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- Money market accounts are FDIC-insured accounts that work a lot like a savings account. Unlike a money market fund, money market savings balances are not invested and should never lose value.
- Capital One offers a money market account that I use for my savings. To get the 2% interest rate, you need a minimum balance of $10,000.
- Even with the minimum balance, I like that the Capital One account has good interest rates, low risk, and liquidity — I don’t have to lock my money away like I would with a time-bound CD.
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If you are hunting for a good place to store your emergency fund or other cash savings, Capital One’s money market account is worth a second look. I have a good chunk of my own cash savings in one of these accounts!
Note that a money market account is not the same as a money market fund. Unlike a money market fund, money market savings balances are not invested and should never lose value. Money market accounts are more similar to high-yield savings accounts, although not quite the same.
When you’re on the hunt for a new place to store your savings, here’s what you can expect from a Capital One money market account.
The money market account has twice the interest of regular savings
Capital One consistently offers very competitive interest rates in the online banking industry. As of this writing, the Capital One 360 savings account offers 1% APY. This is a respectable rate, but not too great compared to some other online savings.
The Capital One 360 money market savings account, however, gives you 2% APY if you meet the $10,000 minimum balance requirement. My wife and I are saving for an investment property at some point in the future, and we keep our down payment fund for real estate in the 360 money market account partially due to that 2% rate.
But it also has higher balances requirements for the best rate
One downside compared to regular savings is the minimum balance requirement to qualify for the best rate. If you have less than $10,000 in the money market account, you’ll earn just 0.85% APY. That’s more than most banks in the US, but less than Capital One’s traditional savings account.
Once you hit the $10,000 balance mark, you’ll qualify for the 2% APY interest rate. Some may say this makes is best for medium-term savings. I would argue that it is great for any short-term to long-term savings that you need to be able to access quickly. If you meet the minimum for the best rate, go get the best rate!
The account is FDIC insured and very low risk
Like a regular savings or checking account, the 360 money market account is FDIC insured. That means your deposit is insured by the federal government. If the bank goes out of business, you’ll still get your money back.
I once had a CD at an FDIC-insured bank that closed and got a check a few weeks later for my balance, including interest.
It hits the sweet spot between good rates, low risk, and high liquidity
The best interest rates you can find at most banks usually come from CD accounts. But while CDs offer higher interest rates, you give up the ability to withdraw at any time without paying an interest penalty. Money market savings accounts allow you to withdraw as much as you want at any time you want. The only limit is six withdrawals per month.
You can earn much higher interest rates with stock, bond, and other investments. However, those come with a lot more risk. They are not FDIC insured and can easily lose value. That is more appropriate for long-term goals like retirement. If you need your cash in the short-term, you’ll want less risk and faster access to your funds.
That puts money market accounts in a sweet spot. Depending on your needs and balance, it could be the perfect fit for your savings.
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