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A recent trend in credit card rewards is increased flexibility in how you can redeem your cash back, points or miles. You can book travel, invest, get gift cards and more â but one of the most common ways a credit card company will issue rewards is as a statement credit.
Statement credits may seem simple, but theyâre handled a little differently by each rewards program, and thereâs a lot to consider when youâre trying to decide if theyâre the best way to redeem cash back or other rewards.
See related:Â What is cash back?
What is a statement credit?
Put simply, a statement credit is money credited to your account. In its most basic form, a statement credit is not much different from a payment. Like a normal monthly payment, a statement credit is deducted from your card balance, reducing the amount of money you owe. But where cardholders are responsible for payments, credits come from either a merchant or card issuer.
rewards cards also allow you to redeem the points or miles youâve earned as statement credits. While some cards allow you to use a statement credit to reduce your balance with no restrictions, others only apply credits to your account after you meet certain criteria or make purchases in specific spending categories.
Statement credits on cash back cards
Cash back cards usually make it easy to redeem your points as a statement credit. In most cases, all you need to do is meet the cardâs minimum redemption criteria, then choose a statement credit as your redemption method. Once a credit is applied to your account, your card balance decreases accordingly.
If, for example, you were to spend $3,000 with a flat rate 1 percent cash back card, youâd earn a $30 credit; and if you were to redeem this entire credit, $30 would be deducted from your account balance.
While many cards give you the option to request your cash back in the form a check, some only allow you to redeem as a statement credit â so be sure to read your issuerâs terms carefully. After all, when you get your cash back as a check or direct deposit, the money is yours to spend or save as youâd like. With a statement credit, however, the funds are âtrappedâ in your account and only impact your card balance. If you stop using your card or close your account, you could lose any cash back or points you havenât redeemed.
Capital One Venture Rewards Credit Card, for example, allows you to book travel through the rewards center at a rate of 1 cent per mile. But if you redeem your miles for cash back as a statement credit, their value is cut in half to just 0.5 cents per mile.
If you prefer to redeem your rewards as a statement credit, make sure doing so doesnât dilute the value of your points or miles, as each rewards program grants and values statement credits a little differently.
Statement credits for an introductory bonus
Statement credits also frequently appear as part of a card introductory or annual bonus, when issuers offer to reward you if you spend a certain amount of money within a given timeframe. The Blue Cash Preferred® Card from American Express, for example, offers a $250 bonus after you spend $1,000 with your new card in the first 3 months. Instead of simply sending you a check for $250, however, American Express credits your account $250 after youâve met the conditions of the offer. Once received, the credit will cover the next $250 you charge.
Statement credits for card benefits
Many cards also award extra perks in the form of a statement credit. The United Explorer Card and Chase Sapphire Reserve, for example, each offer up to a $100 credit to cover the cost of a Global Entry or TSA PreCheck application.
In these cases, a statement credit is applied to your account only after you make the eligible purchase and cannot be used for anything else.
How statement credits work with the major rewards programs
Hereâs how some of the major rewards programs treat statement credits:
Rewards program
Can you redeem rewards as a statement credit?
Minimum redemption
Rewards rate when redeemed as a credit
Discover cards Cashback Bonus
Yes
None
1:1
Bank of America Cash Rewards
Yes
None ($25 for automatic redemptions)
1:1
American Express Membership Rewards
Yes
$25
1:0.6
Chase Ultimate Rewards
Yes
$20
1:1
Should I redeem my points as a statement credit?
Once you know what a statement credit is and how itâs treated by your rewards program, youâll probably wonder if itâs smart to redeem your points or miles in this form. While the answer will depend on your spending habits, goals and financial situation, it makes more sense in certain circumstances.
If youâre trying to decide whether you should redeem your points as a credit statement, consider the following:
Are you going to carry a balance? If youâre not sure whether youâll be able to pay off your balance in full by the due date, redeeming your points as a statement credit makes sense. Youâll knock a chunk off your balance and make it easier to pay in full and avoid interest charges. Keep in mind, however, that statement credits are not usually considered payments, so if you canât help carrying a balance, youâll still have to make a minimum out-of-pocket payment.
Does your card offer an incentive for redeeming points as a statement credit? Some cash back cards offer redemption bonuses when you opt for a statement credit over âtrueâ cash back in the form of a check or direct deposit. If thatâs the case, and you plan to continue using the card, go with a statement credit to get more mileage out of your cash back rewards.
Are your points worth less when redeemed as a statement credit? If youâre using a card with a more flexible rewards program, redeeming your rewards as a statement credit is likely possible, but not necessarily wise. Check your issuerâs terms to see if your points lose any value when redeemed as a statement credit. If 1 point is worth 1 cent when used for travel purchases, but only 0.5 cents when redeemed as a statement credit, youâre missing out on a lot of the value youâve earned. If you have no interest in travel, see if you can get full value out of your points in a roundabout way, like redeeming points for gift cards at stores you frequent.
Other ways to redeem your credit card rewards
Many cards offer several other options for redeeming your rewards. In addition to statement credits, you may be able to redeem cash back, points, or miles for:
A direct deposit â You can link your bank account so that when you hit âredeem,â that money goes directly to your account. For some, this is more satisfying than receiving a statement credit.
A check â If you donât mind waiting, many credit card issuers will mail a check for the value of your rewards.
Gift cards â Some credit cards allow you to exchange your points or cash back for gift cards. Make sure that youâre getting the same or more value before you choose this option â sometimes the dollar value of gift cards is different from what you would get redeeming for a statement credit or direct deposit.
Merchandise â Credit card issuers sometimes have shopping portals that give you the option to use your cash back or points to pay for merchandise. This is another option that you should approach with caution. Do the math to make sure youâre getting the same dollar value as you would with a direct deposit or statement credit.
Travel â Travel redemption options vary from card to card, but there are two main methods, one of which is receiving a statement credit for travel purchases youâve already made. The other is using the issuerâs portal to book travel, such as flights or hotels, online.
Final Thoughts
A statement credit is just one way you can receive bonuses and redeem the rewards youâve earned. If youâre using a cash back card, it could be a smart, low-maintenance way to reduce your balance and build good spending habits. If youâre using a more flexible rewards or travel card, though, make sure redeeming as a statement credit still gets you fair value for your points or miles.
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Surveys consistently show that no credit card reward is more popular than cold, hard cash. Indeed, cash back cards came out well ahead of other types of rewards cards in a recent CreditCards.com survey, which found that close to half of U.S. adults own a cash back credit card.
And for good reason: Instead of having to decipher a complex redemption scheme, you can opt for a simple, straightforward reward and use it in the way that fits you best.
Here we take a look at some of the most common types of cash back redemption, along with some of the restrictions you may encounter when redeeming your rewards.
How cash back cards work
Cash back cards come in a variety of flavors, but they all fundamentally work the same way: As you make purchases with your card, you earn cash rewards at a set rate. There are three major types of cash back cards.
Flat-rate cash back cards offer the same percentage of cash back for all purchases, usually between 1% and 2%.
Bonus category cash back cards typically reward some purchases, like groceries or dining, at a higher rate, while rewarding general purchases at 1%.
Rotating bonus category cash back cards have dynamic bonus categories that automatically change or allow you to select a different bonus category after a certain length of time.
See related:Â What is cash back?
Ways to redeem cash back
Depending on your card and issuer, you may have a variety of choices in how you redeem your cash back rewards. Some issuers even allow you to set up an automatic redemption, meaning your redemption would automatically initiate after a set number of days or after you earn a certain amount in rewards.
The most common ways to redeem cash back are:
A statement credit
A direct deposit to a bank account
A check
Gift cards
Merchandise
Redeeming cash back as a statement credit
One of the most common ways to redeem cash back is as a statement credit. A statement credit is money credited to your account that reduces your card balance. For example, if you were to spend $1,000 with a card that offers 1.5% cash back on every purchase, youâd earn $15 in cash back rewards; and if you were to redeem this cash back as a statement credit, your balance would decrease by $15 to $985.
Blue Cash Preferred® Card from American Express, for example, requires you to have earned $25 in cash back before you can redeem as a statement credit.
The Chase Freedom Unlimited®card lets you redeem rewards as a statement credit in any amount, anytime.
Once youâve met your cardâs redemption requirements, you can simply choose a statement credit as your preferred cash back redemption.
Redeeming cash back as a check or direct deposit
A slightly smaller number of credit card rewards programs let you redeem your rewards for âtrueâ cash back in the form of a check or direct deposit to your bank account. Claiming your cash back in this way gives you a bit more leeway since you can save or spend your rewards however you like instead of having them âlockedâ into a particular card account.
As with statement credits, the requirements for requesting a check vary from card to card, with some issuers requiring you to have earned a minimum amount of cash back before you can request a check and others imposing relatively few restrictions.
Direct deposits tend to be a bit trickier across the board, especially if you donât already have a banking relationship with your credit card issuer.
The Bank of America® Cash Rewards credit card, for example, will only let you redeem cash back as direct deposit if you have a checking or savings account with Bank of America.
The Citi® Double Cash Card lets you redeem your cash back as a direct deposit only if you have a linked Citi account or a checking account from which youâve paid a Citi credit card bill at least twice. While the Double Cash card requires you to have earned at least $25 in cash back to redeem as a statement credit, thereâs no minimum to redeem as a direct deposit.
Wells Fargo Cash Wise Visa® card lets you claim your cash back via an ATM (in $20 increments only) if you have a Wells Fargo Bank account.
Automatic cash back redemption
Along with manually requesting a statement credit, check or direct deposit, a number of cards allow you to set up automatic cash back redemption. If your card allows automatic redemption, your cash back is generally distributed at set times or after youâve earned a certain amount.
The Capital One Quicksilver Cash Rewards Credit Card and, for example, allow you to schedule automatic cash back redemption via statement credit or check at a set time once per year or once youâve reached a cash back earnings threshold ($25, $50, $100, $200, $500 or $1,500).
Even some cards designed for credit-builders, like the Credit One Bank American Express® Card, allow automatic redemption as a statement credit, offering those looking to improve their financial habits a âset-it-and-forget-itâ cash back savings tool that will periodically knock off a chunk of their credit card balance.
Travel, gift cards and merchandise on an issuerâs online portal
Most credit card issuers also give you the option of redeeming your cash back through a rewards portal for online shopping or as gift cards to select department stores, restaurants, video streaming services and more.
The Discover it® Cash Backcard, for example, lets you redeem your cash back for gift cards from shopping partners once youâve earned $5 in cash back (gift cards range from $5 to $200, in increments of $5).
The Amazon Prime Rewards Visa Signature card*lets you redeem your points for purchases on Amazon.com, as a statement credit or deposit, or for gift cards and travel â all at a rate of 1 cent per point.
Having the option to use your rewards for travel allows you to enjoy the benefits of travel rewards with a cash back card and is especially common among cash back cards that use points or allow you to choose between cash back and points.
The Chase Freedom Unlimited is a great example. You can earn unlimited cash back at a rate of 5% cash back on every purchase, which translates to 1.5 points per dollar if redeemed for travel in the Chase Ultimate Rewards portal.
Similarly, the Citi Double Cash Card lets you transfer your cash back to Citi ThankYou Rewards and redeem for travel rewards, as well as gift cards, merchandise and other purchases through the Pay with Points program.
Cash back redemption options on popular rewards cards
As you can see, cash back redemption options vary considerably from issuer to issuer and card to card. Hereâs a closer look at how cash back redemption breaks down with some of the most popular cash back credit cards.
Card
Redeem as a statement credit?
Redeem as a check?
Redeem as a direct deposit?
Blue Cash Preferred® Card from American Express
Yes (once youâve earned $25 in cash back)
No
No
Bank of America® Cash Rewards credit card
Yes (once youâve earned $25 in cash back)
Yes (once youâve earned $25 in cash back)
Yes (into a Bank of America checking or savings account, once youâve earned $25 in cash back)
Capital One Quicksilver Cash Rewards Credit Card
Yes, anytime
Yes, anytime
No
Chase Freedom Unlimited®
Yes, anytime
Yes, anytime
Yes
Citi® Double Cash Card
Yes (once youâve earned $25 in cash back)
Yes (once youâve earned $25 in cash back)
Yes (to a linked Citi savings or checking account or to a checking account from which youâve paid your Citi credit card bill at least twice)
Discover it® Cash Back
Yes, anytime
No
Yes
Best cash back redemption options
With all those options for redeeming for cash, which one is best?
The key point to consider is whether your rewards lose any value when redeemed in a certain way. You want to make sure you are getting the most value back, so be careful if you redeem for merchandise, which can be worth less than rewards redeemed for straight cash.
That said, unless your issuer offers a bonus for claiming your rewards as a statement credit instead of âtrueâ cash back, you should simply stick to whichever option is most convenient.
One drawback to cash rewards is they often donât feel like actual rewards because they get swept up into your ongoing finances. If that bothers you, you might consider taking note of how much you are receiving in cash rewards, then rewarding yourself by spending that amount on something you want, so that you feel like youâre getting a reward.
Either way, thatâs the best aspect of cash back rewards: Itâs your decision.
Choosing the best cash back credit card for you
Your redemption options are just one consideration when choosing a credit card. Consider these factors:
Bonus categories
When shopping around for cash back cards, find the card that will work the hardest for you, not the other way around. In other words, a cash back rate of 5% at restaurants is great, but not if you rarely eat out. Bottom line: Find a credit card that matches the largest portions of your budget.
Also, be honest about how much thought you want to give to your credit card. If you prefer a âset and forgetâ approach, a flat-rate card is a better choice than a rotating bonus category card.
Annual fees
With so many great no annual fee cards, you might wonder why you would ever get a card with an annual fee. But often, the rewards rates are so much better that it actually makes sense to get the card with the annual fee. For example, comparing the Blue Cash Everyday® Card from American Express and the Blue Cash Preferred® Card from American Express, we found that consumers who spend more than $3,200 annually at U.S. supermarkets ($267 per month) were actually better off with Blue Cash Preferred, which has a $95 annual fee.
From redemption options to bonus categories, each cash back card is designed for a different type of consumer. If you havenât found your perfect match yet, try our CardMatch⢠tool, which can deliver personalized credit card offers in seconds with no impact on your credit score.
All information about the Capital One Savor Cash Rewards Credit Card and the Amazon Prime Rewards Visa Signature Card has been collected independently by CreditCards.com. The issuers did not provide the content, nor are they responsible for its accuracy.
What would you do if you were laid off from your job today? This question isn’t meant to make you want to hide under your desk, but to encourage you to evaluate your circumstances. What would happen to your financial situation if you suddenly didn’t have an income to rely on?
While it’s not exactly fun to plan ahead for life’s hardshipsâsay, your car breaking down or losing a jobâdoing so can help you stay afloat financially and avoid taking on debt to remedy an already tense situation.
What can you do to prepare your budget for a layoff? These four steps will help you prepare your budget for a layoff and survive a layoff financially:
1. Put some of your paycheck into savings
In order to prepare your budget for a layoff, one of the best things you can do is learn to live on less when you have your typical paychecks coming in. Living paycheck to paycheck is a reality for many, and a habit many promise to break once they earn more. If you can afford it, consider trying to live off only a portion of your paycheck. That way, you can always depend on having extra money to fall back on in the event of a hardship, like a layoff.
Jill Caponera, a consumer savings expert at coupon platform Promocodes.com, suggests paying yourself firstâputting some of each paycheck into savings before you spend any of itâin order to save for an unexpected job loss.
“Put money directly into your savings account the moment you get paid so that you’re never in a position where you’re strapped during a true financial emergency,” Caponera says. Try scheduling an automatic recurring transfer from checking to savings that hits after each payday, or create a direct deposit to savings from each paycheck through your employer.
If living on less isn’t feasible for you right now, start small and focus on taking baby steps to prepare your budget for a layoff. You could start with a money savings challenge and a more attainable goal, like living off of 97 percent of your paycheck and saving the remaining 3 percent. This means that if your take-home pay is $4,000 a month, your goal is to put 3 percent, or $120, into savings monthly and then limit your bills and spending to $3,880. As you get accustomed to that amount, gradually increase the percentage of your paycheck you save each period. Some budgeting experts suggest saving at least 20 percent of your income and living off of the other 80 percent.
If you devote even a small percentage of your paycheck to savings before the bills and discretionary expenses roll in, saving will eventually become habit. You’ll get used to budgeting only with your post-savings take-home pay, and you won’t miss the savings portion of your paycheck.
âPut money directly into your savings account the moment you get paid so that you’re never in a position where you’re strapped during a true financial emergency.”
2. Save 3 to 6 months of expenses in an emergency fund
Once you’ve gotten used to regularly saving a portion of your income, you can save for an unexpected job loss by building up a solid emergency fund over timeâespecially if you are using an online savings account with a high interest rate. An emergency fund is a dedicated savings account that you only touch in the event of financial hardship, such as a medical emergency or job loss.
Sunny skies are the right time to save for a rainy day.
Start an emergency fund with no minimum balance.
Start Saving
Online Savings
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Christian Stewart, founder of financial coaching site Do Better Financial, recommends having an emergency fund of three to six months of expenses to help you survive a layoff financially.
“The goal is to make sure all your bases are covered, meaning you can pay the bills and proceed with a relatively normal life until you find another job,” Stewart says. She notes the actual amount of money you need to save for an unexpected job loss will vary based on your lifestyle, employment industry and willingness to relocate, since this can dictate how long it could take to find another job.
To build an emergency fund and save for an unexpected job loss, Stewart recommends starting a zero-based budget. This form of budgeting gives every dollar you earn a job, such as paying a bill, funding your emergency account or financing fun and discretionary expenses. In addition to making your emergency fund a priority, this budgeting strategy helps you identify exactly how much you spend within each budget category each month. You can then find areas of careless spendingâperhaps an unused subscription serviceâwhere you could stand to cut back. You could redistribute those dollars to your emergency fund.
“In the event of a layoff, you will have a clear line of sight to regular areas of your spending that can be cut if it takes longer to find a new job,” Stewart says.
After you’re comfortable with the size of your emergency fund and feel like you can survive a layoff financially, you can use any extra savings for a different financial goal, such as saving for retirement or a down payment on a car or home.
3. Find income from a side hustle
Another way to survive a layoff financially is to have a side gig in place. Contrary to what some believe, side hustles do not have to take up an onerous amount of your time. There are actually many side hustles you can do while working full time, such as freelancing in your current field, driving for a rideshare app or tutoring.
Not only do side jobs create extra cash flow to devote toward savings or debt repayment when you have a full-time job, they also give you an added layer of security to help you save for an unexpected job loss. You might not be able to replace your full-time earnings with your music lesson business, but it can provide you with some predictable cash flow while you interview for a new position.
You could even turn your side hustle into a full-time job if you have a passion project you’ve been wanting to turn into a career. Alternatively, your side hustle turned full-time gig could help maintain your income stream if you plan to take additional time off after a layoffâif you decide to go back to school or make a move to a new industry, for example.
4. Know where to turn for assistance
Being laid off can be a traumatic experience, and if it does happen, it is important to know where to turn and how to make decisions that aren’t rooted in fear or emotion.
“Sit down with a level-headed friend, spouse and/or counselor to process your new financial reality,” Stewart of Do Better Financial says. “If you’re receiving a compensation package, do yourself a favor and work out beforehand where the money will be spent and how long you need it to last.”
Speaking of work benefits, make sure you utilize all of the benefits possible before your layoff goes into full effect, such as getting an annual physical through your health insurance plan.
âSit down with a level-headed friend, spouse and/or counselor to process your new financial reality. If you’re receiving a compensation package, do yourself a favor and work out beforehand where the money will be spent and how long you need it to last.”
“If you’ve been laid off, or are expecting an upcoming layoff, you should immediately contact your state’s unemployment office to set up your account and start receiving your compensation,” consumer savings expert Caponera says. “While these benefits won’t pay as much as your full-time salary, these funds will certainly help to cover your monthly bills and living expenses while you continue to look for work.”
Each state has different benefits and paperwork requirements, so make sure you’re using your state’s government website to learn more and to survive a layoff financially.
Prepare your budget for a layoff
Facing a layoff can be emotionally and financially draining, especially if you don’t see it coming. The most important thing is to start planning ahead, and prepare your budget for a layoff before it happens.
The post A Step-by-Step Guide to Prepare Your Budget for a Layoff appeared first on Discover Bank – Banking Topics Blog.
If you’re looking for a new bank account that allows you to easily store as well as access your cash, you might be thinking about opening a money market account or checking account. But how do you know which to choose? Decisions, decisions. Both types of accounts have unique advantages, depending on your savings and spending goals.
âThink about how you will be using the money within the account,” says Jill Emanuel, lead financial coach at Fiscal Fitness. “Is this money for daily, weekly or monthly use? Or is it money that will not be needed regularly?”
You’ll probably need a little more to go on before answering the question, “How do I decide between a money market account or checking account?” No worries. Our roundup delves into the features of both types of accounts to help you determine which one could be right for your financial plans, or if there’s room for both in your money mix.
Get easy access to your funds with a checking account
In simple terms, a checking account allows you to write checks and make purchases with a debit card from the money you deposit into the account. That debit card can also be used to withdraw cash from the account via an ATM.
When deciding between a money market account or checking account, Emanuel says most people use a checking account for the primary management of their monthly income (i.e., where a portion of your paycheck is deposited) and daily expenses (often small and frequent transactions). âA checking account makes the most sense as the account where the majority of your transactions occur,” she adds. This is because a checking account typically comes with an unlimited number of transactionsâwhether you’re withdrawing cash from an ATM, transferring money to a savings account or swiping your debit card.
While a checking account is a good home base for your finances and a go-to if you need to easily and quickly access your funds, this account type typically earns little to no interest. Spoiler: This is one key difference when you compare a money market account vs. a checking account.
âIf you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use.â
Grow your balance with a money market account
When you’re comparing a money market account vs. a checking account, think of a money market account as a savings vehicle that allows you to earn interest on the balance you keep in the account.
“A money market account is an interest-bearing bank account that typically has a higher interest rate than a checking account,” says Bola Sokunbi, certified financial education instructor and founder of Clever Girl Finance.
With some money market accounts, you can even earn more interest with a higher balance. Thanks to its interest-earning potential, a money market account can be the way to go if you’re looking for an account to help you reach your savings goals and priorities.
If you’re deciding between a money market account or checking account, you may think that a money market account seems like a typical savings account with your ability to earn, but it also has some features similar to a checking account. With a money market account, for example, you can withdraw cash from an ATM and use a debit card or checks to access money from the account. There are no limits on ATM withdrawals or official checks mailed to you.
Before you decide to use this account for your regular bills and your morning caffeine habit, know that federal law limits certain types of withdrawals and transfers from money market accounts to a combined total of six per calendar month per account. If you go over these limitations on more than an occasional basis, your financial institution may choose to close the account.
Don’t need regular access to your funds and want your money to grow until you do need it? Then the benefits of a money market account could be for you.
Deciding between a money market account or checking account
Still debating money market account or checking account? Here are some financial scenarios to help you determine which account may best suit your current needs and goals:
Go with a checking account if…
You want to keep your funds liquid. If you’re thinking money market account or checking account, know that a checking account is built for very regular access to your funds. âIf you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use,” Sokunbi says. Think rent, cable, utilities, groceries, gas, maybe that morning caffeine craving. You get the idea.
You want to earn rewards for your spending. When you’re comparing money market account vs. checking account, consider that with some checking accountsâlike Discover Cashback Debitâyou can earn cash back for your debit card purchases. The best part is you are earning cash back as you keep up with your regular expensesâno hoops to jump through or extra account activity needed. Then put that cashback toward fun things like date night, lunch at your favorite spot or a savings fund dedicated to something special.
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Get 1% cashback on Debit from Discover. 1% cashback on up to $3000 in debit card purchases every month. Limitations apply. Excludes Money market accounts.Discover Bank,Member FDIC.Learn More
You want to deposit and withdraw without the stress of a balance requirement. If you do your research when comparing money market accounts vs. checking accounts, you’ll find that some checking accounts don’t require a minimum balance (or much of one). However, you may be required to maintain a minimum balance (and potentially a higher one) with a money market account in order to avoid a fee. If you’re accessing your money frequently and need to make large withdrawals, a checking account with no minimum balance requirement is a convenient option.
Go with a money market account if…
You want to earn interest. âIf your money is just sitting there, it should be earning money,” Emanuel says of the money market account or checking account question. âI spoke with a woman recently who told me she’d had around $50,000 sitting in her checking account for at least the last 10 years, if not longer. If that money had been in a money market account for the same period of time, she would have earned thousands of dollars on it. Instead she earned nothing,” Emanuel says.
You want to put short-term savings in a different account. If you have some short-term savings goals in mind (way to go!), you may benefit from keeping your savings separate from your more transactional checking account so you don’t dip into them for a different purpose. That whole out of sight, out of mind thing. âA money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund [a.k.a. rainy day fund], a vacation fund or a place to park money after you’ve received an inheritance or proceeds from selling a home,” Emanuel says.
You need an account to fund your overdraft protection. If you’re comparing money market account vs. checking account, consider that a money market account could also cross over to support spending goals. One way is in the form of overdraft protection. If you enroll in overdraft protection for your checking account, for example, you could designate that funds be pulled from your money market account to cover a balance shortfall.
âA money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund [a.k.a. rainy day fund], a vacation fund or a place to park money after you’ve received an inheritance or proceeds from selling a home.â
Using both accounts to achieve your financial goals
Speaking of crossover. Both spending and saving are vying for your attention, right? Consider leveraging both types of accounts if you have needs from the checking and money market account lists above.
“Personally, I use my checking account for bill payments, my day-to-day spending, writing checks and for any automatic debits I have each month,” Sokunbi says. She’s added a money market account to the mix “because of the higher interest rateâto store my savings for short-term goals, for investing or for money I’ll be needing soon,” she explains. Maybe it’s not about deciding between a money market account or a checking account, but getting the best of both worlds.
Before opening a money market account or checking account, do your research and compare your options to see which bank offers the best package of low or no fees and customer service, in addition to what you need from an interest and access to cash perspective.
The post Money Market Account or Checking Account: Which Is Best For You? appeared first on Discover Bank – Banking Topics Blog.
