Here's How to Know if a Money Market Account Is the Right Move for You in 2023

All that and FDIC insured too!?

It's a good idea to evaluate your banking needs every so often, such as at the beginning of a new year or if your financial circumstances change. If it's been a while since you looked at bank account options, you might be surprised to see just how much some accounts have changed recently.

Savings accounts, especially those with online-only banks, are now paying interest of 3% or more, and money market accounts (MMAs) have gone up too, thanks to rate hikes by the Federal Reserve during 2022. With inflation up, it's a bad time to keep too much in your checking. You may not have considered money market accounts at all before, though. So what are they?

Money market accounts are kind of like a hybrid bank account, a cross between a checking account and a savings account with features of both. And MMAs are FDIC insured, meaning that up to $250,000 kept in one is protected should your bank fail. Let's discuss some ways to know if opening an MMA might be right for you this year.

Do you want a higher APY?

Everyone wants to make money on their money. That's what compound interest is all about, and getting a higher annual percentage yield (APY) is the easiest way to achieve greater returns on your cash. If you put $1,000 into your MMA and it earns 4%. After a year, your $1,000 will have grown to $1,040. So the following year, you'll earn that 4% on $1,040 instead, and will end up $41.60 richer -- and so on. The more money you can put into a high-yield account and the longer you leave it there, the more money your money will earn. It's like magic.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings APY 4.10% Rate info 4.10% annual percentage yield as of October 11, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info 4.10% annual percentage yield as of October 11, 2024	Min. to earn $0
Capital One 360 Performance Savings APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
CIT Platinum Savings APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000 for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY	Min. to earn $100 to open account, $5,000 for max APY

Would you like easier access to your money?

Money is a tool, and as nice as it can feel to log into online banking and see a high balance, sometimes you need to use some of that money. MMAs shine here too, as they often come with check-writing capabilities and/or a free debit card, meaning that when you need your money, you can access it.

A typical savings account might not come with a debit or ATM card, and by definition will not come with checks. So if you had, say, a big car repair bill that you needed to pay out of your savings, you'd be stuck moving that money to another account first to access it. And that transfer might not be instantaneous, especially if you bank with multiple institutions, like I do. MMAs make it easy to get to your money in a hurry. You will be limited to six "convenient transactions" per month, per Regulation D, however -- so don't think an MMA can take the place of your checking account.

Can you maintain a minimum balance?

While it's necessary to get at your money when you need it, you might also be looking for an incentive to keep emergency savings right where they are. After all, if you spend your emergency fund on a non-emergency expense, what happens when you have a real emergency? To that end, some MMAs come with a minimum balance requirement, either to open an account or to earn the highest APY. This can be a great incentive to save and to leave that money alone. In fact, MMAs are a great place to keep your emergency fund.

If you've never considered opening a money market account before, they're worth thinking about. You'll gain a higher APY, easier access to your money when you need it, and even incentive to keep the account funded. Pretty cool!