3 reasons to switch your money market account now

The interest rate climate may be holding steady a bit longer. That was one of the items savers started thinking about this week after a new inflation reading showed the rate dropping in July, the second consecutive month in which it did so. With unemployment numbers concerning, however, the Federal Reserve, which many anticipated would hike interest rates when it met again in September, may instead elect to maintain the interest rate freeze it has kept in place since last December. 

And that’s a good thing for savers.

With interest rates elevated, returns on select savings accounts will remain competitive, too. So, if you’re currently keeping your money in a traditional savings account, with an average rate of 0.38%, you should seriously consider making a switch. But that’s not the only account type that may be worth reevaluation in today’s economic climate. A money market account, as beneficial as it may have been in recent years, is also worth reconsideration. Below, we’ll outline three reasons why a switch from this account type and into an alternative may be beneficial (and profitable) right now.

Start by seeing how much interest you could be earning with a high-yield savings account here.

3 reasons to switch your money market account now

While your money market account may feel comfortable and familiar, there’s a compelling case to be made for transferring your money out of it right now. Here are three reasons why that could be the smart move to make:

Interest rates are higher on alternatives

The top money market account interest rates typically top out around 3.90% to 4.00% right now. But the best high-yield savings account rates are around 4.10% currently and rates tied to select certificate of deposit (CD) terms are as high as 4.40%. In other words, you’re not maximizing your interest-earning potential by keeping your money here when you have plentiful, more profitable options to choose from. And, with online marketplaces listing accounts, terms, rates and banks all in a single location, you can easily pivot into a better account right now.

Shop for the top savings accounts here.

You can lock in a fixed (higher) rate with a CD

That CD rate that’s almost half a percentage point higher? It’s also fixed, guaranteeing a big return in a way that you won’t receive with a high-yield savings or money market account, both of which have variable rates that will respond to market conditions. In other words, not only will you earn more interest with a CD but you’ll also add a layer of protection and predictability that you won’t get with a money market account, whose rate will change as the economy evolves. And while that differential isn’t major right now, it easily could become so over time, especially if the likelihood of an interest rate cut grows as inflation cools.

You don’t need the check-writing ability the account offers

One of the main ways a money market account differs from a high-yield savings account is the structure. Money market accounts will typically incorporate check-writing features that can help users streamline their banking needs with a single account. But is that a feature you actually want and need now? Or do you prefer to keep your checking separate from your savings? In today’s still-elevated interest rate climate, your realistic banking needs and goals are worth reevaluating. And that’s especially true if the path toward meeting them can be more easily (and quickly) achieved with an alternative account type.

The bottom line

Money market accounts remain viable and profitable vehicles for savers in today’s economy. The question, however, revolves around how viable and profitable they are compared to readily available alternatives. With interest rates higher on alternative types, the rate both higher (and fixed) with a CD and the reality that the check-writing feature the money market account offers is not as useful as it may have been previously, a switch may be justified right now. Just be sure to diligently shop around before making any transfers as you’ll want to ensure that the account you ultimately choose justifies moving your money around.