A friend of mine pointed out to me that some banks are beginning to raise their savings/checking/MMA (money market account) rates. Right now, I belong to a credit union, that until this weekend, I thought had a fairly competitive rate of 2.45% a year on its money market savings account, with a minimum required balance of $2,500.
The friend of mine pointed out the site, Bankrate.com, which compares savings rates, mortgage rates and other liquid investment tool rates across financial institutions. He also told me about GMAC (A division of GM) which is offering a MMA with an annual rate of 4.10% a year! Also, in this particular case, the minimum balance is $500.
If we compare the interest on a balance of $5,000 in each of the institutions, the credit union would provide me with $123.89 of interest in a year (compounded monthly). If the $5,000 were deposited with GM, then I would earn $205.08 (compounded daily!!!). By keeping the money in the credit union, I am losing $81.19 a year!
Now, because of the higher interest rates that MMAs often provide, there are restrictions that apply. Notably that you may only make 6 withdrawls a month. Using it to pay your bills or as a checking account would incur penalties and fees, but if you have some money, and you aren't sure what to do with it, or you want to keep it in case of an emergency, I highly recommend placing it into a MMA. I know I will.
1 comment:
I wanted to let everyone know that I've converted over and now I'm in GMAC. They just raised their interest ratest to 4.30% according to Chris!
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