A client recently called me and was shocked that the annual interest rate on the money market sweep account at Bank of America Investment Services is currently at 0% interest. Most other money markets are currently paying less than 1% interest.
Banks, and credit unions and mutual fund companies offer money market accounts. These accounts consist of very short-term debt securities. The investments are highly liquid and considered safe because of the short maturities of the underlining obligations. Last year there was some concern when some money markets held debt from companies in question such as Leman brothers. People and institutions use the accounts to park funds that they intend to use in the near future.
Most money markets invest in similar types of short-term investments but the big difference in yield is in the expense ratios. See some examples below:
Vanguard prime money market 0.28%
TIAA CREFF 0.25%
Fidelity cash reserves 0.44%
HSBC Prime MMF 0.80%
Columbia cash reserves 0.85% (This is the fund that BoA uses)
You will note that the BoA expense ratio is 3 times higher than what others charge. No wonder B of A Investment services money market is paying 0% when they pay out of line fees to themselves and their vendors.
It just goes to show that you need to look out for your self or have help watching out for you by some one who is not selling you a product!