Some MMAs Are Paying More Than 5%. Here's Why I'm Not Opening One

If you've got money in the bank, you're at a definite advantage these days. Not only are you more likely to be able to avoid taking on debt in the event of an unplanned expense, but annual percentage yields (APYs) on deposit accounts are quite high. This is thanks to the Federal Reserve's string of 11 rate hikes between 2022 and 2023.

These increases to the federal funds rate were intended to slow inflation, and they did have an effect -- as of the most recent Consumer Price Index report, inflation was at 3.4%. This is higher than the 2% the Fed targets, but it's miles better than the 9.1% we saw for June 2022.

The Federal Reserve doesn't set consumer interest rates on bank accounts, credit cards, and loans, but these tend to move in the same direction as the federal funds rate. Hence, we're seeing those higher APYs on savings accounts, CDs, and money market accounts (MMAs). Some MMAs are even paying more than 5% APY. But I'm not rushing to open one -- and here's why.

I am currently well-banked

As of now, I have four bank accounts, two each for checking and savings, and they're at two different banks. One of my banks is of the big national brick-and-mortar variety, while the other is online only.

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 15, 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 15, 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

By using both, I get to take advantage of the different features they offer -- and I favor the checking account with the big bank and the savings account with the online bank to meet most of my banking needs. With this many accounts to juggle, I'm not really interested in adding yet another bank account to my plate. (This might change in the future, however, as I'll discuss below.)

High-yield savings accounts are competitive with MMAs

Another reason I haven't opened an MMA is because I can get a similar APY on a savings account right now, thanks to that higher federal funds rate. And savings accounts have some other advantages, including no minimum balance requirements or monthly fees. If I can earn the same returns on a savings account, it doesn't make sense to open an MMA right now.

I'm not ruling out an MMA in the future

While I'm not opening a money market account now, I could change my mind. I'm planning a big financial move for 2024 -- buying a house. I've spent the last 15 months or so saving money to meet this goal in a high-yield savings account, but once I actually find a house to buy and go forward with the purchase, I might end up looking for a new home for my emergency fund.

That money is currently co-mingled with my house fund in the savings account, but it might be nice to have easier access to it in the future. Right now, to get the money in that savings account (which is with an online-only bank), I have to transfer it to the checking account I have linked to it and then I can use my debit card to make purchases or withdraw cash from an ATM.

If I open an MMA, I can get around this money shuffling -- I could directly access my cash via debit card or checks when I need it. And if interest rates fall and MMAs end up with higher APYs than savings accounts, it might make a lot of sense to move my emergency fund to one at that point.

There are a lot of options out there for bank accounts. Money market accounts might not be the right fit for me at this time -- but they might be right for you.