Best Money Market Rates – April 2017

Traditional banks are paying very low interest rates on money market accounts. For example, Bank of America pays between 0.03% and 0.06% APY. Fortunately, you do not need to settle for such ridiculously low rates. You can easily find the best money market rates at internet banks paying 1.05% or more. If you put $50,000 into Bank of America’s account at 0.03%, you will only earn $15 of interest over one year. That same money in an account paying 1.05% would earn you $525 of interest. And you can typically open and fund an online money market account in less than 10 minutes.

MagnifyMoney has searched for money market accounts paying the highest interest rates – and this list gets updated monthly. Here are the best rates for April 2017:

1. Top Choice: Sallie Mae – 1.05% APY, no minimum balance and checks available

If you have student loan debt, you probably are not very excited to see Sallie Mae at the top of this list. However, many people are unaware that Sallie Mae also operates an internet-only FDIC-insured bank with some of the best interest rates in the country. You can earn 1.05% APY, compounded daily and paid monthly. There is no minimum balance and no monthly maintenance fees. You will have check-writing capabilities (although the standard money market limit of six per month applies to this account). The easiest (and best) way to fund and access your funds is via electronic transfer from your existing checking account.

2. Highest Rate: United Bank – 1.25% APY, $2,500 minimum to avoid a fee, restricted to 25 states

 Unless you are from New England, you have probably never heard of United Bank. Formerly RockVille Bank (which originally opened in 1858), United has more than $5 billion of assets and started growing very rapidly over the last few years. Its lending portfolio has been growing faster than its deposits – which is why United started looking for deposits online. You do not need to live in New England to open this money market account. However there are some important restrictions. You need to deposit at least $500 to open the account. If your balance ever falls below $2,500 you will be charged a monthly fee of $15. You can fund and access your deposits electronically. An ATM card is also provided, but you would be charged $2 for every withdrawal outside of the ATM network (which is the AllPoint ATM network). If you live in one of the 25 states and have at least $2,500 – this deal is hard to beat.

Available States: CA, CT, DE, FL, GA, KS, KY, LA, MA, MD, ME, MO, NC, NE, NH, NJ, NY, OK, PA, RI, SC, TX, UT, VA, WA.

3. Excellent Rate: EverBank – 1.11% APY, $5,000 minimum deposit (1-year intro APY)

EverBank, recently acquired by TIAA-Cref, is a rapidly growing bank that conducts most of its business online (even though it is based in Florida). In 2017, EverBank has become very aggressive on interest rates. Its products have regularly made our list of best CD rates, and – not surprisingly – it also appears on the best money market list. This is a great product, but you should be aware of a few pieces of fine print. The APY is only valid for one year. EverBank does promise that the rate, after the first year, will “never stray from the top 5% of competitive accounts.” Just be prepared for a lower rate after 12 months. You need at least $5,000 to open the account. There is no monthly account fee.

4. Good Rate for Big Deposits: Capital One 360 – 1.00% APY on balances above $10,000 (0.60% on balances below)

Capital One has become more aggressive in recent months on the rate that it pays for online CDs and money market accounts. Capital One is focused on big balances: if you don’t have a lot of money, you can get much better deals elsewhere. But if you have a lot of cash and want another FDIC-insured account, Capital One is a strong option. You earn 0.60% APY on the first $9,999.99 that you deposit. You will then earn 1.00% APY on deposits from $10,000 up to $250,000. There is no monthly fee associated with the account.

5. Favorite Online Package: Ally – 0.85% APY, no minimum deposit, and link to free checking

Ally Bank is a very popular internet-only bank. Although the interest rate on the money market account is not the highest, Ally does offer a very competitive overall package – particularly if you link the account to an Ally checking account. The checking account has no minimum balance and no monthly fee. You can link your money market account to your checking account to provide overdraft protection. Money would be transferred to your checking account with no transaction fee if you ever made a mistake. You would be able to access your money market account with your Ally ATM card, which has free AllPoint access and up to $10 of non-Ally ATM fees reimbursed every month. This money market account is a nice way to provide yourself with overdraft protection while earning interest. If you don’t need check-writing capabilities on your savings, you would still be better off with Ally’s savings account.

3 Questions To Ask Before Opening A Money Market Account

1. Should I open a savings account or a money market account?

Many years ago, money market accounts were higher risk and paid higher returns. The financial crisis of 2008 changed all of that. Money market accounts are now FDIC-insured up to the legal maximum ($250,000 per institution per individual). Interest rates are now very similar – and there is no material difference. In other words – choose whichever account you want.

In general, you tend to get slightly lower interest rates on money market accounts because you have check-writing capabilities. The best savings accounts have rates between 1.00% and up to 1.25% APY – very similar to the rates on this page. But at Ally, for example, you can get 1.00 APY on a savings account (no check-writing) and 0.85% on the money market account (with check writing).   

We have written a full explanation of the difference between money market and savings accounts here.

2. Am I willing to make a longer term commitment? 

Savings accounts and money market accounts pay much lower interest rates than CDs. Right now you can easily get a 1-year CD paying 1.35% APY (with only a $2,000 minimum). You can find the best CD rates here. If you build a CD ladder, you can take advantage of 5-year rates that are now as high as 2.30%.

Money market accounts are great places to keep money that you might need immediately. But the interest rate on a money market account can change right away, at the bank’s discretion. To lock in a higher interest rate, you should consider a CD. If you need to get access to your CD early, would forfeit interest (typically from 3-6 months). In most circumstances, putting more of your money into CDs can really help boost your returns.

3. Is a money market account the same as a money market fund? 

No, money market accounts (offered by FDIC-insured banks) are not the same as money market funds (most likely sold by your broker). In fact, we really don’t know why people even buy money market funds in the current environment.

For example, Vanguard offers the Prime Money Market Fund. Like other money market funds, this one “invests in short-term, high-quality securities.” Its objective is to keep the fund trading at $1 and generate a decent return. Right now that return is 0.89% – a bit lower than the returns you see from the money market accounts listed in this article. However, money market funds do not have FDIC insurance.

Most people compare the return of a money market fund (sold by their broker) to the interest rate paid by a traditional bank (0.03%, sold by their local bank teller). As a result, they are willing to take the risk of a money market fund. However, as you can see from the best money market accounts in this article, you can get FDIC insurance and beat the return of most funds. Why earn 0.89% with no FDIC-insurance when you can easily earn 1.05% and have FDIC insurance.

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Goldman Sachs Enters Consumer Deposit Market With GE Acquisition

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Updated May 6, 2016: Goldman Sachs has launched its savings account

1.05% Interest Rate with No Minimum Balance

GS BankGoldman Sachs has launched its long awaited online savings account. The bank, long known for serving the wealthiest individuals and corporations, is now offering a high yield savings account that requires only $1 to open. Here are the details of the product:

  • 1.05% Annual Percentage Yield (APY)
  • No minimum deposit – you can open the account with just $1
  • There is a deposit limit – you can only deposit a maximum of $250,000
  • You can access your money by electronic transfer, wire transfer or by check. Note: Synchrony Bank pays 1.05% but also provides an ATM card for easier access to your funds. The minimum deposit is $30 (instead of $1), but we think the ATM card makes it a superior offer.

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You should shop around. Interest rates as high as 1.20% are available for people with big balances. MagnifyMoney has a list of the best savings accounts here.

Goldman Sachs Purchased GE’s Savings Accounts

Goldman Sachs purchased $16 billion of GE Capital Bank’s consumer deposits. $8 billion of the deposits are online savings accounts and CDs, and the other $8 billion are brokered certificates of deposit. In addition to the deposits, the employees of GE Capital responsible for the deposit business have been transitioned to Goldman Sachs.

The acquisition accelerates two big trends in consumer banking. General Electric has decided to exit the consumer financial services market, and has been rapidly shedding businesses all over the world. Goldman Sachs is building out a consumer banking strategy as it diversifies its business. Earlier this year, it announced that it will be entering consumer lending. And now, with a meaningful consumer deposit business, it will be active on both sides of the balance sheet.

Without the cost of a branch network, Goldman Sachs is able to pay higher interest rates to consumers while still obtaining funding advantages. Goldman Sachs is looking to diversity its funding, and sticky consumer deposits can be attractive. As interest rates increase, consumer deposits, due to their inertia, are typically not as responsive to increases in interest rates.

Goldman Sachs: Building The Consumer Bank Of The Future

FinTech companies, largely in the Silicon Valley, have started to change the way financial services are delivered to consumers. Marketplace lending has brought a better product and experience to consumers, a higher return to investors and more advanced credit risk analytics to lending decisions. Internet banks, by avoiding branch networks, are providing savers with higher interest rates and banks with low-cost funding sources. Goldman Sachs is out to prove that even a large, existing bank can take advantage of these trends.

Goldman Sachs will be launching a digital lending business. It has hired a former senior executive at Discover to lead the expansion. With the acquisition of the GE deposit franchise, Goldman Sachs will be a formidable competitor to the large incumbent banks. Why receive 0.01% on your savings account from Bank of America, and pay 19% interest on your credit card to Citibank, when you can get 1% on savings and pay 12% on loans to Goldman Sachs? Because Goldman does not have a legacy business to defend or cost structure to rationalize, it is uniquely positioned to challenge the large consumer banks in America.

At the moment, the marketplace lenders are taking advantage of ultra-low interest rates to grow. Investors are pouring money into any investment that offers yield. However, as interest rates increase, having access to low-cost consumer deposits will become a competitive advantage. Deposit rates for consumers do not increase as rapidly as interest rates in general. Goldman Sachs could end up with a funding cost advantage in a rising rate environment. Not only would the large consumer banks suffer, but the Silicon Valley start-ups may find it harder to compete.

Good News For Consumers

Many people have an immediate, negative reaction when they hear the name Goldman Sachs. However, in the consumer deposit and lending space, Goldman Sachs will be a challenger brand. In order to win as a challenger, you need a better product, experience, or both. Consumer loans and savings accounts remain entrenched with four big lenders who became even bigger after the financial crisis. Consumers will benefit by having well-funded new entrants looking to steal market share. Goldman Sachs is both large and well-funded. Consumer should expect better rates on savings accounts and loans in the years to come, as competition intensifies.

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