A New Way to Nab High Rates
Wary of banking online? Money funds once again offer a high-yielding alternative.
(MONEY Magazine) – Since interest rates hit rock bottom three years ago, savings accounts at online banks have been the clear yield king, luring savers with the highest rates around. But lately money-market funds, which directly track rate hikes by the Fed, have been making a comeback. For the first time in five years, the top money funds now offer a slight yield advantage: 5.24% vs. 5.16%. Meanwhile, the average money fund yields 4.78% vs. 0.80% for the average bank account, a figure that includes stingy brick-and-mortar banks as well as the online variety. Money funds at major investment firms are leading the way. Case in point: Vanguard's Prime Money Market Fund now pays 5.17%. So if you've been loath to send your cash into cyberspace, you now have a convenient and high-paying alternative.
SAVINGS NOTES AND SOURCES: CD and money-market account data as of July 25 from 100 Highest Yields ($124 for 52 issues; 800-327-7717); all have a minimum investment of $10,000 or less. Average tax-exempt and taxable money-market fund yields for the week ending July 25 from Money Fund Report (imoneynet.com); all have a minimum investment of $10,000 or less and assets of $25 million or more. Average bond fund yields for the month ending June 30 from Lipper; all are medium- and high-quality funds without sales loads and with average maturities of three years or less.  Manager absorbed all or some operating expenses. CREDIT NOTES AND SOURCES: All rates subject to change. Credit-card rates are for standard cards as of July 25 from Bankrate.com and are variable unless otherwise indicated. Survey does not include Internet-only cards or AmEx Blue.  Fixed rate.  Visa only.  Platinum and gold cards.