Whenever one thinks of high and reasonable returns from savings accounts, money market accounts come to mind. Savings accounts have assumed several types including checking accounts, certificate of deposit accounts, etc. But the interest rates of these accounts were no where near other investment options available. This drawback vanished with money market savings accounts which offer very high interest rates.
Annual Percentage Yield
Interest rates of these accounts are expressed in APY or Annual Percentage Yield. This is the effective rate of interest when actual monthly interests get compounded. Unlike monthly rates, APY gives a direct measure of the returns one would get. Due to this fact APY appears little higher than the interest rates. Banks offer data sheets containing both rates and APY in adjacent columns to give a clear picture to customers.
Rules and Restrictions
These accounts have several rules and restrictions to compensate for the high interest rates offered. Foremost one is the criteria of minimum balance. Some banks do require a minimum balance of certain dollars to be maintained for the high rates to be applicable. Any balance below the limit wouldn't mean interests wouldn't be paid, but additional charge would be collected with monthly maintenance fees. But there are banks which require no minimum balance for these accounts.
Limitations
Online money transfers would be limited with these accounts. There could be limits imposed on free fund transfers across banks, online bill payments etc. Additional number of transactions would be charged.Generally there would not be overdraft protection for these accounts.