I have just recently started to have a close look my investment options so I don't have a whole lot of finance knowledge at this point. One thing I did come across that looked interesting were money market funds that you can use a type of savings account with limited check writing and deposit/withdrawl capabilities.

I've started to compare some of the better rated money market funds and the ones that I have found are comparable to my HSBC online savings account (5.19% APY). Is there some incentive that I am missing regarding money market funds other than the worry that HSBC might try to lower my interest rate at some point?

I am assuming that APY is equivalent to compound yield. Also, this isn't really for investing, more just for a rainy-day type of fund.

Certainly there are some nicer high interest accounts around now the base rate of interest from the Bank of England has gone up. So it's certainly worth looking at those - I know the ING accounts used to be pretty attractive, but am also under the impression that they're not so competitive now.

Really, high interest savings are probably your best bet at this stage - once you start juggling with investment vehicles you have to start committing to the long term. By rainy-day I'm presuming you don't want such restrictions.

Hope that helps.