Are Money Market Account Rates Locked In?

Are Money Market Account Rates Locked In?

MMAs typically offer a high annual percentage yield (APY), but rates aren't fixed. Instead, money market account rates are variable, which means they can fluctuate based on various factors.

Similar to savings accounts, MMA rates tend to move in the direction of the federal funds rate, which is set by the Federal Reserve. Financial institutions, like banks and credit unions, use this benchmark rate to determine the rates they offer on savings products, including money market accounts.

But other factors can also affect MMA rates, such as promotional offers from financial institutions, tiered APY account setups and specific account terms. For instance, to qualify for the best rates, you may need to meet minimum monthly balance requirements. Or you may need to have another account with the financial institution, like a checking or savings account.

How Often Do Money Market Account Rates Change?

Banks, credit unions, online-only banks and other financial institutions determine their own MMA rates, and they can usually change them at any time. While overall rate ranges tend to follow market conditions, other common factors that influence influence MMA rates include:

• Customer or account status: Some rates may only be available for new customers. Or you may need to already have an account with the financial institution, like a checking or savings account, to qualify for the best rates.
• Deposit requirements: Some MMAs require a minimum deposit within a set time frame to qualify for a promotional rate. Ongoing minimum deposit requirements may also apply. If you don't put enough money into your account, your rate could change.
• Minimum balance requirements: Some MMAs require account holders to carry a certain minimum balance to qualify for best rates, such as in a tiered account. If your account balance is below the threshold, your rate may earn less interest.
• Other required terms: Financial institutions may have other requirements you need to meet to earn a specific APY. For instance, if you close your MMA before your interest is credited, your earnings could be reduced. Be sure to read the fine print when comparing MMA offers.

How to Get the Best Money Market Account Rate

Comparison shopping can help you get the best money market account rate. But once you open an MMA, it's also important to know how to maintain your rate. Here are some pointers to get the best money market account rate.

• Compare rate offers. Financial institutions like banks, credit unions and online-banks regularly advertise their MMA rates. To find the best rate, look past the advertised rate and see what's required to receive the APY. For instance, it's common for MMAs to have promotional rates or tiered rates tied to your daily balance.
• Consider different locations. Rates often depend on where banks and credit unions are located, and are usually highest from online banks. While restrictions sometimes apply, you may be able to get better rates by opening an MMA in a different state or through an online-only bank.
• Take advantage of tiered rate structures. Having a tiered MMA doesn't mean you'll automatically qualify for the higher rate. To maximize your earnings, you may need to meet certain conditions, like maintaining a minimum balance. Check the fine print to make sure you understand how to earn the highest rates.
• Watch out for fees. Many MMAs charge fees on top of monthly maintenance fees. Fees for overdrafts, insufficient funds, ATM use, foreign exchange or excessive withdrawals could lower your overall balance below your MMA's minimum account balance requirement.
• Keep an eye on market rates. Money market rates are closely tied to market conditions. If the Federal Reserve lowers rates, financial institutions may decide to offer higher interest rates on savings products, like MMAs, to encourage more deposits to fund loans. Watch out for market shifts to make sure you're getting the best rate.

The Bottom Line

As long as your balance is under the $250,000 insurance limit, a money market account is a safe place to save up for a short- or medium term savings goal, like an emergency fund or a large purchase.

Opening a new money market account typically doesn't take long. So if you find a stronger promotional offer or account requirements that better fit your budget or savings goals, it may be worth opening a second MMA or transferring your money market account savings to a different financial institution.