A money market checking account is one of the best types of banking accounts to maximize your interest earnings. However, money market accounts have drawbacks and aren't for everyone. In some cases, you may be better with other banking products such as high-interest checking accounts. Here is more information about the pros and cons of money market checking accounts to help you decide whether it is right for you.
What Are Money Market Checking Accounts?
Money market checking accounts are often described as being a blend of checking and savings account. Most money market accounts offer favorable interest rates compared to other accounts. However, they also require you to maintain a higher-than-average minimum balance. Money market checking accounts also limit the amount and type of withdrawals allowed.
What Are the Advantages of Money Market Checking Accounts?
The main advantage of money market checking accounts is you earn more interest while still retaining flexibility. There is no limit to how much money you can put in your account. As long as you stay within the six withdrawal limit and minimum balance, you can withdraw as much money as you want without penalty. Deposits are also insured like any other type of checking and savings account.
What Are the Disadvantages of Money Market Checking Accounts?
Most money market checking accounts require a minimum deposit and balance to avoid fees. You are only allowed six withdrawal or transactions within a month. Transfers, as well as debit card purchases, may be included in the six withdrawal limit. Some banks allow unlimited ATM cash withdrawals, however. If you fail to maintain a minimum balance, then you could be hit with sizable fees.
How Are High-Interest Checking/Savings Accounts Different?
In some cases, a high-interest account may be more profitable than typical banking accounts, especially for short-term goals. They aren't much different from money market accounts and sometimes pay more interest. Like money market accounts, high-interest accounts limit withdrawals. To get the best interest rates, you are often required to deposit and maintain an exceptionally high minimum balance. They may also have other restrictions and limits.
As with any type of banking account, you have to choose what best fits your lifestyle and savings goal. If you don't mind hanging on to a high minimum balance, then a money market or high-interest account may be right for you. If you need more access and flexibility, then a better choice could be regular checking and savings accounts. For more information about different types of banking accounts, contact a financial expert near you.