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Dr. Don Taylor, CFA, Bankrate.com advice columnist Is Ford money account investment safe?

Dear Dr. Don,
I have money invested with Ford Interest Advantage money account that is not FDIC insured. Is this a safe investment? How do I find the credit rating for this company?
-- Michael Monies

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Dear Michael,
You're buying floating rate demand notes issued by the Ford Motor Credit Corp. The prospectus for the notes explains the risk inherent in the investment including, but not limited to, the possibility of a credit downgrade, the lack of diversification, the lack of a secondary market for the notes and the notes being unsecured obligations of Ford Credit.

Firms have both short-term and long-term credit ratings and a ratings outlook that provides some guidance by the rating agencies as to the company's future outlook.

Ford Credit's short-term ratings and ratings outlooks currently are:
  Short-term Outlook
Dominion Bond Rating Service LimitedR-4Negative
Fitch Inc. BNegative
Moody's Investors Service Inc. Not prime Negative
Standard & Poor's Rating Services, a division of McGraw- Hill Companies Inc. B-3Negative

To stay abreast of ratings changes you should see if your local library subscribes to one or more of these services.

The Ford Credit Web site posts the Ford Interest Advantage rates weekly. Shown below are the rates from that site for the week of April 23.

Current rates for the week beginning April 23, 2007
  Amount invested
Ford interest advantage
Rate Compound yield
Under $15,000 5.61%5.76%
$15,000 to $50,0005.76% 5.91%
Over $50,0005.91% 6.07%

Whether you're being adequately compensated for taking on this level of credit risk is subject to debate and is, in part, based on the size of your position in these notes.

You're getting a yield pickup versus FDIC-insured money market accounts, MMAs, and non-insured money market mutual funds, MMMFs, because you're accepting the risks inherent in investing in these notes. I can't tell you that the notes are a safe investment. You have to decide if the yield pickup is worth the risk.

Note: Thanks to Jeffrey Matthias of the American Family Mutual Insurance Co. in Madison, Wis., for his assistance in helping me answer this reader's question.

Bankrate.com's corrections policy-- Posted: May 8, 2007
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