When it comes to where you keep your savings, you have more options than just a traditional savings account. Money market accounts are an alternative choice for individuals looking to potentially earn more interest than a typical savings account while maintaining easy access to their funds. But how safe are these accounts? Let’s explore the safety features of money market accounts and what you should consider when choosing one.
What is a money market account?
Money market accounts are a type of deposit account that can act as a hybrid checking and savings account, giving you flexible access to your money.
Once you've been approved, you can transfer money from your checking or savings account into your money market account. Your bank then pays you interest on your balance, according to the terms of the account. Like a checking account, money market accounts allow you to write checks and use ATMs and debit cards. But you generally earn a higher interest rate with a money market account. Ally Bank’s Money Market Account offers a competitive rate, no monthly maintenance fee and access to your money at any time.
What’s the difference between money market accounts and other savings accounts?
The difference between money market accounts and savings accounts has to do with rates and access. Generally, money market accounts offer slightly higher return rates than savings accounts, but it depends on the financial institution and type of account. You’ll usually have an easier time accessing your savings with a money market account, since most offer the ability to write checks and use ATMs and debit cards for withdrawals.
Are money market accounts safe?
Just like other types of savings and checking accounts, banks are required to have certain safety measures in place. Your money market account is protected with:
FDIC insurance
When you deposit your money with an FDIC-member bank, you can rest assured that your deposits are insured up to the maximum amount allowed by law. FDIC insurance covers up to $250,000 per depositor for each qualifying account ownership category.
Regulatory oversight
Financial institutions offering money market accounts are subject to strict regulatory standards, which ensure their financial practices remain sound and secure.
Ally Bank security measures
Keeping your financial information safe is of the upmost importance to Ally Bank. To do so we implement a combination of industry best practices and technology including multi-factor authentication, firewalls, SSL encryption and biometric authentication.
Read more: Learn about the many ways Ally Bank works to keep your money safe
Limitations with money market accounts
While generally safe, keep in mind the following when investing in a money market account.
Inflation risk
The interest rate earned on a money market account is variable. Depending on your rate, the interest earned on the money you keep in the account may not keep pace with inflation. This could reduce your money’s purchasing power over time.
Withdrawal limitations
It is at your bank’s discretion what withdrawal limitations are placed on accounts – it is best to check with your bank to see if they have those limits in place and how much they are per month.
You may want to consider putting six to 12 months' worth of living expenses into a money market account, which can act as your emergency fund.
Funding your money market account
Once you’ve selected an account that works for you, how much should you keep in it? You may want to consider putting six to 12 months' worth of living expenses into a money market account, which can act as your emergency fund. Your emergency fund can cover unforeseen circumstances and financial emergencies such as a car that you need to replace or a family health emergency.
Keeping your money safe
Money market accounts offer an alternative option beyond traditional savings accounts and checking accounts. They’re a safe and flexible way to grow your savings, while still offering you the benefit of keeping your money liquid and accessible. Before committing to a specific account, compare the interest rates, fees and other features — and against traditional savings and checking accounts — to find the right account for your savings needs and goals.
