Money Market Accounts vs. Checking Accounts
When you go to the bank to open an account you have quite a few options available to you. That raises the question of what kind of account should you open. In large part that is going to depend on your personal needs. In order to make this decision you are going to need to know the difference between a money market account and a checking account. This will allow you to decide what is best for you.
Both money market accounts and checking accounts have their advantages and their disadvantages. The decision about which is best for your needs is largely going to come down to what you are using the account for. The advantage of a checking account is obviously that you can draw checks on it. That makes it easy to make your day to day payments. In fact that is really what a checking account is for. It provides you with easy access to your money any time that you need it so that you can take care of your daily expenses.
There is of course a significant downside to a checking account and that is that it pays virtually no interest. In most cases at today's interest rates it pays no interest at all. That means that it is not really a good place to keep your money since it will do nothing to help it grow. In reality with all of the fees that most checking accounts charge it will actually cost you money to have a checking account. Therefore you are going to want to limit the amount that you keep in your checking account to the minimum that you require to cover your expenses.
The advantages and disadvantages of a money market account are almost the exact opposite of those of a checking account. The interest rate that you will earn will be quite a bit higher than you could get with a checking account. In fact the interest rates are probably the highest of any investment that has the same level of safety. Money market accounts are very safe investments with almost no risk. That means that when you are looking at investing you are going to want to shop around for the highest money market rates since it is really the only thing that differentiates the accounts.
The main disadvantages of a money market account is that you don't have easy access to your money. In most cases it will actually take a couple of months to get your money out. The reason for this is that it allows the bank to lend out more of the money and earn a higher return. This is why they can pay higher interest rates on money market accounts. That means that you are going to have to make sure that you don't put any money that you are going to need to right away into your account.