“But I earn $300/year from switching banks!”

July 3 19 Comments latest by Anand

A little comment exchange on yesterday’s post about not switching banks to get an extra 0.25% interest:

Mike:

I’m one of those rate-chasers, so [with $40k in emergency savings], I’ve consistently been earning anywhere between 0.65-0.85% higher than my operating money market account… That’s an extra $300/year in interest, which is definitely worth changing banks every 4-6 months for me.

My response:

Mike: If you were smart enough to sock away $40k in an emergency fund (which is really impressive, btw), I bet you’re smart enough to spend your time doing something better than earning $300 year — something that will sustainably let you earn much more. You’re only earning $0.82/day doing that!

How about spending the same time optimizing your asset allocation? That step alone is probably worth thousands per year. Or starting a side business? Have you considered reading 5 new books about personal finance, entrepreneurship, psychology, whatever? Or even spending those few hours with your family? I don’t know what you value, but in my eyes, any of those things would produce more value than $300/year…especially for someone who’s so far ahead of everyone else, like you are.

This is just my 2 cents…~1/40th of what you earned today (sorry, couldn’t resist).

Reminder: If it’s more convenient, you can get my blog posts sent to your email inbox.

19 Comments latest by Anand

Stupid account requires $10,000 for $25 bonus, and I mock them

July 2 13 Comments latest by Jim

Stupid marketing gimmick alert!

My friend Ian sent this to me today: A Capital One Account that gives you a $25 bonus…if you have $10,000 in it. (Plus, $10,000 minimum required to get the high interest.)

Wow!! Amazing!! Thank you Capital One!!

Listen up. If your bank account’s best incentive is $25 for locking up $10,000, your bank sucks. Not only could that money be invested, the very fact that this bank is trying to trick you into giving you high interest only if you keep $10,000 — if you don’t keep that amount in your account, your interest drops to 2.5% — shows you what kind of bank they are: A Big, Worthless Bank.

In fact, even the fact that they offer this exposes Capital One’s sad attempt at matching great online banks like ING and Emigrant Direct, who offer around 3% with no minimum balances. Pathetic.

Two things to be aware of:
1. If your bank offers you some fantastic rate but has a catch (minimum rate, first 6 months, etc), ignore the offer and ignore the bank
2. Don’t be a moronic rate jumper, who says, “ZOMG! HSBC/ETrade/Capital One is offering 3.25% compared to 3%! I better switch!!” Run the numbers and you’ll realize that, even on a balance of $5,000, that’s about $1 more per month. Find a great bank with no catches, that offers you great customer service, and stick with it — even if another bank offers a .25% higher interest rate.

You may want to read How I set up my financial accounts or check out the savings account I use, ING (great interest rate, simple website, no tricks/gimmicks).

13 Comments latest by Jim

Last day to buy book on irrational behavior, get $1,000 in free gas

June 30 3 Comments latest by Ramit Sethi

[Edit, 7/1/08: This contest is now closed.]

Today, at 11:59pm PST, is the last day to read my book review of NYT bestselling book Sway, send your receipt, and try to win $1,000 in free gas.

3 Comments latest by Ramit Sethi

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