Money Market Checking: Write Checks But Earn Higher Interest

2007-03-08 10:33:40

( Financial )



You may have noticed how interest-bearing checking accounts have increased in popularity. Banks now offer you several kinds of checking accounts going by so many names. One of the more popular products is the money market checking account.

Money market deposit accounts, including money market checking deposits, are popular with savers and investors like you due to their convenience and safety. Unlike investments in pure money funds, your money market checking deposits are federally insured because they are regular bank deposits.

Typically, however, your bank will require that you maintain a relatively high minimum balance on a money market checking account. You may open the money market checking deposit with a small amount, but it will not earn any interest unless you reach the required balance. In fact, you may be assessed for allowing your balance to fall below the established minimum.

Your money market checking deposit will generally pay higher interest than the usual interest-bearing checking account. You will have check-writing privileges, but you can write only a limited number of checks and you'll pay a fee if you have additional transactions.

This reduces the flexibility of your account, but you should view your money market checking deposit more as savings rather than a convenience account like the true checking account. Besides, money market checking deposits pay you the highest interest rate of any bank account on which checks can be written. Take note of the monthly bank charges, though, and compare these with the monthly interest earned.

You may want to consider putting your deposits in money market mutual funds. These pay even higher interest than those paid on regular savings accounts. They may work like money market checking deposits because you also get check-writing privileges. The difference is that the checks must be written for a stipulated minimum amount (usually five hundred dollars).


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