Benzinga readers have worked with CIT Bank for many years when they are looking for the best money market rates.
Still stuffing cash under the mattress? Today, consumers have a variety of accounts and instruments at their disposal for everyday saving needs, from regular checking accounts, savings accounts (including ones that you can open entirely online from the comfort of your home), high-interest savings accounts (HISAs) and certificates of deposit (CD).
Money saved in something like a checking account and/or another deposit account is considered “risk free,” as deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to a certain amount. As a result, they can be an excellent way of stashing cash safely for short-term needs, such as tuition, a down payment, vehicle purchase or an emergency fund.
Savers who store money in these accounts earn interest (savings rate), expressed in terms of annual percent yield (APY). For example, an investor who deposits $10,000 in a savings account offering 0.50% APY will earn $50 annually. Interest rates vary between deposit account types but are generally subject to a national cap imposed by the FDIC. Earning interest is an excellent way to put spare cash to work.
An alternative to savings accounts with better rates and flexibility are money market accounts. Compared to savings accounts, money market accounts can allow investors to write checks, withdraw from ATMs and use a linked debit card. Like savings accounts, money market accounts also pay an annual interest rate (savings rate), which is usually more competitive.
Banks use the deposits stored in a money market instrument to invest in a variety of low-risk investments, such as CDs, federal government Treasury bonds, municipal bonds and high-credit-quality corporate bonds and commercial paper. Regular savings accounts cannot invest in these instruments, hence the lower interest rates paid.
Historically, the percentage yield on money market accounts has been poor because of low central bank interest rates. However, the U.S. Federal Reserve recently raised the Federal Funds Rate (FFR) several times (it currently sits at 1.58%) in response to high inflation and is likely to continue throughout the remainder of 2022. As a result, both money market and savings account rates are expected to increase in turn, offering savers a better yield.
Here are some of the top banks offering money market accounts for 2023, with their annual percentage yield, pros and cons. Many of these banks are online-based and offer better, more competitive rates compared to big-name banks with brick-and-mortar branches. They can offer these benefits because of lower overhead costs and smaller range of services, making them a good no-frills option for the frugal and money-savvy.
Best for Business and Personal Checking: CIT Bank
CIT Bank is ideal for savers looking for a balanced mixture of competitive APY, account minimums and fees and accessible online services and mobile apps. Additional rates include: Platinum Savings Tier 1 at 0.25%, Platinum Savings Tier 2 at 4.85%, Savings Connect at 4.60% and an 11-month No Penalty CD at 4.90%.
- Free year of Amazon Prime membership (conditions apply)
- No monthly service fees
- Can be linked to Zelle and Bill Pay
- Accounts can be opened online
- Online check deposit and transfers via mobile app
- Limit six transactions per statement cycle
- Minimum $100 deposit to earn interest
- Must deposit a minimum of $15,000 within 15 days of opening and maintain that account balance for 60 days subsequent to qualify for Amazon promotion
Best for High Interest Rates: CFG Community Bank
CFG Community bank is ideal for savers with large balances looking to maximize interest rates without a need for ATM or in-person banking services.
- Highest interest rate offered among competitors
- Accounts can be opened online or in person
- No out-of-network ATM surcharges
- $25,000 account minimum to earn interest
- $1,000 account minimum to avoid a $10 monthly service fee
- Check-writing and ATM access unavailable unless opened in-branch (only two branches in Maryland)
Best for Joint Bank Accounts: Ally Bank
Ally Bank is ideal for savers who plan on making more frequent transactions with their money market account via ATM withdrawals and debit card purchases
- Access to debit cards, ATMs and checks
- No minimum deposit to open an account
- Fees at non-allpoint ATMs reimbursed up to $10 per statement cycle
- No physical branches
- Cash deposits not accepted
- $10 charge for excessive transactions
Best for Student Loans and Banking: Sallie Mae
Sallie May is ideal for savers with smaller accounts looking for zero monthly service fees and minimum balance requirements.
- No minimum account balances
- No monthly maintenance fees
- Ability to write checks
- Low rating for mobile app
- Customer service hours limited to weekdays 9:00 a.m. to 6:00 p.m. EST
- No ATM access or debit card
Features to Look for in Money Market Accounts
Choosing the right money market account isn’t just about maximizing the interest rate earned. While APY is certainly important, other factors can make or break your savings goals and make the banking experience hassle-free or a nightmare. Here are five other features to consider as you look for an account that offers performance savings rather than the bare minimum.
With yields rarely going above 1.00% (with the exception of a high yield savings account), it's all the more critical to ensure that fees remain low. This way, your money isn’t walking out the door every month. Pay attention to whether your bank of choice has fees for online banking, check-writing, check-cashing, monthly service fees, ATM withdrawals or excessive transactions. If there are fees, consider how much you may incur in a year, divide that by your planned balance and multiply by 100. Subtract this from the APY to determine the amount of drag on returns caused by fees. For example, if you’re paying $50 a year in fees and have a $10,000 balance, every year your fees are costing you 0.50%. If you have a 1.00% APY, your net yield is reduced to just 0.50%. You may also pay a transaction fee when moving money from one account to another.
Many of the banks profiled earlier are predominantly online banks, with few physical branches present, if any. As such, a depositor such as yourself might not get the customer service they are accustomed to when driving to the local branch to speak with a teller. Make sure that the customer service is up to par, accessible and helpful. Consider the hours of operation for phone services and if the bank offers live online chat. Try and reach out on both to get a sense for wait times and the friendliness of customer service representatives.
There are two types of account minimums to be aware of if your bank has them. The first one deals with the minimum amount of deposits that must be present in your account to not be charged a maintenance fee. The second one deals with the minimum level a depositor must meet to earn a corresponding APY, with higher account balances earning more in various tiers. Ensure you read the fine print to understand how much you must keep in the account to satisfy both requirements because your beginning balance is often just the first step in the process.
Given that many of these banks are online-only, the user experience and interface of their websites and mobile apps is important from an accessibility perspective. Before signing up, try and get a sense of how their online services work and whether or not you like using them. Are the apps and websites intuitive, well-laid out and easy to navigate? Does it run smoothly or frequently crash? Have there been security issues in the past? Is tech support and troubleshooting readily available and understandable?
If being able to access banking services and resolve potential issues in-person is important for you, you may want to consider money market accounts at banks with local branches. Some banks are online only, which can restrict you from banking services only accessible in-person such as cash deposits, bank drafts or ATM withdrawals. More complex issues can be difficult to resolve online or over the phone, so factor this risk into your decision making.
How to Apply for a Money Market Account
Applying for a money market account savings account at any of these banks is a relatively painless and straightforward process. Many money market accounts can be set up from the comfort of your home within half an hour. All that’s needed is an internet connection and personal documentation. Here is a step-by-step guide to set you up for success.
Choose the Right Bank
The first step is to select the bank that offers the money market account best suited to your needs. As the account owner, you need to be comfortable depositing cash with this institution, and it cannot be said enough—not all banks are for everyone. Consider how important the following factors are to you, by assigning a weight to each and selecting the bank that has as many features and as high of an overall weight as possible:
- High APY
- No minimum balances
- No monthly fees
- Debit cards
- Physical branches
Get Your Documents in Order
Depending on the bank, you’ll require some personal information on hand to open an account. If you’re an existing customer of the bank with other products (like checking, saving, or CD accounts), this process is relatively straightforward. If you’re a new customer, the information required varies between institutions but generally comprises the following:
- Home address
- Email address
- Phone number
- Social security number
Fund Your Account
The next step is to fund your account. The method of doing this will depend on your bank’s deposit requirement. For online-only banks, you may have to initiate an electronic transfer or wire payment from your existing bank or payment processor (such as PayPal, CashApp or Zelle). For banks with an in-person branch, you can make deposits via checks, bank drafts or cash. When funding your account, ensure you transfer enough to waive maintenance fees or minimum account balances, if any. Also be aware of transfer fees on any deposit amount you choose as your existing bank may charge you if you opt for that route.
Meet the Conditions for Promotions
Many of these accounts offer promotions, whether it be higher savings interest rates or partnerships with other companies for products, services, memberships and incentives. However, these promotions come with fine print. Common requirements for a deposit product include a minimum initial deposit, monthly account balance or lock-up period, so ensure you abide by these to receive the promotion. You will also require a promo code for some promotions, so ensure you have this on hand and it is up to date.
How You Can Improve Your Finances
Money market accounts are a great tool for generating a return on your savings. However, they aren’t a cure-all for poor financial planning. Like with checking, savings and brokerage accounts, they serve as tools to help you to improve your financial situation and meet savings goals. Here are some tips on how to better manage your personal finances.
Set a Budget
In its most basic forms, a budget is simply: Net Income - Expense = Savings. The goal here is to assess whether or not your budget is net positive at the end of the month. Do you have money for savings? Or are you living paycheck to paycheck? Once you do the math, you can break down expenses into necessities like rent, utilities, groceries and non-essentials like streaming services and dining out. If you’re over budget, prioritizing like this can help bring it back under control. Having proper insight into where your money comes from and goes to is a necessary step to building up savings.
Pay Down High-Interest Debt
High-interest rate debt (anything over 10% APY) is toxic, the most notorious being credit card debt, which can run as high as 29.99% APY in some cases. If you find yourself in this situation, consider paying down the debt as quickly as possible. Making more than the minimum payment will help you avoid paying excessive interest. A good way to deal with credit card debt is by consolidating it via another lower-interest loan, such as a line of credit or another credit card offering a low promotional rate.
Establish an Emergency Fund
Life doesn’t always go smoothly. A layoff, medical emergency, natural disaster or economic downturn can significantly impact your quality of life. Having an ample cash runway in the form of a 3 to 6 month emergency fund (which can grow with a special interest rate) can help you stay afloat until you’re back on your feet. A great place to store this emergency fund to grow safely until you (hopefully don’t) need it is in a money market account, where it can earn interest higher than a checking or savings account.
Contribute to Employer-Matched Retirement Accounts
Once the previous four steps are completed, a great way to plan for the future is by contributing to employer-matched retirement accounts such as a 401(k). Contributing enough to obtain your employer's match guarantees an instant 100% return on investment. This is free money that should not be given up on. The money contributed should be invested in low-cost, broadly diversified index funds, so pay attention to expense ratios for your 401(k_ options. Avoiding expensive actively managed funds is a good choice, given their poor net performance relative to passive investing.
Invest in Self-Directed Accounts
The last step here is to invest in self-directed accounts such as a Traditional or Roth IRA or taxable account. Investors can do so via various online self-directed brokerages, which offer the ability to buy stocks, mutual funds and exchange-traded funds (ETFs) at a low price or with zero-commission in some cases. A great way to invest for the long term is via a portfolio of index funds or using a target-date fund. Keeping your fees low, ensuring holdings are broadly diversified, making consistent contributions and staying the course through market volatility will help build your retirement portfolio.
Frequently Asked Questions
Can you lose money in a money market account?
Deposits in a money market account are insured either by the Federal Deposit Insurance Corporation (FDIC) for banks or by the National Credit Union Administration (NCUA) for credit unions. In the event that your bank or credit union files for insolvency, your deposit is insured for an amount up to $250,000 per account holder per bank. However, having multiple insurable accounts at the same bank (checking, savings, CDs) will also contribute toward the $250,000 limit. Joint accounts are insured for $500,000. Unlike stocks in the stock market in which you could lose your principal, you don’t risk losing principal in a money market account.
What is the downside of a money market account?
Money market accounts are subject to inflation risk because of low yields. If inflation runs high, there is a good chance that the interest rates offered by the money market account will not be able to keep up. As a result, deposits in a money market account may lose purchasing power over long periods of time due to their low total return. Savers with a longer time horizon can consider alternatives such as Series I Savings Bonds (which are indexed to inflation), which offer a much higher rate at low risk but can only be purchased in $10,000 increments per year.
How much money should you keep in a money market account?
Money market accounts are best used for short-term savings goals and emergency funds. As such, 3 to 6 months of living expenses or the amount needed for large purchases such as a vehicle, rent or down payment is ideal. Savers should also check the minimum account balance needed to avoid maintenance fees and to earn the highest APY tier. Savers with large account balances should also be aware of the $250,000 FDIC or NCUA insurance limit.
How often do money market accounts pay out?
The answer to this question depends on the bank, so make sure you read the fine print. In general, interest is calculated daily and paid out (shows up in your account balance) monthly. Money market accounts paycompound interest (interest on reinvested interest), which leads to a higher APY over accounts that only offer simple interest.
How much interest will I earn in a money market account?
The amount of interest you earn annually from a money market account is expressed in APY, which is a percentage. To calculate the amount of interest earnable, divide the APY by 100 and multiply it by the amount you plan on depositing. For instance, $10,000 deposited in a money market account earning 1.00% APY would result in $100 of annual interest income (1 / 100 * 10,000 = 100). This amount assumes you have your money remaining fully invested for a year and is gross of any fees charged.
Hire a Pro: Compare Financial Advisors In Your Area
Finding the right financial advisor that fits your needs doesn't have to be hard. SmartAsset's free tool matches you with fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is legally bound to act in your best interests. If you're ready to be matched with local advisors that will help you achieve your financial goals, get started now.