To get the best money market returns, shop around to find the highest interest rates available before the money market account is opened. Funds should be left in the account for as long as possible and the number of withdrawals should be limited. This will ensure that the account owner will earn the stated annual percentage yield (APY) and that penalty fees will be avoided.
Before a money market is opened, compare the current interest rates offered by all local, national, and online banks and credit unions. In the United States, financial institutions must list the APY for all money market accounts. Listing the APY helps consumers make a fair comparison of different money market returns.
APYs can be found on financial institutions’ websites, by visiting a branch office, in local newspapers, or by calling the bank or credit union. Some personal finance websites also list available APYs from different banks and credit unions to make it easier to find the best money market account. Also check the APY at the time you open a money market account to ensure it has not changed.
To earn the stated APY, the original deposit and all credited interest must remain in the account. In doing this, the credited interest earns interest. This is known as compound interest, which offers the best money market returns.
Generally, there is also a required minimum balance needed to earn the stated APY. To get the best money market returns, this balance must remain in the account. If the account balance falls below the required minimum, interest will not be earned. Service or maintenance fees may also be charged to accounts that fall below this minimum. These fees will lower returns.
In the United States, another fee that should be avoided is the Regulation D fee. Regulation D limits the number of off-site account transactions to six per month. Such transactions include electronic payments known as automated clearing house (ACH), checks, phone transactions, electronic transfers, and debit card purchases.
Of the six transactions allowed per month under Regulation D, only three of them may be checks, debit card transactions, or payments to third parties. Accounts that exceed the Regulation D withdrawal limits will be charged fees. Regulation D fees also reduce account earnings, which lowers money market returns.
To ensure the best money market returns after the account is opened, continue to compare advertised APYs. Most money market APYs are variable. This means that the APYs can change at any time without notice. Usually, money market accounts can be closed at any time without penalty fees. Money market funds can then be moved to a new account to continue to get the best returns possible.
Prior to moving funds, ensure that the most recent interest payment has been credited to the account. If a money market account is closed before interest is credited, this interest could be lost. Some, but not all, financial institutions will credit a partial interest payment before the account is closed. Loss of any interest will also lower money market returns.