How to Open a Money Market Account: Everything You Need to Know
A money market account (MMA) can be thought of as a hybrid between a savings and checking account since it has characteristics of both types of bank accounts. An MMA may be a smart financial option because it usually yields higher interest rates than a regular savings account. However, you still have direct access to your money if needed. In some instances, these accounts come with debit cards or checks so you can easily draw from the account when you need it.
To open an MMA, you may be required to provide a high minimum balance. Therefore, this type of account can be the best option for yielding higher interest from an investment that you still may need to draw money from in the near future. The process for opening an MMA is similar to opening any other type of bank account. Here are the steps to follow:
Table of Contents
Step 1: Compare Features and Rates
More than likely, you took the time to compare options before deciding on a bank for your checking or savings account. The same rings true when opening a money market account. Different banks offer MMAs that include specific features and rates, so it’s important to first compare them and learn more about your options before opening an account.
When comparing your options, look into the fees the bank charges and how many withdrawals you can make each month from the MMA without penalty. Find out more about any maintenance fees the bank may charge you. For example, some banks charge fees if your account is inactive (meaning you don’t transfer money to or from the account) for a period of time.
You should also consider the account’s interest rate, which may differ depending on the balance you hold. If having a debit card or checks linked to your MMA is important to you, find out which financial institutions offer this feature with such an account.
Step 2: Apply for the Account
Once you’ve compared different money market accounts at various financial institutions and decided on the one that’s right for you, it’s time to open the account. Different banks may have their own procedures for opening MMAs. In some cases, you may be able to complete the process online. This is usually only the case if you already have an account open with the financial institution.
In most cases, you’ll need to provide at least one government-issued photo identification, such as a driver’s license or passport. Some banks may require that you bring two forms of photo identification. You may also be required to provide your Social Security number, so consider bringing your Social Security card with you.
A bank may also ask that you provide proof of your current address, which can be accomplished by providing a copy of your lease or a utility bill in your name with your address on it. Keep in mind, if you plan to put another person’s name on the account, you may also be required to bring acceptable identification for him or her. Depending on the bank’s guidelines, you may also be asked to provide other financial information or proof of assets, such as other bank account balances.
Step 3: Fund Your Account
Once your application is approved and your MMA has been opened, you’ll need to fund it right away. The initial deposit you’re responsible for can vary between banks, but be prepared to provide more than you usually would for a standard savings account. In most cases, the minimum amount you can fund the account with is also the minimum balance you can reach. If you withdraw too much money from the account and dip below this minimum balance, you’ll be charged penalty fees.
Most banks can help you to electronically transfer money from a checking or savings account into your new MMA. However, in some cases, you may be required to fund the account by providing a check to the financial institution or by wiring money. Some banks may prefer that you bring cash to fund your money market account if your other accounts are with a different financial institution.
Once you’ve provided funding, there may be a temporary hold placed on your account balance. During this hold, you won’t have access to your money. In most cases, the hold only lasts a few days. However, it’s important to ask your bank if a hold will be placed on the MMA and, if so, how long you’ll need to wait to gain full access to your funds.
Step 4: Use Your Money Market Account
Once you’ve funded your money market account and temporary holds are lifted, you have complete access to your money. If your account comes with a debit card or checks, your bank may send them by mail, which can take a few weeks. However, once you’ve received them and activated your card, you can use it as a regular debit card. Depending on the type of account you signed up for, you may be able to set up automatic bill payments or transfers through your money market account.
Keep in mind there may be a minimum balance of funds you need to keep in your MMA to avoid penalty fees. Review your bank’s interest rates so you can understand the minimum balance you should carry to receive the most return on your funds. More importantly, enjoy your money market account and the interest it will earn you!
Image Source: Deposit Photos
This post was updated September 25, 2019. It was originally published September 27, 2019.