When shopping for the best interest rates on certificates of deposit, money market accounts, checking accounts and savings accounts, always check the Annual Percentage Yield, or APY. Using the APY rather than the interest rate to decide between different investments will give you a clearer picture of the amount of money you’ll be earning, because the APY takes compounding into consideration.
The More Often the Interest Is Paid, the Higher the APY
Given that two money market accounts pay the same interest rate, the one that pays the interest more often will be the better investment. Getting paid monthly would be better than getting paid quarterly or annually. If you’re paid interest as often as possible, the interest can start earning interest. Earning interest on interest, or compounding, means that your money is working as hard as it can.
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