Best money market rates
Money markets refer to a bank account that allows earns a relatively higher interest rates on savings compared to the traditional savings account. The two account types, that is the savings and money market accounts would be available in the same bank but they differ in the requirements for operating the account. The interests on savings are those that are earned on some of the best money market rates.
Savings accounts are simply meant for saving money. These are usually small units of money that only live a few months or years. The minimum balance expected to operate a savings account would be limited to a few hundreds of dollars. In the contrary, a money market account which would attract the best money market rates often has a higher amount of minimum balance demanded; this would range from at least one thousand dollars to several thousands of dollars.
Earning the best money market rates
The money market accounts also known as high rate savings accounts would provide you the benefit of very limited fees charged on transactions. This is unlike the savings account which would attract a fee when a certain minimum threshold is hit. This is not to say that the high interest account will not attract such fees if the balance drops below the agreed minimum, rather, it is because the high rate account would read certain minimum that would allow for any further withdrawal.
To ensure that the discipline of maintaining the high minimum balance is observed, the banks will only allow very number of withdrawals per annum on the money market account. This could be as few as two withdrawals per year or just three. These saving allow the account holder to earn an interest on the savings.
The money market accounts also resemble the current or checking accounts because the account holders are charged very minimal fees. They may also have a cheque book that allow them to operate cashless. The cheque is as accepted just as would the cash.
The savings accrued from these huge deposits allow the bank to invest either directly in other securities or through lending to others. The longer the period of the investment by the bank, the greater the returns based on lending interest rates. The bank therefore shares this windfall with the owner of the money market account which translates to the best money market rates.
Who offers the best money market rates
Therefore banks that have long term investment vehicles or that that have huge portfolios that allow it to invest government securities that have long term maturity.
The added advantage of saving in the money market accounts is that you will not be likely to loose your money. In most countries, the government would guarantee these savings such that even if the bank goes under, you will be able to get back your money. The motivation for this government assurance of the money is that the government finds these as cheaper source of local borrowing.