The extended unnaturally low interest rates by the Federal Reserve makes for cheap money as supposedly more credit (the intention), but also makes certain investment vehicles fruitless and detrimental to companies. That’s likely why PayPal is canceling its money market fund this month. Here’s a letter from the company:

Thanks for using PayPal and the PayPal Money Market Fund. Unfortunately, we’ve decided to close the Money Market Fund, effective 7/29/11.

What does this mean for you? PayPal will transfer any undisbursed dividends you’ve earned into your PayPal account within 7 business days after we close the fund. Don’t worry; you don’t have to do a thing.

Your 2011 tax documents will continue to be available on the Fund Summary page in your PayPal account throughout 2012. You’ll receive a tax statement from PayPal only if you’ve earned $10 or more in dividends in 2011.

Thanks for your understanding,
PayPal

No one was making money on the .1% interest rate PayPal was offering, but in its hayday, the PayPal money market fund was a great way to store money and earn interest with credit arbitrage. Those days are long gone thanks to the unintended consequences of the Bernanke and the Fed.