Money market vs. high-yield savings account: Which will be better if the Fed raises interest rates?
Summary
The Federal Reserve may raise interest rates soon, which could increase returns on savings accounts. Money market accounts offer more spending flexibility, while high-yield savings accounts usually provide higher interest rates but have limits on withdrawals.Key Facts
- The Federal Reserve might raise interest rates in September or October, according to a market tool.
- A rate hike generally leads to higher interest rates on savings products like money market and high-yield savings accounts.
- Money market accounts allow more withdrawals and often come with debit cards or checkbooks.
- High-yield savings accounts usually offer better interest rates but limit how often you can access the money.
- Money market accounts often have higher minimum balance requirements and possible fees.
- High-yield savings accounts may have lower entry requirements but sometimes require higher balances for the best rates.
- A certificate of deposit (CD) is another option that locks in interest rates for a fixed period.
- Using a CD ladder strategy means spreading money across different CD terms to take advantage of rising rates over time.
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