Both Ford and GM have their own money-market funds offering about 2.5 percent interest and check-writing privileges. (GM just restricted its fund, but the limitations are still generous.) General Electric, another big consumer lender, has one, too.
The upside is in the return. If you’ve got $30,000 sitting in a rainy-day fund, you might pick up $600 or so in one year’s interest. The companies can afford to pay more because they make more in loans. The downside? “It’s that ‘all your eggs in one basket’ thing,” says Standard & Poor’s analyst Peter Rizzo. Money-fund holdings are usually well diversified and often contain safe government securities. Corporate money funds aren’t. Ford and GM aren’t likely to default on their loans any time soon, but their credit ratings are mediocre. GE still has top grades for creditworthiness, and might be the safer buy. “Chances are that investors will be fine, and might as well take the yield,” says Peter Crane, editor of imoneynet.com, which tracks traditional money funds.
Or you might just stick with your money fund a little longer. If rates start to rise as the economy improves, the money funds will ratchet up their returns immediately. Then it might be these corporate accounts that get stuck on a number.
