There is no doubt that we are living in extraordinary times.  A deep and profound depression unlike anything that anyone living has ever seen before and the reemergence of terrorism worldwide sends clear signals like never before - worldwide stock markets are going lower.  If you haven't gotten hurt badly and still have money left to protect, you are now taking a whole lot of it and trying to protect it.  Corporations and individuals have moved so much money into US Teasuries, presumably the safest investment of all, that short-term interest rates are basically zero (could they go negative like they did in Japan in the 1990's?).

I, for one, am amazed at the number of friends and family who have just thrown up their hands in this environment.  They reason that as long as they are protecting principal and not losing money, it doesn't really matter where the money is.  I think that is foolish. 

The good news is that the increased FDIC limits until the end of 2009 now make it more worthwhile than ever to take the extra effort to make greater returns on your money.    If you can lock up your money for any length of time, there are still plenty of 1 to 3 year CD rates listed on BestCashCow.com at well over 4%.  The risk, as long as you stay within FDIC limits is zero (as a point of fact, not only is the principal safe in my WaMu and IndyMac CDs that I purchased earlier in the year still there, but they are still earning their contract interest rates).  But, if you are still going to fret, you can do very well in well recognized banks like ING Direct, Everbank or Discoverbank.

The short-term CDs are all no brainers, but the excuses are still there.  There are at least two excuses that I will recognize.  First, you don't want to lock up the money for such a long period of time.  Second, you don't want to deal with the additional paperwork and time.

I don't even give too much credence to the second of these excuses, even though I hear it all the time.  As many of the bank reviews on BestCashCow.com show, many of these banks have streamlined the process so well that you can open the accounts as soon as the bank verifies your social security number and driver's license details, all entered through the internet, and you can transfer money simply by entering numbers from your checks, also entered online.

The first excuse, of course, is reasonable, but these days you can still get a great rate in an online bank account without locking up your money at all.  For, example, Dollar Savings Direct is offering a 4% rate.  This rate is not only better than any 3 month rate, it is virtually as good as any 6 month rate. It just doesn't make any sense not to put as much as you can, up to FDIC limits, in one of these accounts.  The risk of course, unlike a CD, is that the rate could fall dramatically and quickly.    But, it needs to fall quite precipitously not to be better than what you might get in one of the leading money market funds (and still further not to be better than a Treasury bond).