I have a confession to make. I am no longer sold on the merits of high-interest savings accounts.
The main draws of high interest savings accounts are:
- Higher interest rates than at your brick and mortar bank or credit union
- Easy to open sub-accounts
- More difficult to access your money (can take 2-3 *business* days)
Ally ‘s currently posted rate is 0.89% and this fluctuates constantly. ING Direct’s rate is currently 0.80%. The institution where I have my checking account is lower than that (somewhere around 0.55%), but how much do we and should we pay for convenience/annoyance?
For example, I have a rewards checking account in which I keep a certain level of savings. I use a spreadsheet to track which “sub-account” in my checking account has what balance and gets what amount of interest each month. I’ve done the calculation and I would actually earn more interest by keeping about $30,000 in this checking savings account than in one of Ally’s accounts.
My local institution also makes it super easy to open sub-accounts online and I can even rename them, just like I can with Ally or ING! It is not annoying to access the money – it transfer instantly to my checking account.
For a lot of people, having their savings accounts at an institution separate from their checking account is a good thing. But for me? It’s just plain annoying. It makes paying the visa bill for vacations annoying – I can’t just transfer money from my savings account to my checking account and write a check. Instead, I wait 2-3 *business* days for the funds to show up in my checking account. I’m not any more liable to spend the money if it’s at my local institution than I am with it off at Ally or ING.
I’ve already transitioned my vacation savings account to my local institution. (I did this a few months ago.) It never builds up higher than $3,000 before I take a vacation, so dealing with annoyances for small amounts of change and interest is a huge pain. I’m debating (er, strongly considering) doing this with my vehicle replacement (2020) and house down payment funds as well.
Readers, are you with me on ditching high-interest saving accounts?