If you’re like most people, the safety of your cash deposits is priority number one. So how do you make sure your money is secure? What if you want to earn some interest at the same time? Besides the old savings account standby, there are other safe places to save that you may want to consider.
Money market accounts are a great way to keep your money safe, earn a great rate of return, and (bonus) get flexible access to your funds. Take a look at the following answers to common questions about money market accounts.
What is a money market account and how does it work?
A money market account is a deposit account, like a savings or checking account. Money market accounts work much the same as other bank deposit accounts: you put money in the account and the bank pays interest on your balance periodically according to the terms of the account.
You can think of a money market account like a savings and checking account hybrid, or an account that combines the features of both. You generally get a better rate than you do with a checking account, but you have more flexible access than you do with a savings account.
Note: A money market account is not the same as a money market fund. A money market mutual fund is an investment product that is not FDIC-insured. You can learn more about money market mutual funds here at Ally Invest.
Is your money safe in a money market account?
Yes, if your money market account is with an FDIC-member bank. In fact, they’re among the safest places you can put your savings. The FDIC (Federal Deposit Insurance Corporation) protects you against losses in the unlikely event of a bank failure. For more information on making the most of your FDIC coverage, use the FDIC’s deposit insurance estimator.
Are online money market accounts safe?
With a reputable, FDIC-member bank, you can rest assured that not only are your deposits secure, but so is your personal financial information. Most online banks implement several common security measures to provide a safe banking experience for their customers. These include SSL encryption, firewalls, anti-virus protection, and multi-factor authentication, to name a few.
Ally Bank Tip: The best online banks stay on top of industry trends and go the extra mile to protect your information. Check out the Ally Bank security guarantee to see for yourself how we are committed to keeping your personal information secure.
What’s the difference between money market accounts and other savings accounts?
The difference between money market accounts and savings accounts boils down to rates and access. In general, deposit accounts that offer higher rates of return come with less flexible access, and vice versa. Of course, that’s not always the case, but it’s a pretty good rule of thumb.
For example, you may get higher rates of return on a certificate of deposit (CD) compared to those you get with a money market account. But CDs usually require you to keep your money in the account for a certain amount of time, or term length, to avoid withdrawal penalties. You usually can’t add to your balance in a CD, either.
With a money market account, on the other hand, you may not get as high a rate (although you can still expect competitive returns), but you can add to your balance anytime, plus you get limited check-writing and debit card access.