Why a bank might offer a more attractive interest rate on a Money Market Account consists of several factors. We have to look at the bigger picture. Please consider the following:
Remember…the rule of thumb is that typically the more restricted an account is (or the less access you have to your funds) the higher the interest rate you will earn.
• Interest Bearing Checking Accounts typically do not have restrictions on the number of withdrawals that can be made, so typically the rate will be a less than you see for a Savings Account or Money Market. At Systematic, our checking with interest accounts have an annual percentage yield (APY) of 0.50% with an interest rate of 0.50%.
• Savings Accounts – as with Money Market Accounts – are governed by Regulation D. This regulation dictates how many withdrawals are allowed on these types of accounts. With a savings account, you do not have the opportunity to write checks as you do on a money market. Personal savings accounts with us have an APY of 0.50% and an interest rate of 0.50%. Our money market accounts are based on a tiered system:
$0-$9,999.99 0.45%APY and 0.45% interest rate
$10,000-$24,999.99 0.55%APY and interest
$25,000-$49,999.99 0.60%APY and interest
$50,000+ 0.70%APY and interest
• Certificates of Deposits allow you to park a certain amount of money, for a certain amount of time, and receive a set interest rate for the term of the certificate. During this set term you are not allowed to make deposits or withdrawals, however some banks will allow you to take the interest on a monthly or quarterly basis or you may make a one- time withdrawal of interest paid on the account. Because of the limited access, you will typically earn a higher return. For example, our 6 month CD has an APY of 0.41% and an interest rate of 0.40%, our 12 month CD has an APY of 0.56% and an interest rate of 0.55%, and our 24 month CD has an APY of 0.81% and an interest rate of 0.80%.
Because the Money Market and Savings Accounts are being governed by Regulation D, they require additional monitoring on the bank’s part to ensure that our customers do not exceed the number of transactions allowed. If the allotted number of transactions is exceeded, we are required to send out notification to the customer. After a certain number of times the limit is exceeded, we then have to either move the funds into a non-interest bearing account or close the account. We are also required to save a record of this correspondence and any changes made to resolve the excessive use for a specific amount of time and then provide the record to examiners for review when requested. We offer you more attractive rates to encourage saving and discourage excessive transactions in these accounts. We don’t want to have to move your funds (then you lose the opportunity of earning interest on the account) or entirely close out your account due to Regulation D. Really we are looking out for you.
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