Short-term Money Market Interest Rates

One type of savings and investment account you should know about is the money market account. These are provided by credit unions and banks, and are much like traditional savings and checking accounts. However, the interest paid on the account is higher, as well as the required minimum balance. In addition, you are limited when it comes to the amount of withdrawals you can make and checks you can write each month. The funds in your money market account are insured by either the FDIC (for banks) or NCUA (for credit unions.) This ensures your money is safe even if the financial institution goes bankrupt.

Money placed into a money market account collects interest, which is paid by the bank so that they have the ability to use your money to pay for loans to others. This in no way means you cannot access your money when you need it, you can. Money market accounts are easy to understand once you learn the fundamentals. The first step is of course opening the account with your bank or credit union. The minimum deposit requirement and other requirements will vary depending on your financial institution.

Interest is earned on the money in the money market account. When the bank uses your money to fund loans to others, they charge a higher interest rate than what you’re getting. So, they are making money too. When it comes to short term money market interest rates, it all depends several factors one of which is your bank or credit union. This is because financial institutions are competing for your business by trying to offer the best rates. The amount of your deposit may also make a difference in your interest rate. So, it pays to shop around before you decide where to open a money market account. The interest on your money market account is paid monthly, and compounded daily. The magic of compound interest makes you money on interest the bank has already paid you.

Managing your money market account is easy. While you can make a withdrawal whenever you need to, there may be limits on how many you can make each month without being penalized. A fee is usually charged if a minimum balance is not maintained in your account. When you open a money market account you will receive a register where you record deposits and withdrawals, which should match up to the statement the financial institution sends you each month. Remember, the more money you deposit into your account, the more interest you will earn. As previously mentioned, banks and credit unions differ on their policies regarding money market accounts, so do some checking around before you decide where to open an account.

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