Why Money Market Accounts Can Make Sense

Historically, the interest rates paid on money market accounts have always been lower than CD rates and other financial investment accounts. The main reason for the rate being lower in a money market account is the accessibly of cash even though you may only have limited withdrawals each month. Another reason a money market account is used would be when people are between investments and a holding account is needed. The majority of people who use this type of account have it with their stock broker. Others just have it to earn a little on their money which is better than nothing. As a matter of fact treasuries have paid nothing in the recent past and currently are paying less than 1%. The rates are at an all-time low.

It is however, an account that pays you a little something up until you find some investment alternatives. You can lock up your money in a certificate of deposit or Treasury Bills for up to 6 months or longer. Depending on your bank, the longer you go, the higher the rate. However, because the interest rates are low everywhere most people are remaining somewhat liquid and stay in a MMA until the rates increase and are attractive for a longer term.

Banks are becoming very aggressive for your deposit business, so you may be able to take advantage of an incentive a bank is offering if you change banks.

If you have a good relationship with your bank, ask to see if your current interest rate can be increased or you will go across the street where you can get more interest. This tactic works sometimes. It doesnít hurt to ask. You may end up with a CD rate on your money market account and even if it is a little better rate, you are the winner and still have your funds available to seek out another investment that you may find attractive.

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