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Are You a Rate Jumper? Why I Look for Better Rates

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interest rate jumping

I’m going to assume most of you here have bank accounts. I know there are many who don’t have bank accounts, but this article really doesn’t have anything to do with the bank-less generation. This has to do with bank accounts and how you manage your money. There is a process for those who have money in banks which I like to call “rate jumping.” The process is quite simple.

What is a Rate Jumper?

 

I would consider myself a rate jumper. A rate jumper is someone with a bank account moving their money to a different account in lieu of a better interest rate. This is quite common with savings accounts, but it also can be common with checking accounts. I got started with rate jumping a few years ago and I can say that I don’t mind it. The same thing could also be done by someone needing to take out a loan for a number of reasons. They might be able to find one rate available through their local bank but would be considered fairly high. But, they could try going through a Peer to Peer lending company like Prosper or Zopa Loans and get a considerably lower rate. The point is when you’re dealing with interest rates of any nature to do your research to find the best rate possible.

My first rate jump was when I was with a big bank. My money was making nothing, well almost nothing. My interest rate on my savings account was 0.05%. Big money, I know ;-). Since I have a little emergency fund sitting around, why not earn something for it?

I found a credit union which offered 0.80% on both their savings and checking accounts. I qualified for an account, so I set one up. Now, my money earns a little more money. Nothing like those days when you could score 4-5% with a savings account, but something is better than nothing.

Is Rate Jumping Convenient?

 

This lies in the eye of the beholder. With the expansion of online banks and electronic transfers, I find rate jumping pretty convenient. I handle it by applying for an account, transferring the minimum possible to get the account funded, then do electronic transfers to move the money over.

I never have to set foot in a bank branch or call customer service. I have moved my money around more times than I care to admit, but I don’t do all of it. I typically only move my emergency fund to different places. My business account and regular checking still are in the same locations.

Most people I talk to want to earn a little more money with their bank accounts, but feel rate jumping might be really inconvenient. I can say each time I moved money, it only took me about an hour to complete everything. This includes paperwork, sending information, and setting up my preferences and transfers. Not bad for a little extra money.

Is Rate Jumping Worth it?

 

As I noted above, I am a rate jumper, but I have calmed down as of late. The reason is the difference between some accounts and the account I have now is so minimal, that I don’t feel the need to move. Let me give you an example.

The last move I made was from my credit union savings account to Ally Bank. My credit union rate dropped to 0.75%, but Ally was offering 0.90%. Now, a higher number always looks more enticing and I bit for sure. The problem is the extra money is so small, it is pretty much unnoticeable.  Here is what I am talking about.

To make this easy, I’m going with $10,000 in my emergency fund. Having my money in my credit union earned me $75.28 in the first year with interest. Moving the $10,000 to Ally, I made $90.41. The difference of $15.16. Now, I made this change because I heard good things about Ally. They have not disappointed.

I am pretty sure banks know I am a rate jumper. I get new “promo” rates all of the time, but also see slightly higher rates from other banks. There are a few online savings accounts offering 0.95%, such as through Discover Bank, but moving my money into those banks is taking my time and the extra money is only about $5 per year. Not enough for my time.

I would say rate jumping can be worth it, but you don’t want to let it get out of hand. I did for some time, but I have reigned it back in. Moving my money around from bank to bank just for a few extra dollars a year ended up being not worth it. If I was jumping from a 0.10% to a 0.90%, or something of that factor, then I would do it. I just don’t see big rates anymore, or when I do, they are only offered for six months.

 

This begs the question from me to you. Are you a rate jumper? Do you look out for bigger rates and move your money when you find them? If not, what is holding you back from seeking a slightly higher payout?

 

Photo courtesy of: FutUndBeidl

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Grayson is the owner of Debt Roundup and Empowered Shopper. He also co-owns Sprout Wealth and Eyes on the Dollar. After going to battle and winning against consumer debt, he decided it was time to learn how to use credit wisely and grow his wealth. He discusses all things personal finance and is not afraid of being controversial. He also is a freelance writer and blog manager.

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16 Comments

  • I am definitely a rate jumper if and when it pays off for the time I have to spend. I am always up for a better deal =)

  • I never understand why some of my clients get emotionally invested with their bank or investment firm. If they are not willing to pay you the best rates, then it is not the best relationship for you. You have to look out for your family and finances first and you should not be concerned with an allegiance to an organization that doesn’t feel the same. I am all for rate jumping!

  • I remember when I first was introduced to online banking, my eyes about popped out of their sockets with how much higher their interest rates were compared to my previous big bank. I’ve switched and never looked back (even though, sadly, I’m watched my APYs steadily decrease through recent years).

  • Liz says:

    I am not a rate jumper mainly because I love my current Credit Union. The interest rates on their saving and checking accounts are really good and their customer service is great! However, I am sure that if they decide to decrease their interest rates I might considering “jumping” to another bank.

  • I’m a rate jumper but if it’s a very minor increase then I don’t go through the hassle. I might have done it anyway back in the day…but time is more precious nowadays. Plus Ally is pretty hard to beat.

  • Kim says:

    I am a jumper, but will usually only jump when there is a sign up bonus. I just opened an account with US bank that pays me $150 to keep a minimum of $1500 in there for 6 mos and pay three bills during that time. Like you, I only do this with savings that isn’t needing to be used right away. As long as interest is pretty piddly, I think it makes sense to take advantage of milking everything you can out of an account.

  • I’m a rate jumper as well. I had my savings in a big bank (BoA) and it was paying me next to nothing. Like you, I moved my savings to a credit union for close to 0.9% APY. I also closed my account with BoA and opened a new one with a bank that’s giving me $20 a month for having direct deposit.

    If I find a better deal, I’m jumping again.

  • Yes and no. I would absolutely do it at least once to move am essentially 0% rate to something significantly higher. After that, it would depend on the rate being high enough to make it worth my time, like you said, or I was really unhappy with the new bank.

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