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Over 8800 financial institutions insured by the FDIC and more than 1600 money market mutual funds want to compete for your investment dollar. That would be in addition to all the credit unions, brokerages and other institutions with money market accounts. Consequently, investors can afford to be very demanding. However, in their haste to snatch up the highest money market rates, many investors ignore the warning signs, and lock themselves into loosing money through taxable income, inflation risks and high fees. Don't let this happen to you! Use the information and resources below to evaluate your options and find the best money market account.
Define Your Needs - Initially, let's put aside the issues of finding high-yield money market rates and low fees. You need to make some decisions about the type of investment you want. Get out a piece of paper, or open a computer spreadsheet, and describe the perfect money market account.
While all money market accounts purport to offer safety and liquidity, they are not risk-free. Do you also need federal FDIC insurance, or could you evaluate the advantages and drawbacks of money market funds? Are you willing to look beyond your local financial institutions to find the highest interest rate? Most mutual funds don't have local offices, but they can still work very conveniently with your favorite local institution. Most money market fund and bank account providers also have toll-free phone numbers and online access. What is your tax situation, and would a tax-free money market fund serve you better? Many tax-free accounts produce higher after-tax returns than taxable accounts. How much are you investing? Some accounts have very large minimum investment requirements, but don't feel pressured to invest more than you want - there are many options available. Do you want to write checks on the account? Finally, have you gathered information about opening accounts at a dozen or more institutions? No? Well then...
Let's Find the Best Account - Start out by gathering information about institutions that are locally-based or where you already have financial relationships. If you want some national comparisons, see some examples at the top of this page. Comparison-shopping is the key to getting the best rate available and the best features available.
Begin your comparisons by going back to your ideal account list that you wrote down or typed in a spreadsheet. As you do your research on the phone, or online, make sure that each money market account meets your basic needs before considering as an option. If it does, write down the following five facts for each account:
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the financial institution's name;
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the name of the account;
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what is the permanent (not introductory) annual percentage yield (APY);
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what fees or expenses will be charged to your account, and; 5) how you would withdraw funds.
Finally, compare your best results with the following two sources:
- Bankrate.com offers several outstanding tools to help you compare rates and other account features as well as educational articles for investment experts and novices alike;
- money-rates.com also maintains a useful list of institutions and their account rates, but you will need to investigate the fee structures and features of each account through links provided on money rate site. Because rates change very quickly, you may notice that the various lists of the best money market rates differ. Regardless of any recommendation, make sure that the account fits your needs.
Disclaimer - The information on this site is believed to be accurate, but no warranty is made regarding rates, terms or features of any financial product. Carefully read the prospectus for any product before investing. The best money market rates, accounts, and funds are determined by individual needs, and tax, financial and legal advisors should be consulted before making an investment
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