My first bank account was at a credit union, where checking and savings accounts had funny names like “share” and “share draft.”
It was at that credit union that I learned of a third kind of account – the money market account. I remember seeing it listed on the board, which was one of those cloth boards that had the white plastic letters, and I had no idea what a “money market” was. In my mind, I pictured a dusty marketplace where there were fancy vendors were buying and selling money. In reality, I wasn't that far off though the markets aren't nearly as interesting.
In short, money market accounts are less flexible than checking accounts but more flexible than savings accounts, which is why they offer an interest rate that is higher than a checking account but often lower than a savings account. We delve into this more at the end of the article if you really want to know the differences.
What should you look for in a money market account? Pretty much the same as a savings account. You want a high interest rate with low or no minimum balance, no monthly maintenance or service fee, and a reasonable excessive transaction fee (if you exceed 6 transactions a month, per Regulation D).
We will outline a few of the best money market accounts available today, with updated rates as they change.
CIT Bank – 1.85%
The undisputed leader in money market accounts is CIT Bank. They may not be a household name (yet) but CIT Bank was founded in 2000 by the California-based CIT Group, which stands for Commercial Investment Trust.
Their money market account currently offers 1.85% APY with a minimum $100 deposit. CIT Bank is listed first because the minimum is so low for such a high rate. Others on this list may have the same rate but require a much higher minimum.
There is no monthly service fee and the excessive transaction fee is $10 with a $50 monthly cap.
In addition to having the highest interest rate on a money market account, they also have one of the most aggressively priced 12-month CDs too (2.20% APY) with a $1,000 minimum. By comparison, most 12-month CDs offer around a 2.00% APY.
The real gem of CIT Bank is their Savings Builder account. It offers a 2.45% APY if you have a $100 direct deposit each month (or maintain a $25,000 balance without the direct deposit). That's higher than most savings accounts.
Learn more about CIT Bank
(full review of CIT Bank)
Capital One 360 – 2.00%
Capital One 360 has a no-minimum no-fee 360 Money Market account that will give you 1.85% if you have a balance over $10,000. If you don't, you still get 0.85% APY on your savings – which exceeds most brick and mortar savings accounts.
I'm a fan of Capital One 360 from back in their ING Direct days. I still have a savings account there and the ability to create accounts quickly helps a lot with our savings goals. With no minimum and no fees, it won't cost you a thing.
Learn more about Capital One 360
BBVA Compass Bank – 1.80%
BBVA Compass Bank is an Alabama-based bank that's the subsidiary of the Spanish multinational Banco Bilbao Vizcaya Argentaria. It primarily operates in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas but you can open an account online so you do not need to be a resident of those states to apply.
They offer a money market account with a $25 minimum and a competitive 1.70% APY on the entire balance, no tiers or minimums. You can fund the account from a credit or debit card too.
Ally Bank – 0.90%
I'm a big fan of Ally Bank, it's the hub of my financial map, and where I keep my savings.
With a brick and mortar bank, you expect the money market account to have a higher interest rate than a savings account. With many online accounts, this isn't always the case.
With Ally Bank, their money market account offers a lower interest rate than their savings account. As of this writing, January 2019, the MMA offers 0.90% – 1.00% APY while the online savings account is more than 2x higher at 2.00% APY. Both accounts are similar in having no maintenance fees and remote deposit, the only difference is that you can get unlimited deposits and ATM withdrawals on the account.
(read our full review of Ally Bank)
Discover Bank – 1.95%
You probably know Discover mostly for their credit cards but Discover Bank has some of the most competitive rates for banking products too. They currently offer a tiered rate where you can get 1.85% APY on balances under $100,000 and 1.90% APY on balances over $100,000.
There is a minimum average daily balance of $2,500 to avoid the $10 monthly fee, but otherwise, there are very few additional fees. The excessive withdrawal fee is $15 per item.
Learn more about Discover Bank
TIAA Bank – 2.15%
TIAA Bank is the banking arm of TIAA, formerly known as TIAA-CREF (Teachers Insurance and Annuity Association-College Retirement Equities Fund). The financial services company has a rich and storied history, having been founded in 1918 by Andrew Carnegie, and today is one of the better-known banks in the United States. They recently acquired another bank, EverBank, which I used to work with quite a bit because of their market safe foreign currency CDs.
TIAA Bank has an introductory 2.15% APY on their money market account for balances up to $250,000 for the first year. Then the rate falls to the prevailing rate which, at the moment starts a 1.10% and goes up to 1.90%, depending on your balance.
There is a $5,000 minimum to open but there is no monthly account fee.
Money Market Account vs. Savings Account
A money market account is a hybrid account that's very similar to a savings account but also offers limited check-writing ability. If you think about the differences between checking and savings account, you're often trading a higher interest rate for access.
Checking accounts have a lower interest rate but you can write checks, withdraw money, and transact on the account as often as you need.
Savings accounts have a higher interest rate but you're limited by Regulation D to six transactions a month. Online savings accounts are savings accounts at online banks but they often have MUCH higher interest rates (and other great perks).
On a checking account, the bank has to hold a higher percentage of your balance in their coffers. They are able to lend out more of your savings account balance because it's less flexible. The tradeoff is that they pay you more because they can lend more of it out.
The “money market” is the part of the overall financial market that deals with short-term borrowing and lending. Your money market account earns the interest rates within the money markets, which is often higher than savings accounts, but it's going to be less than 12-month CDs (which are a component of the money market).
Before high-interest savings accounts, money market accounts were the only way to get a decent interest rate. Major banks pay nothing for savings accounts. As of September 2018, Bank of America currently pays 0.03% APY on a Rewards Savings Account.
Today, online banks have pushed rates higher. As you've seen with this list, online money market accounts offer a decent interest rate on FDIC insured funds.
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