Key takeaways
- Opening a money market account requires the same documentation as any other bank account including a government-issued ID and your Social Security number, along with a way to fund the account.
- The rate you’ll earn on the account is the most important factor to consider, but don’t forget to review the fine print for extra fees and considerations about access to your money to make sure you’re picking an account that fits your lifestyle.
- Read the fine print prior to opening a new money market account to make sure you’ll meet the requirements to earn the highest APY while paying the lowest fees.
A money market account is a great way to keep your cash readily accessible while still earning a high yield. Think of it as an intersection between a checking account and a savings account: The money is there when you need it, but you’re ultimately hoping to leave as much in as possible to take advantage of an annual percentage yield (APY) that can rival that of a high-yield savings account.
A money market account has another thing in common with both a checking and savings account: it’s super easy to open. Read on to learn how to find one that meets your needs.
Opening a money market account (step-by-step)
1. Shop around
Just as you would with any financial service, you’re going to want to compare multiple options before applying for a new money market account. Money market rates are usually variable, which means they will go up or down at any time, but an account with a higher rate tends to always be at the front of the pack. When rates go down, you can feel confident you’re still getting one of the best deals out there.
It’s not just the rate, though. Be sure to pay attention to any minimum opening deposit requirements and whether there’s a minimum balance needed to avoid monthly service fees. And, of course, make sure the institution is covered by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA).
If you find it’s important to be able to talk to a teller in person now and then, choose a financial institution that operates at least one branch near you.
2. Gather the required documents
Whether you open a money market account online or in person at a branch, you’ll need to present certain types of documentation. If the account will have any joint owners, you’ll need to include their information as well.
This information will likely include:
- Driver’s license or state ID
- Birth certificate
- Social Security number
- Phone number
- Proof of address, if your ID lists a previous address
Keep in mind if you have a credit freeze in place for security reasons, you’ll need to have it lifted temporarily while opening the account.
3. Fund the account
If you’re funding the account by transferring money electronically from another bank account, your options may include an online transfer or remote check deposit. For online transfers, be sure to have the account information handy for the bank from which you’re moving the money.
Opening a money market account at a bank branch gives you the additional options of depositing money with cash or a check.
4. Set up online banking
If you’re opening a money market account at a bank that’s new to you, you’ll likely want to set up online banking so you can make transactions using the bank’s mobile app or website. This can make it easy to manage such tasks as checking your balance, depositing checks, ordering checks and transferring money between accounts.
Whether you’re on the bank’s website or downloading the mobile app, you can sign up by creating a username and password. Be sure to use a strong password with random uppercase and lowercase letters, as well as numbers and symbols.
5. Set up direct deposit
Many people prefer to have their paycheck directly deposited into a checking account so that the money is available to pay bills. However, you can also set up direct deposit to go to your money market account and transfer money needed for living expenses to your checking account. This can help you save extra money instead of spending it. What’s more, your funds will likely be earning interest in a money market account, whereas not all checking accounts earn interest.
You can start up direct deposit by giving your employer the account number and routing number of the new account.
Key factors to consider when opening a money market account
As with any type of deposit account, there are several factors to consider when searching for the best money market account for you.
APY
Similar to traditional savings accounts, the APY for money market accounts can vary a great deal. Online-only banks tend to offer higher rates than brick-and-mortar banks because they don’t have the overhead of maintaining branches. Some online banks may offer competitive rates as a way to attract business. Make sure you’re paying close attention to who actually qualifies for that APY, too; some banks only offer elevated rates to depositors with huge balances (think at least $25,000).
FDIC/NCUA insurance
It’s important to choose an account that’s insured by the FDIC or the NCUA, both of which insure deposits up to $250,000 per customer, per bank, per account owner category. This means you won’t lose your money in the event of a bank failure.
Most banks and credit unions carry this type of insurance, and you can confirm one is covered by using the FDIC’s BankFind Suite or the NCUA’s searchable database.
Minimum balance requirements
When shopping around for money market accounts, you may notice that many require a higher minimum balance than traditional savings accounts. Such a minimum balance may be necessary to earn an advertised rate as well as avoid monthly maintenance fees. Minimum opening requirements also vary; some banks don’t require a minimum opening deposit while others may require anywhere from $100 to $1,000 or more.
Check-writing privileges and debit cards
Some money market accounts allow you to write checks and use a debit card, so seek out one with these options if it’s important to you. However, it’s worth noting that banks often impose a limit on the number of such transactions per month with money market accounts.
Fees
Do a deep dive on the bank’s website to get a full grasp on the fees associated with a money market account. In some cases, you could pay a monthly fee if your balance falls below a certain threshold. Be especially mindful of excessive transaction fees, too. These aren’t as common anymore, but some banks and credit unions still charge these on money market accounts. For example, if you make more than six withdrawals from your money market account in one statement period, the bank might begin charging you $10 for every additional transaction.
You’ll also want to consider ATM fees. If you plan to use your debit card to withdraw cash from your money market account on a regular basis, it’s smart to consider a bank that reimburses for out-of-network fees.
Bottom line
Money market accounts are offered by many banks and credit unions. Opening one can be as quick and easy as it would be for a traditional savings account or a checking account. Shopping around can help ensure you’ll get the right account for you when it comes to the rate of return, the safety of your funds and other features.
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