What Is A Money Market Account?
What is a Money Market Account?
A money market account has similar features to both a checking and savings account. The difference is that a money market gives you higher payouts in interest than a traditional savings has, but requires a larger minimum balance than the traditional checking account.
Also, you can only withdraw from the account 6 times per month. The larger your balance is, the more interest you will earn at the end of each month!
How does it work?
Accounts compounds interest daily and pay out monthly.
For example: Let's say you were earning 1.00%*and had $10,000** in your account (let's also assume you didn't withdraw or deposit any money from that account during the month).
Since our money market compounds interest daily throughout the year, you would divide 1% APY(Annual Percentage Yield) by 365 days.
That would come out to approximately 0.003% per day.This is the percentage that you are earning daily.
Now, multiply that 0.003% by the $10,000.00 in your account then that gives you approximately 30 cents per day.
On the second day, your new account balance would be approximately $10,000.30 (remember: this will not show in your account until the end of the month).
Now, that 0.003% will be applied to $10,000.30 (not $10,000.00). Therefore, you're earning a little bit more than you did the first day.
By the end of the month, it will come out to be approximately $8.33 in interest.
When does the actual Annual Percentage Yield (APY) apply?
If you multiply that $10,000 by .01 (the 1.00% APY in decimal form), it comes out to be $100 you will earn by the end of the year.**
*Example rate does not reflect our real rate. Please see our rates page for the current Money Market Account rate.
**Example balances are estimates and earnings may change when you deposit or withdraw cash from your money market account.