PayPal money market fund yield down to 5.02%

Here are some recent money market mutual fund yields:

• iMoneyNet average taxable money market fund 7-day yield was unchanged at 4.73%
• PayPal money market fund 7-day yield fell from 5.03% to 5.02%
• ShareBuilder money market fund (BDMXX) 7-day yield fell from 4.46% to 4.45%
• Fidelity Money Market Fund (SPRXX) 7-day yield rose from 4.99% to 5.00%
• Fidelity Cash Reserves money market fund (FDRXX) 7-day yield was unchanged at 4.96%
• Fidelity Prime Reserves money market fund (FPRXX) 7-day yield was unchanged at 4.45%
• Fidelity Federal Municipal Money Market Fund (FTEXX) 7-day yield rose from 3.06% to 3.07% or tax equivalent yield of 4.72% (up from 4.71%) for the 35% marginal tax bracket and 4.26% (up from 4.25%) for the 28% marginal tax bracket
• 28-day (1-month) T-bill investment rate fell from 4.88% to 4.76%
• 91-day (3-month) T-bill investment rate fell from 4.98% to 4.95%
• 182-day (6-month) T-bill investment rate rose from 5.12% to 5.13%

From two weeks ago: I need to look into what is going on at Fidelity. I hadn't noticed SPRXX before and they used to talk about FCASH, which I no longer see. Maybe they've seen the light and done the right thing, or maybe they've simply confused matters even worse. I'll have to investigate further how they are handling "core" cash these days for a taxable account (which I do not have, yet). Next year, when I have an extra $2,500 in free cash I will consider using a Fidelity account for payroll direct deposit and checks and bills. Since I pay most of my bills (including back taxes) through direct debit from my bank account, I'll have to check into whether Fidelity can handle that. They do have "Bill Pay", but that's different and not what I need.

PayPal is looking like a fairly interesting place to store cash for both relatively quick access and a well above average yield. There is no minimum for a PayPal account, no fee for a basic account, and it can be linked to your bank checking account for easy access. Right now I am using PayPal as a savings account, putting a little more money in whenever I get a chance and feel that my budget has some "spare change." In fact I just "deposited" some money in my PayPal account a few minutes ago.

Right now, 28-day T-bills don't feel as attractive for cash that you won't need for a month, since new issues (as contrasted to those they I currently hold) are yielding less than PayPal and Fidelity Cash Reserves.

Please note the disclaimer on Fidelity's web site:

Past performance is no guarantee of future results. Yield will vary.

As always, please note that cash placed in money market mutual funds is subject to the disclaimer that:

An investment in the Fund is not insured or guaranteed by the Federal Insurance Deposit Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

In practice, that is not a problem at all, but it does incline me to spread my money around a bit.

T-bills and the cash in your bank checking account or bank CD are of course "protected", either by "the full faith and credit of the U.S. Treasury" or the FDIC. Please realize that you may not get your full principle back if you attempt to cash out early for Treasury securities since you'll get the price on the open market, which is not guaranteed by the U.S. Treasury. You get your full principle only if your Treasury security is held until maturity.

-- Jack Krupansky