Investments: Banking On Rates

Banks are back. For decades, they've lagged in offering competitive short-term savings rates. But now the old-fashioned depositories are beating the money markets. FDIC-backed money-market deposit accounts are paying an average of 1.36 percent, while money-market mutual funds are averaging only 0.73 percent. That's because the banks --can use long-term money, like mortgages, to support the interest they pay. Some banks (like Ford Motor Co.'s www.fordfinancial.com/moneymarket) are paying as much as 3 percent interest on these liquid accounts. Shop for the best rates at money-rates.com, but don't just look at the best rate, says Peter Crane, a fund expert with iMoneyNet.com. Some banks may be paying more than they can afford, and your money, though insured, could be tied up if the bank gets into trouble.

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