How to open a money market account
It’s easy to open a money market account at credit unions, traditional banks, online banks, and investment brokers.
Setting up a money market account is a relatively easy process and can be done in-person or online. You’ll need to provide some basic information including your address, social security number, and contact information.
At Credit Union of Southern California (CU SoCal), we make setting up a money market savings account easier!
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our mortgages, home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.
Get Started on Your Money Market Account Savings Today!
What is a money market account?
A
money market account is a type of savings account that offers interest rates that are higher than most traditional savings account interest rates. However, unlike traditional savings accounts, money markets have transaction rules that may limit the number of withdrawals you can make each month.
Benefits of money market accounts
Easier access to funds. Your funds can be accessed using online banking features provided by your credit union or bank, as well as by ATM. You’ll also be offered checks for your money market account. While certificates of deposit (CDs) may provide higher interest rates than money markets, money in a CD is not accessible without a penalty, until the CD term is reached.
Better interest rates. Money market interest rates are almost always higher than checking and savings accounts interest rates. This is how financial institutions reward consumers for the larger minimum balance requirement.
FDIC / NCUA insured. All money market accounts are insured. If the account is held at a bank it is insured by the Federal Deposit Insurance Corporation (FDIC). A money market at a credit union is insured by the National Credit Union Administration (NCUA). Both FDIC and NCUA insure money market accounts up to $250,000. The deposit insurance amount of $250,000 is provided per depositor, per FDIC-insured bank, per ownership category.
Opening a money market account
Starting a money market account is easy, just follow these five steps:
- Compare rates. Check around and see where you can get the highest interest rate. Credit unions offer some of the best rates on money market savings accounts.
- Gather necessary documents. This can include a government-issued ID, such as your driver’s license, your social security number, and proof of address (such as a utility bill).
- Fund the account. Once you’ve been approved for the account, you’ll need to fund it. How much you deposit is up to you, as long as you meet the minimum opening balance required by the financial institution.
- Access your account online. If you open a money market with an online bank, then creating an online account is likely part of the process. If you open an account at a credit union or bank, then be sure to create your online account so you can manage your money anytime and anywhere you go.
- Enable direct deposit. If your employer provides paycheck direct deposit, you may want to have all, or part of your earnings direct deposited into your money market. You can transfer funds out of your money market into your checking account to cover your bills and expenses, while keeping money in your money market. This is a great way to boost your savings.
What to consider when choosing a money market account
Here are some details to consider before opening a money market account:
APY. This stands for Annual Percentage Yield. According to the Consumer Financial Protection Bureau, APY measures the total amount of interest paid on an account based on the interest rate and the frequency of compounding. APY is expressed as an annualized rate, based on a 365-day year.
Deposit insurance. As mentioned earlier, FDIC insures bank deposits and NCUA insures credit union deposits. The Securities Investor Protection Corporation (SIPC) protects customers if their brokerage firm fails. In each case, money market accounts are insured up to $250,000.
Minimum balance requirements. Each financial institution will have a required minimum balance that must be maintained to keep the account. Going below the minimum will result in penalty fees.
Check-writing privileges and debit cards. Some money market accounts include checks and a debit card, however in these cases there may be a limit on the number of transactions.
Fees. Be sure to ask what fees, if any, are charged either monthly or annually.
Transaction limits. Many financial institutions limit the number of withdrawals that can be made each month. Exceeding the limit will result in fees.
How money market accounts compare
When considering whether to open a money market account it’s important to make sure that this type of account will meet your financial needs and goals. Here is a look at how money market accounts compare to checking, savings, and share certificates (the credit union equivalent to certificates of deposit).
Money market vs. checking accounts.
Money markets are designed with savings in mind, while a checking account is primarily for the payment and outflow of money. Some money markets come with check-writing privileges, but if you will be writing a lot of checks and paying bills, it’s better to use a checking account for this purpose.
Money market vs. savings account.
These types of accounts can have similar interest rates; however, money markets may require a larger minimum balance to be maintained. Before choosing a money market, be sure you’ll be able to maintain the minimum balance. Failure to maintain a minimum balance will result in penalty fees.
Money market vs. share certificates
Share certificates require that the deposited funds remain in the account for a specific timeframe to earn a specific interest rate. For this reason, share certificates and CDs tend to earn a higher interest rate than market interests. Share certificates are considered a long-term earnings instrument. While money markets have some limitations on the number of transactions you can make each month, the money is always accessible without a penalty if you adhere to the transaction requirements.
FAQs
Are money market accounts safe?
Yes, generally, money market savings accounts are safe and insured. However, it is possible to
lose money indirectly with a money market.
Are money market accounts taxed?
Yes, the interest earned from a traditional money market is taxable, unless the account is designated a part of a retirement account. Retirement accounts, including
Individual Retirement Accounts (IRAs) and
Roth IRAs each have specific tax rules and depending which type of account you have, the earned interest may or may not be taxable.
Where can I open a money market account?
Where to open a money market account may depend on where you currently have your accounts, and the interest rates you find after shopping around. Credit unions, traditional banks, online banks, and brokerage companies all offer money market accounts.
What's a good return on a money market account?
Money market account interest rates are variable, and a good rate one year may not be considered a good rate the following year. By shopping around you’ll be able to get an idea of what the current rate range is and choose the rate and account terms that work best for you.
How much money should I put in a money market account?
You’ll need to open the account with the minimum required amount. After that it’s up to you how much to keep in your account. The best way to take advantage of the interest rate is to keep as much in the account as you can, while keeping sufficient funds in your checking account to cover debt payments.
Why savvy consumers choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.
Accounts">savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.
Get Started on Your Money Market Account Savings Today!