It can be hard to compare money market rates on an apples-to-apples basis, and it’s no secret that financial institutions try to deceive people these days. On one hand, everybody wants the best money market rate. On the other hand, low rates are questionable. No bank is going to give low rates for no reason – not in this day and age. It will get its money somehow, even if it has to reduce costs elsewhere.

The truth is, banks can’t afford to give out low rates. They are simply competing for your money, so whatever it is they promise, you can’t always expect them to deliver.

Here are a few things to watch out for when you compare money market rates:

Misrepresentation

Misrepresentation happens more often than you might suspect. This happens whenever a bank tries to tell you that its finances are secure, and that your money will be safe. The bank could also fail to disclose information about where investors’ money is going. Some people invest money in high interest thinking that their money will be used for one investment, only to find that it’s being used in a variety of investments, some of which might not be favorable with the public opinion.

Some examples of misrepresentation in the money market include:

• Failure to disclose information regarding the use of investors’ money.
• Failure to disclose problems with various funds and investments.
• Omissions in accounting.
• A bank letting investors believe something which the bank knows not to be true.
• A bank misleading investors into thinking that low rates are a good thing, even when they’re not.

Overvaluation

Some financial institutions will make you think that stocks or mutual funds are worth more than they really are. They want you to think, “Wow! Those are some seriously low rates!” when in fact they actually aren’t. Some financial experts estimate that the market is at least 15% overvalued, and some experts put the estimates even higher. When you compare money market rates, do research to find out what they reflect. Usually, a low rate is reflective of a hurting industry.

Greed and Fraud

Just because a financial institution has been around for a very long time, and is in general good standing with the public doesn’t mean its representatives are incapable of fraud. Even the top levels of management are known to commit fraud. It’s no secret that there is greed in the money market, but many people don’t like to accuse established banks of fraud.

Here are a few recent examples of why you should always beware of white collar fraud: Enron, AIG, WorldCom, and Goldman Sachs. Unfortunately, many white collar crimes go unpunished because they are not investigated by the SEC. Every now and then, a few big wigs might be used to set an example of fraud in the financial markets, but their victims don’t always receive their money back.

In summary, your money will never be completely safe even in the best money market funds. Even if the risks do seem minimal, there’s still a chance that your money could be used in a questionable investment. As you compare money market rates, those that seem too good to be true probably are.