How to Bank Money Market Deposit Account

This is for investors who know they can maintain the minimum balance. It also pertains to those who want to earn interest and have instant access to their money. Finally, it's also for those seeking a safe parking place for their savings or their emergency nest egg.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Extra time
• Transportation
• Interest in saving and investing money
• Steady income

1. Minimum and safety factor. The minimum is determined by the individual banks, but it's typically $1,000 $2,000 or $2,500. The safety factor is actually very high. You are insured up to $100,000
2. Advantages. *Competitive interest rates. *You can transfer money to your checking account (three preauthorized transfers per month). *You can withdraw money in person as often as you like. *You can take your money out easily and instantly if interest rates drop.
3. Disadvantages. *Some banks impose penalties for withdrawal. *You must maintain a minimum balance. *You can write only three checks per month. *If your balance falls below the minimum, you may lose interest or be hit with a charge.

Tips & Warnings

• Find a bank money market deposit account that can be linked electronically to other accounts and to the bank's ATM. Then you can write more than three minimum checks since there's no limit on how often you can personally make transfers.
• If the accounts are connected, you can keep most of your money in the higher-paying MMDA and transfer the funds into your checking account only as you need to do so.
• Select a bank that allows you to connect your MMDA to a brockerage account so you can buy stocks, bonds, and Treasuries by phone.
• Look at the effective annual yield when comparing banks. It is easier to compare the figure than to try to decipher each bank's individual compounding methods.