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Money Market Accounts - Best Savings Rates

The average savings account at a local, physical bank pays a measly 0.77% APY. With an online money market account, banks can pay a much higher rate because of lower overhead. Online money market accounts are very similar to savings accounts, yet they offer very high rates and often $1 minimum deposits and balances.

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Stock Investors are Moving to Money Market Accounts in 2008

More and more investors are moving their money to money market accounts after they have taken a beating in the stock market. The DOW reached over 14,000 on October 10, 2007 and now it is rolling around 11,378. So you can either guess that the market has bottomed out and keep buying the dips, or you can put your money in a place where you can be sure it won't lose a dime - in a high yield money market account. Be careful of money market funds though, they aren't FDIC insured and sometimes do lose your money (money market funds make riskier investments than money market banks).

Is Your Bank on the FDIC Problem Bank List?

The FDIC reviews banks every 12 - 18 months. The FDIC examiners evaluate the banks based on a number of metrics:

• Capital
• Earnings
• Management
• Controls
• Liquidity

If the money market bank has problems, the FDIC will put it on a problem bank list. So what happens to a bank if it is on the problem list? The FDIC will monitor the bank more closely, and if it is not able to correct it's problems, the bank will be sold to a stronger bank. Otherwise the bank may end up failing - like IndyMac. The FDIC doesn't publish the bad bank list - it is kept very secret. Roughly 13% of the banks on the list fail. Right now there are about 8,500 banks in the country and only 90 of them are on the problem bank list. So you shouldn't be too concerned about the health of the banking industry since to how that equates to only 1%.

HSBC Direct Money Market Account

HSBC is known for it's good rates, simple transaction process, and minimum balance and deposit of only $1. It is extremely easy to setup an online savings account with HSBC Direct.

The money market accounts in the chart above offer more than four times the interest rate than a regular savings account. ING Directand Emigrant Directare both excellent banks and offer high money market interest rates. If you have a hard time putting money aside for a rainy day, ING Direct offers an optional savings plan that automatically pulls money from your regular bank account and transfers it to your ING Direct online account on a regular basis. You'll be surprised at how much money you can save when you setup the automatic savings plan.

Emigrant Direct is a solid bank with $14 billion in assets. It probably has the most efficient money transfer and access system which allows it to offer very competitive rates to it's customers. The chart above compares some of the leading online savings account banks.

Best Money Market Accounts

Use the money market comparison chart above to compare the top money market banks. There are subtle differences in these money market banks. All banks are insured up to $100,000 per account by the FDIC. These money markets offer the best liquid savings rates available. High savings account interest is a key to accumulating wealth. High interest on savings accounts can double your money with time. Depending on the savings rates, your money can double in as little as 30 years. That may sound like a long time but your money is liquid and you can pull it out of the money market any time you need.

HSBC Direct Online Banking

HSBC provides several features other online savings banks don't. Three of these services are below:

• 24 HR Support
• ATM Card
• No Checking Account Required

Why let your savings sit idle in you bank account earning a measly 0.5% interest when in five minutes you could open a money market account at Emigrant Direct and be earning four times that amount? Plus, online transfers are free so it is not as though you don't have access to your funds. You can just login and click a button and your money will be transferred back from the money market account to your bank account.

A ROTH IRA Can Help Your Money Market Account

One of the main purposes of any Certificate of Deposit or Money Market Account is to preserve the buying power of your money. However in order to correctly fight inflation, a money market account needs to be placed in a ROTH IRA so that interest accumulates un-taxed and is allowed to compound. Over the years, your money will grow considerably faster without the annual interest income taxation and you can withdraw from a ROTH IRA without paying any taxes - because a ROTH IRA is funded with post-tax dollars.

The money market comparison chart above shows at a glance the main features of several leading money market account providers. The main differences between these banks is the interest rates offered, the minimum balance required among the best money market accounts, and the ways you can access your money. WTDirect is the leader in money market rates, but it has a minimum balance of $10,000. The money market comparison table will help you decide which money market is best for you.

Money Market Rates are Best with Online Money Market Accounts

Most people don't know that there are so many things to take into account when choosing the best money market account. Of course at the top of the list is getting the best money market rate and the minimum balance. It is almost impossible to find a money market account offered by a regular bank which yields 5% or more with only a $1 minimum deposit. Go ahead and check your bank but you will find that these kind of rates are only offered for accounts that have at least $15,000 at physical banks. So if you don't have that kind of money sitting around, an online money market account is for you.

Which Bank is Better: ING Direct or EmigrantDirect?
The best money market account for you depends on your access to the internet. If you have a way to access the internet whenever you need, I recommend HSBC Online Savings Account ; it offers a high rate nationwide for money market accounts only requiring a $1 deposit. It is also an accredited institution and its financial stability has been rated "satisfactory" by Lexis Nexis (an independent rating company.)

If you don't have consistent access to the internet, ING Direct may be a better choice. ING Direct increased its rate to. Washington Mutual Savings and HSBC Direct both offer higher rates and some say that HSBC is the best of money market accounts.



ING Direct offers several ways to access your money, transfer funds, and check balances. You can use ING Direct's Interactive Phone System, or call an account representative. You can also manage your account online. As a bonus ING Direct supports Quicken and has teamed up with TurboTax to help you with your taxes. The website is easy to navigate and when you open a money market account, ING Direct has a referral program which allows you to refer up to 25 people. You earn $10 dollars for every referral that opens a money market account. The person you referred gets an automatic $25 deposited in his or her money market account. I've already used the system to refer my mother and when she open a money market account, we both received the moneys promised.

If you seriously want to save money, ING Direct has an automatic deposit feature that allows you to specify that a certain amount of money be transferred from your checking account to the money market account. I have $10 a week transferred to my money market account. What this does is take the discipline out of saving, you no longer have to manually set aside money each month, it is automatically done for you.

What is a money market account?

So what exactly are money market accounts? A money market account is considered a safe investment but with a higher yield than a normal savings account. The high yield is generated by a chain of investments. You and many other clients invest in separate accounts with the bank. The bank then uses those funds as loans for cars and houses. Because the loans are backed by assets the risk is limited. But what really makes a money market account safe is the fact that it is FDIC insured up to $100,000 per account. That means your principal (the amount you deposited) is guaranteed not to decrease in value by a government agency. The reason the FDIC is willing to insure money market accounts is banks are very careful about who they choose to lend to and most loans are backed by collateral so the bank can only lose the difference between the loan amount that is unpaid and the value of the car or house.

What are the Differences among Savings Accounts, Money Market Accounts, and Certificates of Deposit?

All three of these money accounts are very safe, the differences lie in the interest rates, withdrawals allowed each month, the liquidity of the funds in the account, and the minimum initial deposit.

            •            A savings account is a very liquid investment that normally accrues less than 1% interest annually. The number of withdrawals per month are usually not limited. The initial deposit is usually low, with some accounts beginning at $1.

            •            A money market account is a semi-liquid fund that can currently earn anywhere between 1.39 and 4.60% APY. The amount of withdrawals each month is six. There is wide variance in the minimum initial deposit, but it is usually around $100.

           •            A certificate of deposit is an account with a wide variety of terms and conditions to choose from. Options to consider are: length of deposit, interest rate, and amount deposited. Withdrawals are discouraged and penalties usually occur if money is withdrawn before the certificate matures.

Which Money Market Account is Best for You?

            Answer these questions to help you decide what is right for you:

            •            How much do you have to deposit?

            •            How often do you need access to the funds in the account?

            •            How high of an interest rate do you want?

            •            Do you want a financial institution near you or is an online bank okay for your needs?

Good luck growing your money with a competitive money market account.

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