Money market accounts can be a great way to earn some extra money on your savings, especially with today’s rates. Deposit interest rates, including money market account rates, have been on the decline recently. This makes it more important than ever to compare MMA rates and make sure you’re getting the best return on your balance.
According to the FDIC, the national average money market account rate is currently at 0.58%. While this may not seem like much, it’s important to note that just three years ago, it was a mere 0.07%. So, by historical standards, money market account rates are still relatively high.
Despite the average rate, some of the top accounts are offering over 4% APY. These rates may not last for long, so now could be a good time to open a money market account to take advantage of the high rates available.
When considering how much you can earn from a money market account, it all comes down to the annual percentage rate (APY). This figure takes into account the base interest rate and how often interest compounds, which is typically daily for money market accounts.
For example, if you were to deposit $10,000 into an MMA with the average interest rate of 0.58% and daily compounding, your balance would grow to $10,058.17 after one year. This includes your initial $10,000 deposit plus $58.17 in interest.
On the other hand, if you opt for a high-yield money market account with a 4% APY, your balance would grow to $10,408.08 over the same period, with $408.08 in interest.
It’s important to note that money market accounts may come with more restrictions compared to traditional savings accounts. These accounts often require a higher minimum balance to earn the best interest rate and may limit the number of withdrawals you can make per month, typically around six.
While it’s unlikely to find a bank offering a 7% interest rate on money market accounts, some local banks and credit unions may run limited-time promotional rates that could reach as high as 7%. However, these rates often apply to a limited balance.
In conclusion, money market accounts can be a valuable tool for growing your savings, especially with today’s rates. By comparing rates and understanding how interest compounds, you can make the most of your money market account and earn a higher return on your balance.
