Author Topic: Money sitting around in savings accounts  (Read 3216 times)

WootWoot

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Money sitting around in savings accounts
« on: November 14, 2017, 03:45:05 PM »
As I make my way through these forums, and begin to learn about investments, taking more of an interest in them than I've ever had in my life, I'm discovering I've just been letting some things ride along, to my detriment. So I'm questioning some decisions I've made in the past.

1.  Local banks etc.: I have a checking account (no minimum balance, no interest) at NBT Bank. I've had it for years. I used to cash my paychecks there back in the day when direct deposit was the exception and not the rule. It was also located on my way home from work, so it was easy to access. There's still a branch located near my workplace. I mostly use it for a) Pay Pal transactions; and 2) some check cashing (for instance, I redeemed a EE bond recently. No bank would do this unless I had an account there).

I also have a credit union account (Pentagon Federal). This goes back more than 30 years, when I worked for a local army facility in a civilian capacity. I've had my checking account there for years, plus a savings account. I always got the impression that credit unions were better than Evil Banks, and I never really had any issues with this one (even though it's changed hands twice). I pay all my bills from the checking account, I do occasionally cash checks there, groceries etc. get paid from there because my paycheck gets deposited there. Also, from there money is automatically transferred to:

Capital One 360. I've got several accounts there (because you can make these little mini-accounts). One is a checking account with a debit card w/no foreign transaction fees (I opened this for when I traveled to England).  One is for a new car, when I need it (just made this into a money market account for more interest). One is for recurring expenses (such as car insurance, birthday gifts, etc.). One is just called "savings bond," where I dumped some of the money from last year's EE bond. This is a sort of emergency fund. I say sort of because I've got an equal amount ($5K) in my PenFed savings, which is earning...less than 1%!

So today I'm reading around on here about what to do with $5K, and I followed some links to this: http://www.magnifymoney.com/blog/earning-interest/best-online-savings-accounts275921001/. And the other day I posted about why there are so many variations on how much of an emergency fund one should have. We don't own a home, so the furnace dying won't be a problem. As I mentioned, I've got money for another car. For job loss, unless it was some sort of catastrophe, I'd rely on UC benefits initially.

I should mention: one thing I don't do is put money aside for clothing. I never have. I've always taken it out of my savings account (I know, I know...).  I've often received clothing as gifts at birthdays and holidays. However, I'll grant that a clothing fund is probably a good idea.

OK, so:

1. Do I need all these bank accounts?

2. Do I actually need a local account (for those occasions when I need to cash a  check or bond), as opposed to an online account?

3.  Should I consolidate any of the above?

4. Should I go to, say, Synchrony, with my PenFed savings since it is going to earn more interest?

Please be patient with me; I am still learning and I do find a lot of this quite bewildering. Sometimes I feel like Alice down the rabbit hole.

Thank you!

seattlecyclone

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Re: Money sitting around in savings accounts
« Reply #1 on: November 14, 2017, 04:02:47 PM »
1. Do I need all these bank accounts?

Probably not. I struggle with this problem myself, opening accounts for some good reason and then keeping them around long after that reason expires because it seems like more hassle to cancel it than not. But over the long term there's some value to keeping things simple, with a minimal number of accounts to worry about.

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2. Do I actually need a local account (for those occasions when I need to cash a  check or bond), as opposed to an online account?

I find it useful to have one account at a bank with a physical branch near me. For example, they were able to issue me a cashier's check that I needed for a down payment on a house. They were also able to cash a weird-looking check that I got as a mail-in rebate, and I couldn't cash it by phone. I rarely need to get this type of service from a bank branch, but when I do it's nice to have it. Losing out on some 0.5% interest (or whatever) on the relatively small amount I keep in that checking account seems worthwhile.

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3.  Should I consolidate any of the above?

Maybe! Depends on how much you value the long-term simplicity from having fewer accounts, compared to the short-term pain of switching auto-payments and things from the account(s) you plan to close.

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4. Should I go to, say, Synchrony, with my PenFed savings since it is going to earn more interest?

Maybe! The highest-paying online savings account rarely stays that way for long. EmigrantDirect had the title for a while, then ING Direct passed them up, and others have come and gone since. If you're not prepared to switch accounts every year when the current leader lowers their rate a bit and a new upstart comes along with a higher one, you might just prefer to put your money in your existing Capital One 360 account.

I personally don't even use savings accounts anymore now that the interest even at the best account is barely over 1%. I don't keep enough money in cash for that low of an interest amount to be worth the hassle of monitoring account balances and transferring back and forth from checking as needed to maximize the savings account interest while also not overdrafting the checking account. Instead I just keep the checking account around $5-10k and invest the excess when I exceed that amount.

I realize that many people feel uncomfortable with this little cash on hand. If that describes you, a savings account or CD is probably prudent.

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Re: Money sitting around in savings accounts
« Reply #2 on: November 15, 2017, 01:32:56 AM »
I think @seattlecyclone responded well.

Personally I like having one local bank branch that I can walk into, with 3 months spending cash available there at a moments notice. A second account with an online bank that provides a slightly higher interest rate (but nothing extravagant so a minimal amount is there). And third an online account for investments in ETF, funds, stocks, bonds.

Indexer

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Re: Money sitting around in savings accounts
« Reply #3 on: November 15, 2017, 07:52:35 AM »
I have 2 banking relationships. I think that is ideal for me. One online with great everything, and one local for when I need a physical branch.

1. Capital One 360. You already know them. Great for paying bills, no fees, decent(but not best) interest on savings account. Like others have said the best rate keeps moving. I got tired of moving so I keep my very short term emergency money(1 month of expenses) at Capital One.

2. Big Evil Bank. Yes, one of those. Oh I use to hate them, but they gave me an amazing low interest rate on my mortgage. Having the mortgage nets me a free checking account. I use that checking account exclusively for paying the mortgage, and then I keep as little there as possible. However, they have branches everywhere so it's good if I need to deposit cash, get a notary, or if I need a cashiers check.

I keep the rest of my emergency money(5 months) at Vanguard in short term bonds. My "I'll eventually need a newer used car" fund is also in short term bonds. They pay better than any savings account, and the money can be transferred to my bank in 3 business days.

Car Jack

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Re: Money sitting around in savings accounts
« Reply #4 on: November 15, 2017, 08:39:04 AM »
You can make this as complicated as you'd like.  What I do:

I use my credit union as my home base.  I walk right past it during my lunchtime walk from work every day.  I can cash savings bonds.  All my bill paying is done from them.  They refund all overdraft charges, no question.  Free ATM.  Savings account pays 5.12% on the first $1000.  No fee (as in no fee) checking.  Easy, well set up website.  Transfers to other institutions are easy as well.

I have a number of other accounts.  Redneck Bank for the 1.5% Megamoney account up to $35k.  Ally for the rest above $35k (I pay 2 tuitions a year....about $115k, so need money ready to go).  I also open bank accounts to churn the bonuses.  Citi, Discover, Cap One 360.  All have been closed once the period expires.

Easy transfer to brokerage accounts (Fidelity, Schwab, TDAmeritrade).

Low car loan rates at the credit union if I want to free up cash for some reason (or if I decide that it's time to go buy a Lamborghini or something).

So it's sort of like home base at the credit union with satellite institutions around it.

NoStacheOhio

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Re: Money sitting around in savings accounts
« Reply #5 on: November 15, 2017, 08:51:48 AM »

2. Big Evil Bank. Yes, one of those. Oh I use to hate them, but they gave me an amazing low interest rate on my mortgage. Having the mortgage nets me a free checking account. I use that checking account exclusively for paying the mortgage, and then I keep as little there as possible. However, they have branches everywhere so it's good if I need to deposit cash, get a notary, or if I need a cashiers check.


I draw the line at medium-sized evil banks. There are still some large regional players in most places that aren't Chase, WF or BOA. We use Key and Fifth-Third. They both suck a little, but I don't feel like there's much choice.

WootWoot

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Re: Money sitting around in savings accounts
« Reply #6 on: November 15, 2017, 01:04:03 PM »
That's a great savings rate, I must say.

I am doing a bit of shopping around for other credit unions. I did find one that will cash savings bonds. I have no idea why PenFed would not.

Thanks, all, for your input and help!

I'll be doing a lot of thinking. I don't want things to get more complex than they are now!

You can make this as complicated as you'd like.  What I do:

I use my credit union as my home base.  I walk right past it during my lunchtime walk from work every day.  I can cash savings bonds.  All my bill paying is done from them.  They refund all overdraft charges, no question.  Free ATM.  Savings account pays 5.12% on the first $1000.  No fee (as in no fee) checking.  Easy, well set up website.  Transfers to other institutions are easy as well.

I have a number of other accounts.  Redneck Bank for the 1.5% Megamoney account up to $35k.  Ally for the rest above $35k (I pay 2 tuitions a year....about $115k, so need money ready to go).  I also open bank accounts to churn the bonuses.  Citi, Discover, Cap One 360.  All have been closed once the period expires.

Easy transfer to brokerage accounts (Fidelity, Schwab, TDAmeritrade).

Low car loan rates at the credit union if I want to free up cash for some reason (or if I decide that it's time to go buy a Lamborghini or something).

So it's sort of like home base at the credit union with satellite institutions around it.

WootWoot

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Re: Money sitting around in savings accounts
« Reply #7 on: November 30, 2017, 01:37:16 PM »
Does your credit union allow members from other states, regions, etc.? May I ask who it is? PM me if you like.

Thanks!


You can make this as complicated as you'd like.  What I do:

I use my credit union as my home base.  I walk right past it during my lunchtime walk from work every day.  I can cash savings bonds.  All my bill paying is done from them.  They refund all overdraft charges, no question.  Free ATM.  Savings account pays 5.12% on the first $1000.  No fee (as in no fee) checking.  Easy, well set up website.  Transfers to other institutions are easy as well.

I have a number of other accounts.  Redneck Bank for the 1.5% Megamoney account up to $35k.  Ally for the rest above $35k (I pay 2 tuitions a year....about $115k, so need money ready to go).  I also open bank accounts to churn the bonuses.  Citi, Discover, Cap One 360.  All have been closed once the period expires.

Easy transfer to brokerage accounts (Fidelity, Schwab, TDAmeritrade).

Low car loan rates at the credit union if I want to free up cash for some reason (or if I decide that it's time to go buy a Lamborghini or something).

So it's sort of like home base at the credit union with satellite institutions around it.

Systems101

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Re: Money sitting around in savings accounts
« Reply #8 on: November 30, 2017, 02:27:15 PM »
Quote
2. Do I actually need a local account (for those occasions when I need to cash a  check or bond), as opposed to an online account?

I find it useful to have one account at a bank with a physical branch near me. For example, they were able to issue me a cashier's check that I needed for a down payment on a house. They were also able to cash a weird-looking check that I got as a mail-in rebate, and I couldn't cash it by phone. I rarely need to get this type of service from a bank branch, but when I do it's nice to have it. Losing out on some 0.5% interest (or whatever) on the relatively small amount I keep in that checking account seems worthwhile.

There are other solutions where you don't need to compromise (and if you don't want to juggle the many-institution thing)

I use two credit unions, neither of which is anywhere near me, but both of which are members of the Co-op network.  (see https://co-opcreditunions.org/locator/ ).  That gives me "local" branches all over the US, including one a few miles from my house for the rare times I need it.  One of them has very good money market rates, for the bit of cash that I have moving around, which gives me one of the best interest rates in the country.

Both credit unions are also members of Allpoint (see http://www.allpointnetwork.com/ ), which gives me 55,000+ fee free ATMS across the country... including many big stores (including, but certainly not limited to Target), and one ATM mere hundreds of feet from my house.

One also allow members from basically any location.  (The other is local from a previous living area)

There are at least a few that are flexible in how to get membership.  Some of those include:
Alliant Federal Credit Union
Quorum Federal Credit Union
...and if you are in an IT company, also check:
First Tech Federal Credit Union

If I recall correctly from previous research all 3 of those are both Allpoint and Co-Op.

seattlecyclone

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Re: Money sitting around in savings accounts
« Reply #9 on: November 30, 2017, 03:58:12 PM »
Quote
2. Do I actually need a local account (for those occasions when I need to cash a  check or bond), as opposed to an online account?

I find it useful to have one account at a bank with a physical branch near me. For example, they were able to issue me a cashier's check that I needed for a down payment on a house. They were also able to cash a weird-looking check that I got as a mail-in rebate, and I couldn't cash it by phone. I rarely need to get this type of service from a bank branch, but when I do it's nice to have it. Losing out on some 0.5% interest (or whatever) on the relatively small amount I keep in that checking account seems worthwhile.

There are other solutions where you don't need to compromise (and if you don't want to juggle the many-institution thing)

Where's the "compromise"? My current checking account pays me 0.01% interest, essentially nothing. I looked at First Tech and they would pay 0.05%, also essentially nothing. I'm not going to go to the trouble of switching banks for 0.04%.