To get the highest money market rates, the account owner must leave the principal deposit, and all interest earned, in the account. Any account service or transaction fees should be avoided. Also, the minimum balance required to earn interest should be maintained. The account owner should shop around periodically to check current rates. Funds may need to be moved to a new account to ensure the owner keeps earning the highest money market rates available.
The highest rates offered for money market accounts are listed in advertisements and account paperwork as the annual percentage yield (APY). To earn the APY, the account owner must leave both the original deposit and any interest earned in the account. This allows the interest to also earn interest. This is known as compounded interest.
Often, a bank or credit union will require a minimum balance to open a money market account. Usually, this balance must also be maintained in order to earn interest on the account. The account owner should check for any minimum balance requirements prescribed by the bank or credit union to ensure that the account owner continues to earn the highest money market rates possible.
In addition, the account owner should follow all account rules and federal regulations. This will help ensure that no fees are charged to the account. Any charges will affect the owners ability to earn the highest money market rates advertised for the account. Such costs can include monthly service charges, transaction fees, and Regulation D fees.
If a minimum balance is required and the account falls below that balance, some banks and credit unions may charge a fee in addition to not paying any interest on the account balance. Account owners can usually access the money market funds with a debit card or check. Banks and credit unions may charge fees when these cards and checks are used. Since money market accounts are savings accounts, they are subject to Regulation D in the United States.
Regulation D limits the amount of transactions, when the account owner is not present, to six per month. Only three of these monthly transactions may be checks. Account owners who exceed these limits will be charged Regulation D fees. These fees can lower the account balance and, as a result, the account owner will earn less interest. If any fees are charged, the account will not earn the stated APY.
Since money market rates can change, account owners should continue to check other banks and credit unions to see the highest money market rates being offered. Usually, money market accounts can be closed and account owners can move their funds to a new account without penalty. The account owner should only move funds after any interest earned has been posted to the account.