Are You a Rate Jumper? Why I Look for Better Rates
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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 that offer higher yields, 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