When I signed up for my PNC Bank accounts many, many years ago, I didn’t know what I was doing. Well, I knew what a savings account and a checking account was, but I was also signed up for a Money Market Account. If memory serves, it was some part of a sign up promotion, so I got it and the younger, dumber, 5and2Guy signed up for one. All I remember being told was that I had to keep a minimum of $1000 in it. I figured I could do that, so no big deal. Sign me up.
Fast forward about 20 years and I get into some financial challenges. I forgot and let my balance drop below $1000. And yup, I got charged a fee. I can’t remember exactly but I think it was around $25 or so. Man, that blows, but that woke me up so I threw some more money into that account.
Fast forward a few more years to my two oldest sons being in college. Of course they need money every month, and sometimes multiple times a month. No big deal, I had my Money Market Account hooked up to PayPal, so I would transfer money from there. I also have my Vanguard accounts transferring money from my Money Market Account. Next thing you know, another fee!!! I got a Regulation D Violation Fee of $15.00, twice. What’s going on?
Apparently, my Money Market Account is limited to six withdraws per month. For every withdraw over six, I have to pay a Regulation D Violation Fee ranging from $2.00 up to $15.00. It’s nice to see that PNC Bank charges me the maximum amount of $15.00. Good looking out PNC!!!
I figured I needed to learn more about the accounts I have. Duh!!! I don’t know what I was thinking. So, I did a little research on Money Market Accounts and thought I would share what I found with you.
What is a Money Market Account?
A Money Market Account is pretty much a savings account that has some checking account features with a bunch of limits and restrictions in place. You can typically get money out of these accounts with checks and debit cards, but as I learned, too many withdraws will cost you money. These accounts are FDIC insured so they’re a pretty safe place to save a large amount of money. Not to mention that these accounts typically have better interest rates than regular Savings accounts. They do, however, tend to require a higher minimum balance. Be careful not to go below this minimum balance as you WILL get charged a monthly maintenance fee.
Why not just use a regular savings account?
As I mentioned, Money Market Accounts typically have better interest rates than Savings accounts. They also are easier to withdraw funds from than most Savings accounts. It also makes you sound like you know what you’re doing when your friends say they have a Savings account and you tell them you have a Money Market Account. Woah!!!
Which should you use?
As with anything, what I share with you here is just based upon my experience and should be used for informational and entertainment purposes only. Whenever making any key financial decisions, it’s best you work with a money management expert.
With that being said, I would stick with a regular Savings account. Here’s why:
1. Lower or no minimum balance;
2. No limit on withdraws or transfers;
3. No maintenance fees;
4. I don’t keep money in a regular brick and mortar bank if I want to earn money on it. I keep my savings in online banks only, where the interest rates are typically higher.
5. They’re also FDIC insured.
From my experience, I don’t see typical Money Market Accounts being of any major value to me. Sometimes they provide a better interest rate than Savings accounts, but Savings account interest rates are pretty comparable to them. And Savings accounts have a lot less restrictions and fees. Sure, it may be a little harder to get money out of a savings account, or take longer, but that’s typically not a problem for me. But what if there’s an emergency? Well, I could use my credit card if anything major came up and then just withdraw the money from my savings later to pay it.
I typically use online Savings accounts to store my Emergency Fund and short-term savings. Online accounts with non-brick and mortar banks tend to have higher interest rates, so I use them for my savings. I invest in index funds and bonds when I really want my money to grow.
*** Of course you need to make a decision about what works best for you. Speak with a money management expert about what is ideal for your financial goals. What insight I’ve provided you here is for informational and entertainment purposes only. Please consult your financial advisor before you make your own decision.