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A few months ago I opened an account with a credit union. Now trying to get a realistic "rainy day fund" saved up, and wondering what the best account is to keep that in. The "regular share" acccount states an APY of 0.19%, while the "money market savings" account lists an APY of .10% AND a Dividend Rate of .10%.

So, what does that mean? I left the same amount of money in both accounts as an experiment, and the money market account received interest totaling roughly half what I got for the regular savings account. So does the dividend rate mean nothing, or is it likely that it gets credited at a different time?

  • This is a question that is best asked directly to your credit union. You haven't said which credit union it is, and even if you had, it is unlikely that there will be many participants here who will be familiar with the details of the policy. Also, please edit your question since "the money market account received interest totaling roughly half what I got for the money market account" makes no sense. You probably meant to say that the money market savings account received half the interest that the regular share account got. – Dilip Sarwate Jun 15 '12 at 17:00
  • @DilipSarwate Ok, you got me on that one. The credit union is PenFed... penfed.org – CodeRedick Jun 15 '12 at 17:05
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In a money market fund, one share is worth $1. For your fund, you'll earn $0.0010 a year per share, or 0.10%.

That is all that you will earn. The APY is just another number to represent this interest rate, not a separate income stream. If you were expecting extra money from a separately credited dividend, you were mistaken.

(Usually the APY is a slightly different number than the interest rate, to reflect the way that the interest is compounded over the course of the year. In this case the compounding is too slight to notice with just 2 decimal places.)

If you were investing in a regular savings account, you would see the rate you are paid expressed as an APY also, but not as a dividend (as no shares are involved) and use that number to compare the two. If you were buying a bond fund or stock fund that did not have a fixed price, you could calculate the dividend yield based on the current stock price, but you would not probably see an APY listed. Money market funds are kind of an odd hybrid of 'fund' and 'savings', so they list both.

  • Also, you're not going to earn noticeable amounts of interest at either 0.10% or 0.19%. Sorry. Blame Ben Bernanke if you feel like it. You could earn more off online savings accounts, even in this interest rate environment - maybe as much as 1% - but you probably won't get that from any bank with physical branches nearby to make things convenient. Kinda discouraging when you're trying to do the right thing, I know; most of the time it's theoretically supposed to be different. – fennec Jun 15 '12 at 17:21
  • OK, that makes sense... I actually was hoping it was two different income streams. @fennec I really miss the 5% I used to get with HSBC online... :( – CodeRedick Jun 15 '12 at 17:36
  • Well, if we are blaming the Bernanke for the OP's .1% MM yield, I need to thank him for my 3.5% mortgage (less than half the rate I had when we bought the house) and my 2.5% HELOc, unused, but there. – JoeTaxpayer Jun 15 '12 at 18:13
  • As long as Bernanke is the topic I'd also like to credit him with having a totally epic beard. That is all. – fennec Jun 15 '12 at 20:08
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The dividend is what represents your ownership in the CU. The APY is a calculated figure that will help you compare apples to apples the return of the investment from many vendors and many types.

(I think you CU might have had two different people writing that portion of the website, because the comparisons pages don't make that clear, and the pages don't layout the same way.)

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