What is a jumbo money market account, and where can you find the best rates?

With interest rates finally starting to come down, many bank customers are doing everything they can to keep their deposits high.

One potential option is a money market account (MMA).These accounts require a higher minimum deposit (typically $100,000 or more) and often pay higher interest rates than traditional money market accounts.

Due to the high deposit requirements, Jumbo MMAs will not be the best option for everyone, however, it is one way to maximize your interest earnings if you have a lot of cash.

A money market account is a deposit account typically offered by banks, credit unions, and other financial institutions. These accounts tend to pay higher interest rates than traditional checking and savings accounts, and come with a checking and/or debit card , they often have higher minimum deposit requirements to earn the highest interest rate and avoid monthly fees. These accounts also typically limit how much you can withdraw in a month.

Jumbo money market accounts, which are somewhat rare, usually offer even higher interest rates for depositing more money.For example, the First Internet Bank Money Market Savings account has a minimum balance of $1 million to get the highest interest rate earn a decent interest rate on lower balances, but it won’t be as high.

There is no universal amount you should expect to keep in a jumbo money market account—it depends on the specific account. A typical threshold can be anywhere from $100,000 to $1 million. In some cases, traditional money market accounts pay tiered interest rates where you can more earn a high rate of interest while also maintaining a larger balance on the deposit.

Read more. What is the minimum balance for a money market account?

Money market account rates are constantly changing, and Jumbo MMA rates are no exception.However, we have highlighted some of the best Jumbo MMA rates currently available:

Like all banking products, jumbo MMAs have pros and cons, so consider them carefully before opening an account.

• Higher interest rates. One of the best features of jumbo money market accounts is that they often pay higher interest rates than traditional checking and savings accounts, allowing your balance to grow faster.However, it’s important to compare your options before opening an account because not all Jumbo MMAs offer competitive pricing.

• Liquidity. Money market accounts, including jumbo MMAs, allow you to withdraw or transfer your funds at any time and are often provided by check or debit card for easy access, which can be an attractive feature if you don’t want to lock up your money for long periods of time to earn a higher rate of return, as you would with a certificate of deposit (CD), bond, or other type of investment.

• Exclusive privileges. Since you are required to deposit a large amount of money to open Jumbo MMA, accounts often come with additional benefits, such as reduced fees or special customer service.

• High balance requirements. Some money market accounts, especially Jumbo MMAs, may have minimum deposit or balance requirements that may be difficult for the average customer.

• Monthly fees. If your balance falls below the minimum, you may be charged a significant monthly maintenance fee that will take away your interest earnings.You may also face other penalties, such as losing interest earnings for that month.

• Some of the funds may not be insured. The FDIC insures bank deposits up to $250,000 per depositor, per institution, property category (the NCUA offers similar insurance for credit union deposits). If the financial institution fails, you’re guaranteed your money back, up to the federal limit : But because unaffordable money market accounts often require a much larger balance to get the best interest rate, a significant portion of your money may not be covered.

Read more. How to insure deposits over $250,000

If you have a significant amount of cash savings that you want to keep safe while earning some interest, Jumbo MMA can be a good option. They usually offer higher interest rates compared to standard savings accounts while still allowing you to access your amount as needed.

That said, no-nonsense money market accounts are hard to find. Also, their rates may not be as competitive when compared to some of the standard high-yield money market accounts. For example, among the best MMA rates available today, you can earn up to 5 % APY with no minimum balance required.

See our picks for the 10 best high yield money market accounts available today>>

Also, given that some of your balance may not be insured if you invest more than $250,000 in Jumbo MMA, you may want to consider spreading your money across several high-yielding accounts, including savings accounts, CDs, and even some investments.

For example, a CD allows you to lock in your interest rate for several months or years. This can be especially beneficial when interest rates fall. However, you usually cannot make additional deposits or withdraw money from the CD until it does at maturity.

Stocks, bonds, and exchange-traded funds (ETFs) are more liquid options that can offer high returns. However, they are often volatile, meaning your investments may go through periods of declining value, sometimes lasting months or even years.

While there are alternatives to Jumbo MMA, none are without their drawbacks.As always, you should carefully weigh the pros and cons and how they fit into your larger financial strategy and goals.

Learn more.