December 24, 2023 • 3 mins
If you’ve been researching what kind of bank account is right for you, you’ve probably noticed that most financial institutions, including Patelco Credit Union, offer money market accounts. This article explains how money market accounts work, and how to choose one that can help you meet your financial goals.
A money market account (MMA) is a type of deposit account offered by credit unions and banks. MMAs are insured by the National Credit Union Association for up to $250,000 (or the FDIC, if you open the account at a bank), so they’re a low-risk way to have access to your cash while earning interest.
A money market account works like other bank accounts. Just like a savings account, you can make a deposit and earn interest on your money. You can also access your money whenever you need it.
Prior to April 2020, financial institutions were required to limit withdrawals or transfers from savings and money market accounts to six per month, but that requirement was lifted during the coronavirus pandemic. (Some banks and credit unions may choose to continue limiting the number of these withdrawals.)
Money market accounts offer several benefits, including:
The best MMAs are an ideal way to save — and earn — money in the short term. Stash your cash in a money market account for an emergency fund, a vacation, or a big purchase.”
There can be some drawbacks to money market accounts, though, so it’s important to do your research and shop around.
Money market accounts aren’t really meant to cover your everyday expenses like rent, groceries or gym fees. Instead, the best MMAs are an ideal way to save (and earn!) money in the short term. Stash your cash in a money market account for an emergency fund, a vacation, or a big purchase — new car, anyone?
For longer-term savings or higher yields, speak to a financial advisor to find the right investment solution for your goals. And if you can’t meet your financial institution’s minimum balance requirements, shop around or consider a regular checking or savings account.
Before opening a money market account, it’s important to do your research to find the right account for your financial goals. Credit unions usually offer a higher Annual Percentage Yield (APY) on money market accounts, but that’s not always the case — and if you can’t meet the minimum balance requirement each month, you might be paying fees.
Sure, savings accounts generally earn less interest than money market accounts, but they usually come with fewer restrictions. Opening deposit and minimum balance requirements may be less, for instance — but if you can meet account requirements, always opt for the option with higher yields and less costs to you.
Share certificates (or certificates of deposit, as they are known at banks) are a kind of savings account that comes with a fixed interest rate. Their Annual Percentage Yield (APY) is usually somewhat higher than that of a money market account, but share certificates come with strings attached: You can’t touch your money until the share certificate matures. And if you do make a withdrawal before the end of the term, you’ll be charged penalty fees.
Patelco members can meet with a CFS Financial Advisor1 to learn how we can help you meet your goals.
Considering opening a savings account? Get answers to what is a savings account and the different types you have to choose from.
Looking for ways to save money? Find out how to build an emergency savings fund from the experts at Patelco Credit Union. Start saving now!
How do I decide whether to prioritize saving or paying off debt? The good news is that you can make progress in both areas of your financial health by making a financial plan that accounts for your goals.
1 Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA / SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Patelco Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.