Are you researching different types of savings accounts for your money? A money market account may be the right choice if you can maintain a high balance. Money market accounts are great places to save money when your end goals are to start an emergency fund, save for tax payments, or take a vacation. Interest earnings can be higher than other savings and checking account types.
Types of Savings Accounts
There are three main types of savings accounts that you can choose from. Each of them has characteristics that make them unique and cater to different needs.
Regular Savings Account—This is the most common type of savings account. You generally earn the least interest with this type, but it is higher than keeping your money in a checking account.
Certificate of Deposit – Also called CDs for short, these savings accounts generally offer the highest interest. You agree to the financial institution’s terms for keeping your money deposited for a certain amount of time, which is called a term. This term could last a few months or up to five years. Generally speaking, the longer the term, the higher the interest you’ll earn. You can't take it out while your money is in its term. If you withdraw from a CD before the term ends, you will be subject to a withdrawal fee or may lose part of the interest.
Money Market Account – MMDAs have a mix of checking and savings account features. You may receive a book of checks that you can write against the account. Some institutions will issue a debit card that you can use to access funds at ATMs and make purchases. MMDAs generally pay out more interest than a savings account and require a higher minimum balance as a trade-off. They are subject to the monthly six-transaction limit, just like a regular savings account.
Interest Earned on a Money Market Account
The interest you earn on an MMDA is generally compounded daily. You should be able to look at your statements and determine what day the interest is deposited into your account.
Since interest is compounded, the financial institution pays you additional interest on money that has already earned interest, maximizing your interest-earning potential.
Financial institutions vary significantly in the interest they pay on an MMDA. Some also offer cash incentives to open an MMDA, so it’s in your best interest to shop around and compare different banks and credit unions.
You can open a money market account with NASB to help you achieve your savings goal. We have two high-performance accounts for you to consider. Call us today at 800-677-6272 to learn more.
