In the battle for depositors' dollars, modern money market funds have held a clear advantage over most savings-and-loan associations, whose product arsenals are limited to old-fashioned passbook savings and cumbersome certificates of deposit.
But a few S&Ls, unhindered by federal regulations, have launched a high-yielding account that is virtually identical to a money fund - and offers insurance, as well.
State-chartered thrifts whose deposits are insured by state agencies, instead of the Federal Savings and Loan Insurance Corporation, and which are not members of the Federal Home Loan Bank Board, are not subject to Washington-imposed interest rate ceilings.
Most state S&L insurance agencies follow the lead of the federal government, limiting the yield thrifts can pay. But in two states - Ohio, and Maryland - there is no cap. Thrifts can offer whatever they want to attract customers.
An estimated 45 Ohio thrifts and 15 Maryland S&Ls thus offer a potent weapon loosely labeled ''insured money fund account.'' For the most part, they are standard depository accounts with a low minimum investment, check-writing privileges, and the double-digit yield common to money funds. And, unlike the money funds, the accounts are insured.
The result has been a spirited advertising skirmish.
''Bad News for Money Market Funds'' thumps a pugnacious ad for Government Services S&L, a Bethesda, Md., thrift. The nearby District of Columbia has been inundated with Government Services ads, featuring two-inch-high headlines and radio reminders of a toll-free, 24-hour hot line.
''It's a better mousetrap, and we think everyone should have one,'' says Alex R. Boyle, president of Government Services.
The Government Services Insured Money Fund Account requires a $3,000 initial investment, which is also the figure for the minium balance. Three withdrawals are allowed per month. The account's effective annual yield, for the week ending May 26, was 14.93 percent.
''The money market funds have made a tremendous impact on the delivery of financial services in this country,'' Mr. Boyle says. ''We can learn from that.''
What Government Services learned was that customers wanted a daily-access, daily-yield account. Certificates of desposit, which lock up cash for a period of time, just couldn't compete with the highly liquid money funds.
So the thrift took advantage of its state-insured status and began Insured Money Fund Accounts last month. Mr. Boyle says the account is better than a money-market fund because it adds insurance and the convenience of branch banking to high yields.
Fairfax Savings, in Baltimore, has offered an insured money fund for almost a year. Last week, the account paid a 15.25 percent effective annual yield. Seventeen thousand such accounts have now been opened, adding $50 million to the bank's coffers.
''We get $100,000 a day in new money,'' says Allen Hardester, the Fairfax fund manager.
He says Fairfax has increased its asset size 100 percent as a result of offering the account, and remains profitable - while the list of bankrupt savings-and-loans grows longer every day.
Would insured money fund accounts, if legalized for all thrifts, help shore up troubled institutions nationwide?
The Depository Institutions Deregulation Committee, charged with deregulating interest rate ceilings, has considered similar accounts. None has yet been approved. All interest rate ceilings are scheduled to be phased out by 1986.
''It's possible this may have an impact on federal regulation,'' says Mr. Boyle of Government Services. ''I think it's inevitable that federally chartered S&Ls and banks get in on this.''
Others aren't sure that insured money fund-type accounts are a panacea. Charles Kresslein, president of the Maryland Savings and Loan League, points out that many eligible Maryland thrifts haven't opened such accounts, because they can't afford to pay the high yields.
''They'd be a lot more popular if interest rates dropped,'' Mr. Kresslein says.
Most depository instutions would find it virtually impossible to pay market yields in the near future, says Mr. Hardester of Fairfax.
''You can't go from 51/2 to 15 percent in one day,'' he says.
Maryland S&Ls, which have been able to offer variable-interest-rate certificates of deposit for three years, were able to make the switchover gradually, Mr. Hardester points out.