If you're in a money market account, at least look at CDs

Banks continue to trim away at the yields they’re paying on savings certificates. And if recent history is any guide, we aren’t near the bottom.

So if interest income is important to you, and your cash is sitting in a bank money market account or money market mutual fund, there’s still time to lock in a better yield on a CD -- even if just for a six-month or one-year term.

The average yield on six-month certificates of deposit nationwide fell to 1.71% this week from 1.78% a week earlier, according to rate tracker Informa Research Services in Calabasas. The average was 2.11% in mid-December.

The average yield on one-year CDs eased to 2.03% this week from 2.09% last week and 2.42% in mid-December.

Those are paltry returns, to be sure. But they still are far better than the 0.7% average annualized yield on money market mutual funds, or the 0.8% average on bank money market accounts. And money market yields also are continuing to slide.

We know that the Federal Reserve is intent on keeping short-term rates depressed for an indefinite period. The Fed in mid-December said it would allow its benchmark rate to fall all the way to zero.

In mid-2003, when the Fed’s rate bottomed at 1%, banks were paying an average of 0.87% on six-month CDs and an average of 1.03% on one-year CDs.

So just to get back to those 2003 averages, banks would have to shave an additional 0.84 of a point off six-month CDs and one full point off one-year CDs.

If you have money market cash you aren’t going to need for the next year and you have no desire to invest that money in riskier assets, why not at least double your interest earnings in a CD?

In this economy, every dollar counts, no?

-- Tom Petruno

Photo credit: Lee Jin-man / Associated Press