For the longest time, money market interest rates have lagged behind interest rates on CDs and other time instruments for investing. People who have money in MMA’s often have it there as a place to keep it in while they figure out what to do with it. For example, most individuals who do have cash in a MMA have it in their stock account. Better than having that unused money sit and earn nothing, it at the very least earns a little bit interest until it can be put to work someplace else.
With interest rates close to an all time low, you might find that a number of money market ’s pay interest that is actually close to that of the best CD interest rates and other safe investments like Treasury bills. Not long ago, T bills actually paid 0.00% interest for awhile and now pay just over that. Putting your money in a money market account is definitely a better deal than that.
With Treasury bills and CD’s, you’re agreeing to give up control of your cash for 6 months or longer. They give you no flexibility in the event you instantly need the cash or rates of interest change and you can get something better elsewhere. Money market accounts, however, will allow you to pull the cash out at any time with no penalty. This makes them superior to any timed investment, particularly if you can get a comparable interest rate.
It is possible that you can find a money market account at a bank that is offering an bonus rate for some promotional reason. If you can find one of these, you may be able to get as much as .25 of a % which is important today. If you’ll be able to get some type of a promotional bonus, the interest you earn with that MMA might even put it at about the same rate as you would get with a CD.
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