It used to be that money market funds were only available to investors with quite a bit of cash. These days, though, many banks offer money market deposit accounts to anyone who can manage a much lower initial deposit. Money market funds and deposit accounts aren’t exactly the same thing, but you can still use a deposit account to take advantage of the great interest rates money market funds offer.

Funds and Deposit Accounts

A money market fund is an investment vehicle with a fairly solid interest rate. These funds are not FDIC-insured and require a significant amount of money (often around $50,000 to even begin investing). Money market deposit accounts are an FDIC-insured account opened with your bank — a much better deal for investors. The bank then bundles the funds from all of their money market deposit accounts to invest in treasury notes, CDs, money market funds and all sorts of investments.

The Details of a Deposit Account

Most savings accounts have a minimum balance — but a money market deposit account’s minimum is much higher than what you’re used to. Many banks also have a waiting period for withdrawals and other limitations. You’ll need to check with your bank to see what their rules for money market deposit accounts are.

Despite their limitations, money market deposit accounts are generally a much better deal than your savings accounts. If you use a standard savings account, you probably have a fairly low interest rate. Bank of America, for instance, offers the huge rate of 0.20 percent — yes, that decimal point is in the right place. Bank of America’s interest rate for money market accounts, though range between 1.74 and 2.18 percent.

When Money Market Isn’t Enough

There are savings accounts with much better interest rates than even the average money market deposit account, if you’re willing to go online. ING Direct and other online-only banks offer between 3 and 4 percent on savings accounts. Most of these banks don’t offer any kind of money market account, either. If you’re ready to make the move to online banking, you might wind up with a better interest rate than your local bank can provide.

There’s another way to find better interest rates on both savings and money market accounts, as well. Credit unions often have much better rates for their members on both types of accounts. You do have to be a member of the credit union in question, of course — if you’re not sure if you qualify for a credit union, look for local unions associated with your profession — those tend to be the most prevalent. There are also credit unions based on geographic location, church membership and other requirements.

Start Looking

The simple fact is that most people keep their savings in accounts that don’t earn them very much money. It’s always worth looking into whether you can get a better interest rate — I’m not advocating jumping from bank to bank to take advantage of special deals, but consider taking the next five minutes to pull up your bank’s website and take a look at their offerings.

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