Money market account rates have begun to decline following recent cuts to the federal funds rate by the Federal Reserve. The national average interest rate for these accounts is 0.58%, according to FDIC data, but some institutions currently offer rates above 4% APY.
Quontic Bank and HUSTL are providing a rate of 4.1%, which is more than seven times the national average. These rates are similar to those available on high-yield savings accounts.
The Federal Reserve maintained a target range of 5.25%–5.50% between July 2023 and September 2024. As inflation cooled and the economy improved, the Fed reduced the federal funds rate three times. Deposit account rates, including money market rates, are tied to this rate.
Rates are expected to continue declining after three additional Fed rate cuts planned for 2025. This situation means savers might have a final opportunity to secure today's higher rates.
Money market accounts offer features like check-writing capabilities or debit card access, though monthly withdrawals may be capped. They provide FDIC insurance, protecting the principal from market risk. Accounts can only lose money through fees.
For savers with short-term goals or those building emergency funds, these accounts present a safer option with returns exceeding most traditional savings accounts. Conservative savers who wish to avoid stock market volatility often find them appealing.
In the current falling interest rate environment, finding a deposit account paying 5% is quite difficult. Some promotional checking accounts exceed 5% APY, but they are not ideal for long-term cash storage. Market investments, which carry more risk, typically provide higher average returns.