Checking and savings accounts are basic financial products that many consumers sign up for in the beginning of their adult lives.
As you grow older, however, you'll find that there are other types of savings vehicles offered by banks to help kick-start and grow your savings. As an alternative option to a traditional and high-yield savings account, many savers turn to another popular option: a money market account.
Money market accounts (commonly referred to as MMAs) offer benefits of both the standard checking and savings account you signed up for as a kid — plus more.
Below, CNBC Select breaks down how money market accounts work and some of the best ones out there.
Almost like a hybrid of both checking and savings accounts, MMAs keep your money accessible so you can still make payments while earning higher-than-average interest.
Similar to a checking account, you can use the funds in your money market account to write a check, take out cash at the ATM, make a purchase on your debit card or complete an electronic transfer of money. You can normally earn even more interest in your MMA than you would in an interest-bearing checking account.
At the same time, MMA is a savings account in that you can only make a limited number of withdrawals or transfers per statement cycle. Federal law, known as Regulation D, allows only six of these type of transactions per statement cycle (not counting ATM withdrawals). Though this has been temporarily lifted during the pandemic, it's worth nothing this big difference between a checking account and a MMA. Whereas checking account holders have unlimited withdrawals, savers with a MMA can only write up to six checks from their account each month.
MMA rates are similar to what you would find offered by a high-yield savings account these days, but MMAs often require higher minimums. The national average APY on MMAs currently stands at 0.07% for deposits under $100,000, according to the Federal Deposit Insurance Corporation (FDIC), so you want to find rates that are higher than that when possible.
When you're shopping around, look for banks that offers MMAs with low (or no) minimum deposits to open an account, no minimum balances to start earning interest and zero monthly fees. Even if the bank offers a high rate, it's often times not worth it it you're paying fees every month just to have the account.
Consider the Ally Bank Money Market Account and NBKC Bank Personal Money Market for a higher-than-average APY, along with access to checks and a debit card. These two accounts also offer a rate that is more than seven times the national average.