlimited free deposits, and transfer just enough to pay your regular monthly bills to your checking account.
Money Market Accounts usually allow 6 withdrawals or transfers a month, including overdraft protections, automatic bill pays, wire transfers, telephone transfers and PC banking transfers. By limiting the number of withdrawals and transfers, they encourage you to keep your money in the account to earn interest, which is normally 3-6%, much more than your regular checking accounts.
Money Market Accounts generally require a higher minimum balance, anywhere from $500-2500. This makes it a good place to put your savings for those larger purchases such as a down payment on a house. When you are ready to make the purchase, the money will be easily accessible and it will have earned interest for you.
When searching for a Money Market Account make sure you ask these questions:
What is the opening deposit requirement?
What is the interest rate?
What is the monthly fee?
What is the fee if you drop below the minimum balance requirement?
How many withdrawals are you allowed?
Are ATM withdrawals free?
Can the account be linked to your checking account?
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