May 21, 2010

Watch Your Savings Account Rates

I haven't checked the rate on our savings accounts lately.   I just checked them and found that our savings account at Chase was only paying 0.5% interest.   I knew that our rate wasn't the greatest but it used to be a lot more competitive.   We originally banked with Wamu and a couple years ago our rate was 4% which was great.   The reason Wamu's rate was that good was they were nearing failure and trying to get new accounts or hang onto those they had.   When Wamu was bought out by Chase our rates dropped and then kept dropping.   Any way, long story short Chase has cut the rates so they are not nearly as competitive as they were a little while ago.  

I moved the bunk of our savings over to ING Direct.  I also have an ING account which I've had for many years now.   ING is currently paying 1.1% in my savings account which is 0.6% better than the rate at Chase.    So the ING rate is over double what we've been getting at Chase.

I moved $40,000 from Chase to ING.   At Chase that $40,000 would get us just $200 a year in interest.  At ING we'll get $440.  That means moving the money to ING from Chase will net us an extra $240 a year (before taxes). The entire process of moving the money including discussing it with my wife to make sure we both agreed on the idea took no more than 20 minutes.

$240 is not bad for 20 minutes of my time.

Now I'm not going to act as if this is an amazing discovery or anything special.   I really should have done this earlier of course.   Better late than never.   The point here is just to keep your eye on your savings rates so you notice if one of them drops a ways.   Its easy to get occupied with life and not even notice if your rate drops. 

The more you have in savings the more the interest rates matter.   If you have very little in a savings account then don't sweat it.  If  I only had $50 in savings then it really wouldn't matter if they paid me 1.2% or 0.2%.  But since we've got a large cash reserve, the little differences in interest add up to quite a bit. 

Also, I could make a little more money by opening a new account with one of the banks offering 1.3% or 1.4%.   At 1.4% I'd be getting another $120 over what ING is paying.   However those highest rates are usually 'teaser' introductory rates that tend to go down over time.   ING has consistently competitive rates.  
As long as my interest rate is fairly competitive and consistently high I'm happy with ING.

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