For many, a money market account (MMA) is kind of like a glorified savings account. It’s easy to see why. Like savings accounts, MMAs enjoy good liquidity with higher interest rates than a regular savings account. So, is an MMA right for you? Let’s take a look!
Savings Accounts vs. Money Market Accounts
The most visible difference between a regular savings account and an MMA is the potential to earn greater interest on the latter. A savings account has a single, set interest rate. For example, let’s say you have a savings account with 0.1% APY. This means you will always earn interest at a rate of 0.1% APY, regardless of how much money is in the savings account.
MMAs offer multiple interest rates. The rate you get depends on how much money is in the account. Hypothetically, you could earn 0.1% APY with $0 to $2,499.99 in the account. The APY might increase to 0.15% if you have $2,500 to $8,999.99. The interest rate may be raised again to 0.2% APY if you have $9,000 to $20,000.
To see the interest rates currently offered on Cyprus' money market accounts, click here.
Why Choose an MMA?
From the example above, notice that the interest rates on the savings account and the MMA are identical until the balance reaches $2,500. With that in mind, you would likely not see the benefits of depositing to the MMA until you had at least $2,500. This is one of the tradeoffs when it comes to money markets; they have the potential to deliver greater returns, but you must deposit more in order to earn better interest than a savings account.
At this point, you may wonder: If I have at least a few thousand dollars to spare and I want the best interest rate possible, why not put that money into an investment account? After all, an investment account would offer better returns than a savings or money market account. The reason often lies in timing. Let’s take a certificate of deposit (CD), for example. The money you put into a CD must stay there for a certain amount of time (usually a minimum of six months). This makes the funds in a CD less liquid than they would be in a money market—not a great option if you're planning on spending the money within the next few months. That’s where money markets come in. If you have enough funds to make better interest than what is being offered in a savings account but you need to have easy access to the money, an MMA could be a good option for you.
Funds in Cyprus money market accounts are federally insured by the NCUA. Cyprus Credit Union is an independent, member-owned cooperative financial institution. Your savings are federally insured by the National Credit Union Share Insurance Fund (NCUSIF) to at least $250,000 and backed by the full faith and credit of the United States Government.