On Chasing Interest

Which banks are offering the highest interest rates?! 1% on $5000? That’s $50 a year! That’s $4.17 cents a month! I can buy a latte with that! 😐

Yippee. Let’s be real. The interest you earn on your checking is not going to make you rich. In the above example – assuming the rate has averaged 1% AND assuming you’ve averaged $5000 and haven’t dipped into it – you’ve gotten $1000 – after 20 years.

I banked with someone once who gave me over $100 a year in cash back and interest income. I left them because I had concerns over banking security after getting my third check card in the mail after 11 months. That last time, they had actually approved a fraudulent charge. A charge made several thousand miles away when I had used my card to buy gas that morning in town. 🙁

It wasn’t worth it.

Are there other banks I can bank with who will give me more money than a mega bank that have better security than that local bank I was with? Sure. But for me, as everyone is different, I have to consider what I’m giving up. Being OCD, I have a tendency to fixate on certain things until I drive myself half insane.

ATM access isn’t a factor as I go to the ATM about once a year for a non-deposit related trip. But when I make a mobile deposit, for example, I want the money the next day. Not in 3 to 5 days like most online banks. That’s a deal breaker. It doesn’t matter if I don’t need the money right away and can wait a week. My brain will check three times a day, every day, to see if my money is there. So banking with a brick and mortar bank literally saves me time and mental space.

And when it comes to brick and mortar banks, my options are limited. It has to be a bank in town. It has to be a bank that’s not technologically deficient. The trade off for being happy with my bank, however, is lower interest. Oh well.

I’m not saying it’s not exciting. I was excited when I was at the small local bank and would get $7.50 in cash back. I was not excited when they took 2 weeks to give me my money back after they approved that fraudulent charge. That’s just ridiculous and a violation of Visa’s 0% zero liability policy. Freaking loop holes. It made me feel like they were trying to bribe me to bank there. And essentially, when banks offer you incentives and competitive interest rates, they are.

It’s okay, but let’s call it what it is: a bribe. And it’s important to keep in mind that the higher rates are often just to get you in the door and expire after a few months. Not to mention, rates fluctuate all the time. When i was with the small local bank, they gave me 2.5% interest on my savings if I met certain qualifications, but it was only up to a certain amount, after that it went down to 0.25% for anything over the threshold, and it expired after three months, and that 2.5% went down to 0.75%, and yes, I noticed.

I do conduct a small amount of business with an online bank. It’s probably technically unnecessary as temporary and instant replacement debit cards become more and more of the norm. But I keep the account for a couple reasons. For one, I’m trying the bank out because I’ve often played around with the idea of conducting all of my banking business online. The interest rate is far higher than my main bank, but if I really cared I would more money in the account.

The main reason and really only reason why I have the account is because there are no fees and I wanted an extra account in case there is fraud on my main account over the weekend or a holiday and I have plans and need money until I can get to the bank for a replacement card on Monday or Tuesday or whatever day it’ll be open after the holiday. That’s it. It gives me peace of mind. 🙂

It’s not about interest to me. Chasing interest, to me, is like chasing after nickels and dimes. Sure, they add up over the years, but come on. I saved up all my change when I did a cash budget over several months one year, and I didn’t even have $20! That’s not exciting. That will barely buy sushi. I thought about moving my car fund into the online bank, but then I looked at how much interest that would be after two years, and it wouldn’t even cover the tax. It wouldn’t even put a dent in it. If I want an extra $100 when I go buy my car, I can use my blow money. It doesn’t even seem worth the potential hassle. Maybe at 5%, in fact, YES at 5%, because that would cover tax, but that is nonexistent.

This is just my line of thinking, so whenever I see people getting excited over credit card points and 1% interest on a savings account, I don’t know, it just seems silly.

And it all is really silly when you think about it. Banks only offer an interest rate on the savings account to encourage you to keep money in the bank. However, what they give us has to be less than what they can get from their own investments, namely, loans. If the average interest rate on mortgages is low, guess what is also going to be low, the average return on savings accounts. If the rate on mortgages is higher, the rates will be higher (probably not much, but still.)

When I was first banking with Regions, the average rate on the savings accounts was 0.10%. You know what it was when I closed my account a few years ago? 0.01%. Horrible. They are both horrible numbers, but it was 10x higher just a few years before.

The bottom line is: When I go to spend thousands of dollars (gulp) on my next car, I’m not going to notice an extra $100. It’ll get lost in the transfer. If people want to be excited about $50, freaking be excited! Extra money is always exciting. But you’re not going to get rich off your savings at these rates.

Hi ^_^