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Are you looking for alternatives to a regular savings bank account that offer better returns? There are many options available today that you can choose from. While there are higher risk options that offer correspondingly higher yields, there are plenty of low risk alternatives available. Some common ones are listed below:
Money Market Deposit Accounts (MMDA)
Also referred to as a high yield savings account, MMDAs are similar to savings accounts, but offer higher returns since there is some restriction in terms of the number of withdrawals in a given month. MMDAs also have relatively high minimum balance requirements, but offer the convenience of being able to write checks on it. MMDA accounts are protected by the FDIC for up to $250,000.
Credit Union Options
Unlike banks, credit unions are non-profit entities that offer services similar to banks at cheaper rates, and offer better rates on deposits than banks do. On average, typical interest rate return rates offered in a credit union savings account, will be higher than for even online banking savings accounts. Credit unions offer a smaller variety of services than a full service bank. Credit unions are insured by NCUSIF, a federal institution similar to FDIC that protects investor funds for up to $250,000 against the credit union’s insolvency.
Money Market Mutual Fund Accounts
Unlike MMDAs, a Money Market Mutual Fund is offered by mutual fund companies, brokerages and banks, and consists of assets that these institutions hold for clients that the funds belong to. These accounts are not insured by the FDIC, and also require minimum balances to be maintained. Most money market mutual fund accounts come with checkbooks, but only a limited number of transactions may be carried out in a month.
Certificates of Deposit (CD)
For those individuals who do not need immediate liquidity and are willing to lock in funds for slightly longer periods of time, you could consider investing in CDs. CDs are secure investments that have varying periods of commitment to which you can lock into. While CDs of 1 – 3 month lock in periods are available, CDs are also available for 6 months to 5 years, and offer very attractive returns. Returns are typically better for higher amounts of cash that you are willing to lock in. With some careful planning, you can easily segregate your cash into varying CD terms to meet your liquidity needs as they may arise. Early withdrawal penalties apply if you withdraw your money before the term expires. CDs are FDIC insured for $250,000.
Alternatives to a Savings Bank Account?
