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What is a Money Market Account?

Earn dividends without losing easy access to your funds.

Looking for another way to make your hard-earned money work hard for you? A money market account gives you a way to earn dividends while still giving you easy, instant access to your funds if needed, with no withdrawal penalty. And as your balance grows, you can save even more with a money market account that earns at a higher rate.

 

What is a money market account?

Found at both credit unions and banks, a money market account earns dividends like a savings account. It requires a higher minimum balance than a regular savings account, but you may earn a higher annual percentage yield (APY). Money market accounts are insured up to $250,000 by the National Credit Union Administration (NCUA) at credit unions and by the Federal Deposit Insurance Corporation (FDIC) at banks.

 

Due to recent events such as the global pandemic, money market rates are currently similar to basic or premium savings rates. For current rates at Alaska USA, see our rates page. For the purpose of this article, rates were accessed 3/30/22.

 

Pros and cons of money market accounts

As with just about anything, a money market account may or may not be the best option for you.

 

Advantages

  • May earn a higher APY than a typical savings account
  • Gives you easy access to your money—transfers and withdrawals are unlimited
  • Dividends you earn are automatically deposited into your money market account each month
  • Insured by the NCUA or FDIC, with a lower risk of loss compared to stock, bond, or mutual fund investments

 

Disadvantages

  • Most have minimum deposit or balance requirements to either open the account, earn the posted APY, or avoid fees
  • APY rates may not be as high as those for certificate or high-yield savings accounts

Don’t get confused by the similar names

A money market account is different than a money market fund, which is a mutual fund investment that can lose value over time. Money market funds are not insured against loss by the NCUA or FDIC.

Don’t get confused by the similar names

Alternatives to money market accounts

You have other options when it comes to your savings.

 

Savings accounts

  • Depending on your balance, APYs may be competitive with money market accounts, but lower than certificate accounts
  • Usually have no or low initial deposit or minimum balance requirements
  • Limited withdrawals: your money can only be accessed online, in a branch, or via ATM

 

Certificate accounts

  • Typically higher return than a money market or savings account, but your money is ‘locked up’ in the account for a certain amount of time
  • Fixed APY and duration—one month up to five years, with a fixed APY over the certificate’s term
  • Less risky than investments in stocks, bonds, or mutual funds

 

The choice is yours

A money market account may be a good choice for you if you have a larger balance in your savings account and want it to earn a higher rate of return, but you still want to maintain easy access to your money. It may also be a good option if you don’t want the funds in an investment that could lose value, or you want the account insured against loss by the NCUA or FDIC.

So, if you’re looking for a place to tuck away your emergency savings, or a way to save for a future wedding or big vacation, a money market account could be right for you. Alaska USA members can open a money market account at any time by following these instructions.

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800-525-9094

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memberservice @alaskausa.org

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