10 Best Money Market Rates: How We Reviewed The Best Money Market Rates?

A money market is a type of investment account that is often considered a cross between a checking or savings account and an investment fund. They can be taxable investments or qualified retirement accounts. Both banks and investment firms offer money markets alongside their savings or mutual fund offerings.

 The key difference is that money markets are significantly safer than mutual funds and other investments but offer larger returns than most savings accounts. They don't have as much potential for growth as many other investments, but it is this lack of growth potential that makes them a more secure account for storing your money.

 There are two types of money markets: deposit accounts and mutual funds. Deposit accounts are usually opened with banks and credit unions. Money market mutual funds are usually opened with investment firms and financial advisors and may be offered at your local bank or credit union if they offer other mutual funds.

 Both types are liquid, meaning you can sell the funds and access your money without waiting or risking early withdrawal penalties or fees. Because money markets are considered a type of security, you will often be restricted to only 6 withdrawals a month, so it is not a good option to replace your checking account.

Money markets are an ideal option for storing money that you will need for any major funding needs you have coming up soon. Some people refer to money markets as a sort of garage you can use to park your cash. You store it in a safe place, sheltered from the more extreme elements outside until you need to take it out and use it to reach a new destination or goal. 

Money markets are a great replacement for a savings account if you are just a few months away from purchasing a home. Some buyers will prepare by growing their down payment with stock market and mutual fund investments in the years leading up to a new home purchase. As they get closer to the purchase date, they'll transfer those funds to a money market to protect it from any sudden downturns in the market. 

 It's important to note that unlike checking and savings accounts, money market mutual fund and some deposit accounts are not FDIC insured since they are considered investments. It is possible for money markets to lose money in extremely volatile markets, but they are less likely to do so, and less likely to lose significant amounts like other stock market investments do.

Money markets have relatively low interest rates though they can be somewhat higher than the rates you would find in savings accounts. Since they are not FDIC insured, the institution managing the money market is not restricted as much in how and where it invests and grows the funds.

 Money market deposit accounts are frequently invested in municipal bonds, treasury notes and even certificates of deposit. Money market mutual funds tend to be invested in treasury securities, high-quality debt securities, and municipal bonds.

 Some of the best rates listed below may appear to be fairly constant, but each will vary as the value of the vehicles they are invested in grow or shrink. The best money market rates tend to remain fairly stable, especially compared with stock market investments, but the rates here are not guaranteed and will change over time.

You can open a money market account with your local bank or credit union. You can also choose to open a money market mutual fund with the same investment firm that manages your other investment accounts. Opening a money market with the same firm that you are currently using to grow your money will make for a more seamless transition when you need to transfer those funds. 

 If you will be transferring between mutual funds and a third party location where you will open your money market, you may have to complete additional transfer forms or have the check sent directly to you in order to transfer the funds to your new money market. 

 A few people consider this too much of a hassle for an account that will be storing their money for just a few months before they will need to use it. However, if you want the added security with the best money market rates, these small extra steps can be well worth the effort.

One of the most important considerations when searching for the best money market rates for your situation is evaluating the minimum deposits and the interest rates for those deposits.  Some money markets require a certain amount to open the account. Others have no minimum, but will severely reduce the interest rate if your deposit or balance drops below a certain level. You will also want to be aware of what fees are collected and whether they will cause too much damage to your funds.

You may be familiar with the term annual percentage rate (APR), but you may not be as familiar with annual percentage yields (APY) and how they function. An interest rate is the rate at which your money will grow over a set period of time. It is usually calculated as a percentage of the funds you have available. If the interest grows every month, then the amount each following month will include the interest grown previously.

 This process is referred to as compounding. The APY takes this compounding effect into account to show consumers how much they will earn over a year if they do not take any withdrawals. If you have a 2% APR, but it is compounded daily, your money will grow much faster than the same 2% APR which is only compounded quarterly.  The best money market rates are compounded daily or monthly though some money markets will be compounded quarterly or annually.