Maximize Short-Term Savings With a Money Market Account
If you’re looking for a safe, convenient place to store your small business’s cash reserves, a money market account (MMA) may be right for you.
An MMA is a type of deposit account found at banks and credit unions that gives you immediate access to your money when you need it, typically pays higher rates than a checking or savings account, and is federally insured. Here’s why it’s a great way to keep your cash reserves growing, and what small businesses should know before opening an account.
Access Your Cash Anytime
Putting a portion of your excess business funds in the stock market or real estate holdings can be a wise long-term investment strategy – but it’s important to have cash at the ready when needs arise. A business money market account is a less risky option that lets you avoid market volatility and keeps your money liquid when you’re experiencing a temporary drop in revenue or have unexpected expenses.
MMAs allow you to deposit funds quickly and easily, and you can access your funds at any time through teller withdrawals or electronic transfers, as well as via checks or a debit card (similar to a checking account).
As the name implies, your earnings are tied to the money market, which can help you to earn higher dividends than regular accounts. Rates vary over time and from one financial institution to the next, so it definitely pays to shop around for the account with the best earning potential!
If you find an MMA with a good rate of return, you can use it to store revenue earmarked for operating expenses. This allows your operating cash to remain liquid while generating returns, without the risk involved with less stable investments.
Protect Your Hard-Earned Funds
Funds you invest in the stock market are susceptible to its highs and lows, potentially bringing considerable gains or a total loss. While business money market account rates are variable, you’ll enjoy peace of mind knowing that your funds are federally insured by the FDIC (for banks) or NCUA (for credit unions). This makes an MMA an attractive option for small business owners with uncertain income – or even for more risk-tolerant entrepreneurs who want to balance out more venturesome investments and keep some cash on hand.
Know the Limits
When considering a business money market account, find out whether it has a minimum daily balance or monthly maintenance fees. You may need to meet certain requirements to earn the account’s advertised dividend rate or to avoid a fee. Many MMAs have minimal requirements, while some jumbo accounts require deposits of $100,000 or more for access to the highest rates.
Because the primary advantage of a money market account is its accessibility, it’s also important to be aware of any transaction limits that might affect how you use it. For years, savings and money market accounts were limited to six transfers or withdrawals (excepting teller and ATM withdrawals) per statement cycle. During COVID-19, the Federal Reserve eased that rule; however, your financial institution may set a specific transfer limit for its money market account.
The Right Move?
Opening a money market account can be an easy and secure way to earn dividends on cash reserves while staying liquid for unplanned expenses.
The information contained herein is for general informational purposes only and does not constitute tax, legal, or business advice.
Brought to you by Nu Direction Lending, a digital-first business lender that was formed and is funded by credit unions. To learn more about term loans for your business, visit nudirectionlending.com or contact us by email at email@example.com or by phone at 866-354-7151.
Nu Direction Lending is a digital-first business lender that was formed and is funded by credit unions. We combine the speed and convenience of online lenders with the personalized touch of the local credit unions who help fuel our local economies.