Comparing Money Market Rates

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Money market rates can fluctuate on a daily basis.  People searching for money market accounts often compare only rates, but remember that there are other factors to consider, such as minimum deposit amounts,  location of the account or bank, monthly or annual fees, and friendliness of the personnel can tip your decision one way or another.  However, most people focus, at least initially, on the interest rate paid, and that deserves a more in-depth examination.

Comparing Money Market Rates

Comparing Money Market Rates

One place to start your comparison is at www.bankrate.com.  This website displays the published money market rates for many banks, some of which may be offered in your area.  The vast majority of them will also be offered on the Internet.  Different customers have different levels of comfort when dealing with internet banks, and will need to make a decision as to whether that type of account suits their needs and comfort level.  If not, most of the banks listed at bankrate.com also offer brick-and-mortar establishments.

Narrow your choices down to two or three accounts that seem to suit your needs, and then start digging deeper.  On what do they base their rate?  The LIBOR rate, or London Interbank Offered Rate, is a common base.  This is the average rate that banks around the world use to lend money to each other, and finding a money market account that bases its rate on the LIBOR rate gives you a well-known base that you can follow for your own education.

Ask about any fees or charges associated with the money market account, as well as opening minimum deposits.  Charges can eat away at your rate of return quickly, so knowing if or when charges may apply is critical to making the most from your investment.  Does the bank offer other products?  After you’ve built your money market account balance up to a certain point, you may wish to move some of that money into a longer-term investment that pays a higher rate.  For example, you could keep two or three months’ salary in a short-term bond account, and another two or three months’ salary in a money market account.

Another important consideration regarding money market rates is the frequency that the rate changes.  This is often a daily rate, but some banks may only change the rate weekly or even monthly.  Once you have built up a balance, this difference can mean extra money at the end of the year.  If rates are trending higher, you’ll want an account with a daily rate change.  If rates seem to be sinking, then a money market account with a more stable interest rate would help you earn more in interest.

Money market accounts are a great way to build up a reserve or emergency fund.  The money market rates you get paid for your money can help that reserve fund grow, so be sure to do some comparison shopping before opening your account.  Find the highest rates and lowest fees to make the account work for you.