Ask the Readers: Should I Chase Higher Interest Rates?
Published on - August 1st, 2008 (Modified on - October 29th, 2009) (by J.D. Roth) Almost eighteen months ago, I wrote a post listing the best on-line high-yield savings accounts. Over 750 comments later, the discussion is still going strong. Kyle recently chimed in with a question many people have:
In January, before I started reading Get Rich Slowly, I opened a high-yield investor checking account with Charles Schwab. The interest rate was around 3.75%, but it’s fallen to 2% now. After starting to read your site, I decided to open an online savings account. I chose ING Direct because a friend had an account and could get me the $25 bonus.
I’m wondering if I should shop around to get better rates without sacrificing the relative ease of Schwab and ING Direct. There are accounts with higher rates, and I’m wondering if it’s worthwhile to switch.
Moving from bank-to-bank (or “rate chasing“, as it’s known) can make sense if you have enormous balances. I have about $8,000 in my high-yield accounts. Over the course of a year, that’s going to earn me $240 at 3%. It would earn me $280 at 3.5%. Should I try for that extra half a percent? It depends.
Fluctuating rates
Since I began tracking bank rates at my high-yield savings, interest rates have climbed and fallen. Each time there’s movement in the market, banks shift positions on the list of highest rates.
Right now, for example, Everbank is offering a promotion where they give 3.01%, but only for the first 3 months. After that, the rate drops to 2.15% APY but only for the first year, up to $50k. So, even if Everbank has the best rate now, they may not be the best rate tomorrow.
You need to ask yourself if it’s worth your time to always be looking for the best rate.
Customer service
There’s more to banking than just interest rates. Savings Square is a new high yield account that made some noise earlier this year. Several GRS readers signed up. But then these readers complained to me.
In fact, one reader sent me a l-o-n-g diatribe about her experience opening an account at Savings Square. After this reader jumped through hoops to chase the high interest rate, Savings Square lowered the yield to be the same as ING Direct, the bank the reader had left. She was exasperated. She was especially frustrated because the Savings Square signup process had been so laborious.
To me — but not to everyone — customer service and ease of use are very important. But how important? $10 a year? $100 a year? $1,000 a year? Only you can answer that.
Doing the numbers
Finally, there’s the question of how much difference half a percent makes. If you have $800 in an account, 0.50% is $4 a year. If you have $8,000 in the account, it’s $40 a year. But if you have $800,000 in the account, it’s $4,000 a year. Obviously, that’s a big difference.
If I had $800,000 in a high-yield account, I might chase rates. But I don’t. I have $8,000. Because of this, I’m content to maintain my account at ING Direct.
Recommendation
If you’re just starting out, it makes sense to sign up with a bank that earns high customer satisfaction marks and offers high interest rates. (The online banks thread is a great place to research this subject. There are hundreds of comments with reader feedback.) Some of the top-yielding banks right now include:
- HSBC Direct is offering
3.01%, but it’s a temporary rate until September 15th. (Admittedly, they keep extending the length of this temporary period, but the rate is still set to fall.)1.55% as of May 2009! - WT Direct offers
1.76% APYbut your interest rate drops if you don’t have a $10,000 balance after 60 days. I don’t have $10,000 in savings yet, so this isn’t an option for me. (Soon! Soon!) - E*TRADE Bank offers 0.95% APY, but I hear mixed reviews of them. My cousin loves them, but some GRS readers have had problems.
Notice that each of these accounts has a drawback. I’m willing to host my savings account at a bank with a slightly lower rate because (a) I get great service and a great user interface and (b) my balance is small enough that it doesn’t cost much to sacrifice half a point of interest.
What about you? Do you have a high-yield savings account? What are the most important considerations for you? Would you switch banks over half a percent of interest? Over one percent? Would it make a difference if you had a larger or smaller balance? Are there any other tips you can offer Kyle as he shops for online banks?
GRS is committed to helping our readers save and achieve your financial goals.Savings interest rates may be low, but that’s all the more reason to shop for the best rate.Find the highest savings interest rate from Ally Bank, Capital One 360, Everbank, and more.
This article is about Choices, Money Hacks, Savings
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I opened my first high-yield account at ING Direct just over a year ago. I got a referral from one of the smaller PF blogs.
I think rate chasing is only worth it with something like your emergency fund that you don’t touch often. Don’t rate chase with your bill paying account — it’s way too much work to switch over your direct deposit and all your auto-debits a few times a year, and the account is (or should be) mostly empty most of the time.
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I recently moved most of my $18k from Emigrant Direct (which was at 2.75%) to HSBC Direct (3.5%). At the time I did it, I didn’t realize that the 3.5% was a promotional rate that was not likely to last. However, I intend to keep both accounts open and keep most of the money in whichever one is offering the higher rate at the time. So far I think I like Emigrant better – they credit transfers to your account within a day or two, so even though there is a waiting period before the funds are available, at least they show up in your account balance and accrue interest. With HSBC, the funds don’t show up in your account until several business days after a transfer, and they apparently don’t accrue any interest until then. Also, Emigrant displays “Interest earned so far this month”, and credits each month’s interest on the last day of the month. I opened my HSBC account in mid-July, and so far (as of 8/1/08 at 8:40AM) it has not credited any interest and shows “Interest earned this year” as $0.00.
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I’m also content with ING because the ease of using the interface, ridiculously simple creation of multiple accounts (I have 5 for different savings goals: emergency, investing, synthesizer, VACATION, and one for an award my wife won at work that came with a considerable cash prize)
If I really wanted to rate chase, I’d switch from the ING savings account to the ING 6-month CD at 3.3%. Of course, even if I had $10k to move (I don’t), the difference between a year at 3.3% versus 3.0% on $10k is $30, or less than $3 a month.
For the loss of liquidity a $10k CD brings compared to the savings account, I’m sure I can find a way to recoup the lost $2.50 a month via various frugality strategies.
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I can understand why people rate chase — but I’m just so happy with the service at ING, that I’m not going anywhere.
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I personally dont think rate chasing is worth it at my level. I have around 15k with ING and I couldnt be happier. I will admit my first account was through Emigrant Direct, but when all the rates leveled out, ING’s checking account was another thing that lead me to them.
I also was one who tried to get an account with Savings Square after hearing about them. But I quickly gave up after the grueling process of opening an account, and just in time because their rates dropped soon after.
@PJ I like the idea of recouping the small amount of money that could be earned by changing banks by practicing frugality strategies.
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I have an ING savings account and like it.
But I have an ETrade checking account, and it is the best thing since sliced bread. I can use *ANY* ATM as ALL ATM fees are completely refunded. It has free Bill Pay, and you earn interest if your minimum balance is over $5K (currently 3% APY). Additional checks and deposit slips are also FREE. Only downsides: you have to mail in checks you want to deposit, and there’s no “branch” to walk in to. Overall, I LOVE it (been there about a year now).
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I have high yield accounts with both HSBC and Wamu. I really like Wamu’s online interface and their high interest rates, but I’m worried about their health as a financial institution. Wasn’t Wamu hit pretty hard by the whole home lending crisis? Even though I’m under the $100,000 FDIC limit, I still don’t want to have to deal with getting my money out if Wamu does go under.
On a related note…I can’t find Wamu on http://www.bankrate.com anymore. Anyone know why?
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I have a few ING accounts and have considered once or twice chasing a better rate, but always end up deciding to stay put. I like the simplicity of the web site, my accounts are already there and everything is in one spot with only one login and password to keep track of for all the accounts. If I were to ever get high enough balances to make it worthwhile to chase a rate I think I would either just set up a CD ladder using ING, to capture some of the higher rates they offer, or transfer some amount of the money to maybe a very conservative mutual fund portfolio that is made up of index funds.
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I am with everyone else so Far – ING for life! Well, not necessarily… but it is going to take a large gap in interest rates or some major policy changes to get me to switch. ING has done nothing but make their products and interface better over the last few years.
I am sticking with them.
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Personally, it’s too much trouble for me to chase rates unless a big spread appears. If money were tight and I needed to get the most out of every dollar, then I think I would look at it differently, but it ends up being a big hassle keeping track of all the different accounts.
I decided to go for simplicity awhile back and ended up closing a lot of accounts I had opened chasing rates and bonuses. It’s certainly one way to make some extra money when things are tight, but yuo can also find yourself with a huge number of accounts since the rates change often and lots of new bonuses being offered.
Having only 2 accounts (instead of 10) makes keeping track of stuff much easier and is worth the small amount I lose in interest. If I started to see a big spread of over a couple of points (which I assume we will be seeing soon with the way inflation is going) then I’ll sit back and reevaluate.
@ Micheal
Not sure why WAMU isn’t on bankrate – they just upped their rate to 3.75% – current saving account rates
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I only sign up for the free bonuses. That can be equal to an entire years worth of interested, based on my balance ($2000).
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0.5% is 0.5% regardless of the size of your account. Why should $800,000 in the bank make you more likely to chase rates than $8,000? Psychologically, $4,000 looks a lot larger than $40, but really there is no difference; they are both 0.5% of the total amount in the bank. Also, I would imagine most of the readers of this site cannot relate to having $800,000 in the bank to make that choice; I know I certainly cannot.
Really, if you had $800,000 in the bank, you should look into investing a lot of that in some low-cost index funds and earn much more than 0.5% on that money. $40 interest on an $8,000 account can be made up by eating out 5 times less over the course of a year.
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Hi all,
At some point you have ask yourself what your own time is worth as well, and how much of that time are you going to spend researching and following rates and moving money. If there is a substantial sum of money involved, and it’s money you don’t plan on using anytime in the near future (more than a year out) either put it in a CD or invest it in something like a muni-bond mutual fund.
Or, better, buy some shares of BRK-B and park your money with the greatest investor of all time
Preservation of capital is essential, but chasing rates when you’re talking about a delta of .3% here or there is just not worth it, especially when the rates being chased are *less* than the rate of inflation! What you are in fact doing here, is purchasing safety. The cost being the hidden erosion of your dollar.
Parking money in a savings account and chasing rates costs your in the following ways:
– your time is wasted keeping up with and researching all the rates.
– your time is wasted everytime you move your money to a new institution
– the interest rates is less than inflation, which means your buying power is being eroded
– you are finally taxed on that interest at the end of the year.
Compare that with taking, say, $8000 and buying 2 shares of BRK-B:
– Share prices are relatively stable, so you have decent preservation of capital
– The upside potential to BRK is significantly better than the average market potential in any given years
– You aren’t taxed on the increased value until you sell your shares, which, if longer than 1 year, will be at long-term capital gains rates (which is lower than the ordinary income rates for earning interest)
– It’s much more liquid than a CD earning a measely 4% or so.
If you think you’re going to need the money within 1 year, then clearly a savings or money market account is a better choice. But if really don’t think you’ll need the money for a year or more, BRK-B is better than even an S&P 500 Index fund in my opinion.
Paul
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If I had $800k, I would have it in 8 high-yield accounts for the benefit of the FDIC limits.
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With 800k, I’d use 9 accounts, in order to have elbow room for interest. ($800,000/9=$88,888.88)
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I know you were just using the example of $800,000 in a savings account to make a point, but I’d like to add a reminder that one should limit one’s funds in any bank to the amount insured by FDIC. For savings and checking accounts that amount comes to a total of $100,000 at any bank. Recent bank problems have illustrated the importance of this limit.
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I’m happy to this topic covered again as it will give me a chance to relay my recent experience.
After reading the first article and a boat load of the comments regarding high yield savings accounts I decided to take the plunge and open one of my own.
I decided to go with ING due to the good reports of customer service and ease of use.
After I got everything up and running I went to the website of the bank where I keep my checking account only to discover that they charge a $3 fee for transfering money to an account with another financial institution. The bank I have my checking with is Wachovia.
Due to impending life changes in the not too distant future, I’m not going to close my Wachovia account and search out a checking account with another institution that doesn’t engage in this practice, but I sure will when my wife and I move.
Anyway, I simply wanted to post this as a heads-up for folks who want to open an online savings account. Make sure to investigate any charges that the bank where you have your checking account might have so you can get the full picture of what you might have to pay to get that higher interest.
Mike
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Personally, I have online accounts with E*Trade Savings and HSBC Direct. I have found that while the two do not always offer the highest rates, they are among the quickest to adjust, while ING Direct has gotten a reputation for not only being slower than most it also has not been among the higher payers, but everyone is free to bank where they please. It is also important to me that both institutions I use offer ATM access to funds, which is truly beneficial in real emergencies when you simply do not have the time to wait for a transfer to be completed. I also maintain free checkings account with Wachovia (one each for my business nad personal) which is where I make all of my initial deposits before transfering to higher paying accounts. I find that it is imperative to maintain at least one relationship with a local institution for the ease of doing business, especially if you make manual deposits. It is too easy to open up several acounts at different institutions, and just transfer the funds when one offers a higher rate to not do it (especially with banks that require no minimums or charge no fees).
I have also been reading some other blogs where people post about only keeping one relationship due to the simplicity and not chasing higher rates. It confuses me because many of the people who say this are also the same people that use any trick they can think of to save money yet they claim that the difference interest is negligible. It kind of contradicts themselves a bit: using the library to obtain reading materials and movies rather that purchasing, cutting out cable and high-speed internet, avoiding “conveniences” and “luxuries” all in order to save money, yet when the opportunity to earn more interest simply by filling out an online application comes along they pass. Of course each person is free to live how they wish, I’m just saying that it is rather confusing to me as to how they justify such a contradiction.
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Mike Says:
“After I got everything up and running I went to the website of the bank where I keep my checking account only to discover that they charge a $3 fee for transfering money to an account with another financial institution. The bank I have my checking with is Wachovia.”
So, they charge you $3 to write a check to yourself which gets deposited in an account at another institution?
Paul
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I think Eric (#18) makes a good point — rate-chasing can be another tactic for making the most of your money, just the same as using the library or growing your own food. That’s why if you’re starting out, you should choose a bank that offers a high rate.
My own plan is to keep rate differences in mind as my balance grows. Every time I update my list of savings accounts, I run the numbers to see what the difference is between the top bank an my current bank (ING Direct) and then look at the requirements for opening an account there. So far, I haven’t been inclined to move, but I can certainly foresee a time when I might.
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Barb1954 Says:
“For savings and checking accounts that amount comes to a total of $100,000 at any bank. Recent bank problems have illustrated the importance of this limit.”
It turns out that this limit isn’t exactly true. The FDIC site explains it all in agonizing detail, which I won’t attempt to explain, but the $100,000 limit is a per-person/per-account limit.
Which means it you have a joint account with someone, the limit on that account is $200K, and so on. There is an upper-limit I think. NPR just did a story on this about 2 weeks ago and had an interview with an FDIC official who explained all pretty clearly.
However, I think it’s a good idea to be safe, and keep your account under $100,000. Actually, if you’ve got $100,000 in a checking/savnigs account, I’ve got to ask why?!
If I had $100K of cash, I’d at least have it invested in something like BRK. I certainly wouln’t leave it sitting around in a vehicle like a checking/savings account which will ultimately cost me money.
Paul
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ING Direct is a great place to park your emergency fund. In addition to keeping Murphy away, compounding interest can make you somewhat rich.
Getting on a budget can keep you off the credit card and away from debt by getting you to live within your means and establishing an emergency fund.
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Not worth it, my 2 cents. More than a year ago when ING was around 4.25%, Countrywide, who my mortgage is with, was advertising their new high interest checking account in my monthly bill. The deal was, 5.5%, $10k minimum balance. My mortgage was only slightly above that, so it was really tempting to do, since the interest from my mortgage would almost wash itself with the interest made from the checking account. After a lot of thought, I decided not to do it. My reasoning was – the money in ING is my OH SH*T fund in case something goes wrong in life. I didn’t want to be bothered with moving it around for a little bit more here or there, or worry about rate drops if I fell below the minimum. Been with ING for 4+ years, still very happy.
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I do so love ING. It’s always been easy to use and easy is good in my book. I have so little money (less than $1,000 at any given time) that I only earn a couple dollars a year, so I just stay put. The difference in the rates really makes no difference when you consider a good month a month where your savings account has $300 in it.
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I’m more about peace than about rate hunting.
If I am content with any service, I don’t mess with it – I feel more peaceful that way. People tell me I should dump my cell phone plan – I can get more for the $ or whatnot. Welp, I’ve never had any trouble with my company in 10 years and they give me a new phone every two years and I’ve always gotten free nights and weekends. I dont want to mess with what is working (plus I generally dont go over my minutes and whatnot, I dont really need to pay for more minutes I am not using). Potentially saving a few bucks to give up what’s working for me isn’t worth it.
I have ING and everything has worked out great. I’m content. Chasing other banks doesnt turn me on.
I only messed with it when I found a local bank offering CDs for 5.25% (this was awhile ago obviously). I had enough to w/d for that, so I did. Still kept adding to ING meantime – I call it my “rainy day” fund. However, that same bank now offers only about .15% more now on a CD – I’m not withdrawing from ING for that. Doesnt always have to do with money itself the financial decisions I make. Feeling peaceful and not in chaos makes me happier.
Case in point: I’ve always saved/invested in the slow, steady, “safe” way. True, maybe I could have made more, but I don’t like the frantic feelings associated. Seems to be working out anyway – my 403b has lost zero since I opened it ten years ago. (but I also didnt get big gains other ppl would brag about). I know so many are having troubles but I deliberately chose the “conservative” plan they offered b/c it benefits me emotionally more.
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“So, they charge you $3 to write a check to yourself which gets deposited in an account at another institution?”
If you want to handle the transaction electronically. I’ve got to say that I was pretty shocked to make that discovery as I read a LOT of the replies to the first article on high yield savings accounts and never saw this issue mentioned anywhere.
I’m new to this, but I believe that you can make a paper deposit with ING, but you have to write a check and mail it to them with your specific account info. I believe that this is detailed at the ING website.
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I have 2 question:
1. Are there any Canadian readers who can share their experiences? Are there online high-interest banks available for Canadians, and are the ING rates/regulations different for us Canucks?
2. How do I find a referral for when I do open up an ING account? I hear they can be worth $25 and would love to take advantage of such an offer.
Thanks!
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Mike,
I believe Wachovia’s $3 charge is if you use their transfer function. If you use ING’s (or anybody else’s) to pull the money, there’s no charge from Wachovia because it’s indistinguishable from any other auto-debit transaction.
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I have both ING and Capital One. Capital One gets good ratings on bankrate.com. I switched to it from ING when I was chasing rates. It seems like the 10k minimum requirement is new on the captial one account. Both have been good for me but I may move between the two based on where I can get better interest.
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Here’s an article listing Canadian high-yield savings accounts.
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Another great post! This is something that I have been thinking about a lot lately. I dont have have a high yield account and I really need to begin looking into one. I am just worried that if I change banks for my checking, I will not be able to transfer the funds when an emergency comes along.
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“I believe Wachovia’s $3 charge is if you use their transfer function. If you use ING’s (or anybody else’s) to pull the money, there’s no charge from Wachovia because it’s indistinguishable from any other auto-debit transaction.”
Ah ha! The truth comes out. Thanks for the heads-up, Jon. When I attempt to make my first transfer, I’ll be sure to initiate it through ING. If that works out, well then giddeyup! I can’t tell you how irritating the thought of Wachovia’s $3 charge was. I’m really tired of banks sticking their hand in my pocket.
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I have been a customer at ING Direct for almost 5 years now. They started out having the highest rates but at this moment, they don’t. I still stick with them because of great customer service and other benefits that they have. I’m happy with them and the reward of higher interest rates isn’t worth the risk of the unknown with other banks.
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I started out with ING a couple of years ago. When the rates dropped earlier this year I opened an ETrade account. Then it dropped, so I opened the HSBC account. These accounts are all linked to my checking account and I’ll be keeping them all as long as there is no minimum balance requirement. Once HSBC drops, I’ll move my balance to the highest of the three.
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As a follow up to my comment (#29) this is what capital one says. should be the same rate as ING now.
Rates – High Yield Money Market Account for Capital One Bank (USA), N.A.
Daily Balance Interest Rate** APY*
$0.01 – $4,999.99 2.96% 3.00%
$5,000.00 – $9,999.99 2.96% 3.00%
$10,000.00 – $24,999.99 2.96% 3.00%
$25,000.00 – $49,999.99 2.96% 3.00%
$50,000.00 – $99,999.99 2.96% 3.00%
$100,000.00 2.96% 3.00%
J.D.’s note: Thanks for posting this. I’ve been comparing the wrong Capital One account on my savings account page. I’ll fix that.
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Is anyone using a high interest rewards checking that is the hot bank product now? My small bank (here in the south)is paying 5.5% on balances up to $50k. To get that rate, you have to use the debit card 10 times, have one ACH debit or credit, get your statement electronically and access the online banking site once a month – no problem, already doing all that anyway. No minimum balance, no fee, all ATM fees refunded. Lots of banks in this area have some similar product. I still have an ING account – have had it for years. I like my “savings” to be just hard enough to get to so I’ll think twice before using it. When our CD recently matured, I just popped it into the high yield rewards account; it’s earning the high rate while I ignore it in my register! When/if the rate drops, I’ll move it or make another CD. Love the site, btw.
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Sarah,
if you want a referral,
email me at kylechester@technisource.com
I’d be happy to send you a link, plus I get a $10 bonus!
Thanks for all the comments everyone, I’ve loved ING so far and plan to continue with it and Schwab for the time being.
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I think rate chasing is silly unless you’re missing out on 1% or more, or dealing with a lot of money. But seriously, if you have $10k sitting in an account but find a new rate somewhere else that is 0.25% higher, you’re talking $25 dollars. Sure, I want 25 extra bucks like the the next guy, but I can find better things to do with my time to make 25 bucks over the course of a whole year.
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Wachovia has a program called Way2Save that gives 5% APR for the first year with an additional 5% bonus. You can also earn a dollar for every debit card transaction you make from the linked checking account. However, you can only put $100 a month in the account and there is some annoying setup like having to call to get autotransfers setup. Also, I got hit with a $18 bill for check orders that I will probably never use. But I am hoping to get some referrals from friends without savings accounts at $25 a pop for each person. I figured overall if you can transfer $100 every month the total APR at the end of the year is approximately the same as having $1200 in an account with a ~6.5% APR. Not bad but not great. The account goes to 2% APR after the first year. I will probably bail on it then.
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For all those who say that they could find better things to do with their time, etc I have one question: how long does it take to open an account somewhere? Maybe 5 minutes at the max. If you open accounts at the 3 highest paying banks, you will generally spend about 15-20 minutes and only need to invest $3 to start (if you choose a no minimum account). Rate chasing doesn’t necessarily entail a whole lot of work. It could be as simple as going over to bankrate and doing a search which takes a couple of minutes. Not to sound redundant, but it seems like quite a few people will go to what some would consider extremes to live frugally, but not want to get the most that they can out of their savings.
It’s not something that I do on a regular basis, but every so often Iwill check national rates to see what I maybe missing. Besides, I think being proactive when it comes to savings and earning interest is much better than simply sitting idly by and not taking an active approach to maximize your money’s earning power.
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Folks, please don’t use this thread for referral swapping. Use the ING referral thread instead.
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I’m doing what John’s doing, only my two banks are ING and Emigrant. Also, if I have extra money and feel rates are going down, I may get a CD at my credit union, especially if they’re having a special. So currently, I have a little in Emigrant (at 2.75%), the minimum for the good CD at my credit union I opened a few months ago (at 4.2%), and a bit more at ING (3.0%).
(I started with ING but then got annoyed that it seemed they felt they were above having to have competitive interest rates any longer, so I switched to Emigrant, which is also known for good service and which had had better rates than ING for a long time. Within two months, Emigrant had dropped faster than ING until they were paying less, so I moved most of my money back to ING. I’m not sure I have any good reason for not having more than two online savings accounts.)
I also keep $500 in my credit union’s savings account, which I can access instantly, in case something surprising and urgent comes up.
One problem with switching is all the days where you are getting very little interest waiting for things to transfer. It can take quite a while of earning higher interest to pay that back. I solve this by transferring money during the beginning of the month, after I have received my pay and before bills are due. First I transfer the excess in my checking account to the better-paying online savings account, and once that has arrived I transfer the same amount from the worse-paying online savings account into my checking account. It may take two or three months to move all my money over this way.
I always have less than $10,000 in these online accounts, usually quite a lot less.
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I opened an Emigrant direct account when they had the best rates, but later decided to grab the $25 for opening an ING account. Now that ING has a better rate, I’ve been making my new deposits to the ING account and draining the Emigrant account for expenses. I suppose it is a weak kind of rate chasing, but both accounts are very easy to use, so it is really no hassle changing back and forth.
I also have $500 in the NRA High Yield money market. It is way less convenient than the other two (but the best rate). The NRA account sends you an ATM card for withdrawals, and $500 is the max you can usually grab from an ATM machine in a day. I won’t be adding to my balance, and I think of this account as my “real emergency” cash, i.e. cash I could have essentially right now if I needed it.
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Also remember that the more you chase rates, the more complicated your taxes are going to be. The more complicated they are, the more likely you’ll screw up and get audited.
Remember, most of the online banks do NOT send a 1099-INT out to you, they just email you to tell you it’s on their site.
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The benefits of rate chasing would be offset by the time (=money) it would take me to update and troubleshoot my Quicken with the changes. The more changes I make to Quicken, the harder it is for me to grok what’s going on in the piechart views. Maybe I need to spend more time reading a Quicken blog
However, the comments here have inspired me to reconsider my obstinance wrt to staying with one bank (Citi, which I started online banking with in 2000). Thanks for the post.
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Has anyone looked carefully at the amount of money lost during the transfer time? In other words, for a few days, while you’re doing the transfer from one bank to another, you’re making -no- interest on the money. Surely this eats away at the benefit of rate chasing, but I haven’t seen anyone do a comprehensive analysis. (I.e., one rate-chase transfer a year is very different than ten).
In terms of savings accounts, I use ING and WaMu. I pick which bank I’m going to deposit into based on who has the best current rate, but I don’t shift money back and forth to chase it.
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@PK
The tax situation is no different for someone who is chasing rates than it is for someone with only a single banking relationship. ALL institutions are required to inform customers of the availablity of 1099-INT statements (unless the amount is under $10), regardless of the delivery method. That means they either send out the tax statements directly, or send a notice when they are available online (in fact unless you CHOOSE the online delivery method they are required by law to furnish such material directly via US mail). After that it is a simple matter of recording all of the different amounts on a 1040 Schedule B, and you are done.
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Just wanted to echo Todd and say I’ve been very happy with Capital One in the last four months since I opened it.
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Does anyone know which of the online banks offer an atm card to access the savings account? It would be nice to be able to get to the money instantly in case of an emergency (especially for those that dont have a credit card as backup for emergencies).
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Thanks for both of the links, J.D.
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