Opening a Chase checking account for the bonus

I hope everyone had a lovely weekend! It was absolutely gorgeous here, a great start to spring! :)

Ever since I moved, I’ve been getting the occasional offer to open a Chase checking account and get a free $125. That’s not a bad deal, but I was reasonably busy with moving, settling in, etc. and I didn’t have the energy to sort out the fine print, so I felt it was better to ignore it. I missed one offer back in December/January and then a couple weeks ago, I got one via email for a $200 bonus! So of course I jumped on that pretty quickly.

Some details on the deal:

  • I have 60 calendar days to deposit at least $100 and then the bonus will be deposited within 10 business days.
  • Offer has an expiration date.
  • Offer is not available to those with existing Chase checking accounts.
  • Offer is not available to those who closed a Chase checking account within the last 90 days or if you closed your last Chase checking account with a negative balance.
  • The account to be opened is a Chase Total Checking account.
  • One can only receive one checking account-related bonus per calendar year.
  • Bonus is considered interest.
  • The account must be kept open for six months or the bonus will be lost.

The catch? The account has fees, unless you follow their rules, which is exactly why I left banks for credit unions several years ago. Here are the options to avoid the monthly service fee:

  1. Receive a direct deposit of $500 or more in the checking account.
  2. Have a daily balance of $5,000 or more across your Chase checking, savings, and other accounts.
  3. Have a daily balance of $1,500 or more in the checking account.

The direct deposit one is annoying since I have my cash flow set up nicely, so Option #1 is out. I am perfectly happy with my current savings accounts structure and Chase has even lousier savings account rates than my online bank does, so Option #2 is out.

That leaves Option #3, which makes this entire thing like locking $1,500 up in a 6-month CD with an early withdrawal penalty of 100% of the interest earnings. How much would I earn on $1,500 with Ally in six months? About $7, assuming that their interest rates don’t go any lower. So $200 is $193 more in those 6 months than I would otherwise get and then I can close the account and transfer the money back to my online bank.

I was trying to decide what to do with the extra $200 and came up with a few options:

  1. Make a principal only payment on the mortgage.
  2. Leave it in the Chase checking account until I close it out.
  3. Transfer it to my online savings account.

I ended up going with option #3 because if I had left the money in my online savings account, it would have been earning interest which I would have left there. I was a bit of a dumbo and transferred the $200 to my online savings account on the last business day in March, which means my March net worth update doesn’t reflect the $200 bonus since the money is off in the space between banks until April 1st.

Readers, what have you done lately to get a bit more yield out of your savings?

Debating Ditching “High Interest” Savings Accounts

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:

  1. Higher interest rates than at your brick and mortar bank or credit union
  2. Easy to open sub-accounts
  3. 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?

Rewards Checking Account Math

Back in July, I debated whether or not to use my credit union’s rewards checking account. I’ve been using it for a few months now for my emergency fund and some other small savings accounts.

So how exactly do these accounts work? Mine works as follows:

  • I earn Q% on the first $M in the account.
  • I earn H% on any funds above $M in the account.
  • I need at least one ACH transaction in the qualifying period and D debit card transactions to get the qualify Q% and H% rates. In my calculations, I will assume that this happens.

At first I thought it only made sense to keep $M of savings in this account, but then I started looking at the math.

These calculations assume that the alternative to placing your savings in the rewards checking account is in an online savings account earning 1.00% or S%.

The base formula for calculating how much you should keep in the rewards checking account beyond $M is:

(i) $M x Q% + $X x H% = ($M + $X) x S%

If we solve for $X, we get:

(ii) $X = $M x (Q% – S%) / (S% – H%)

So to maximize the interest on your savings, you should keep $M + $X of savings in your rewards checking account.

I was surprised when I ran the numbers on my account – $X actually turned out to be more than double $M. But I did the math for both sides of (i) and it was correct.

Rewards Checking Account

My credit union offers a rewards checking account that is earning a reasonable rate. (Where reasonable rate = a higher rate than their high interest savings account)

I’m debating moving the contents of my savings account into there and then keeping track of the subaccounts (checking versus savings) in a spreadsheet to take advantage of the higher interest rate. I would earn about $18-25 more per month in interest with all of the funds in my checking account.

I don’t worry about the accounting perspective – I have a good system in place for that. I don’t worry about meeting the minimum number of debit transactions per month – I eat out for lunch most days, which covers that easily.

So then what do I worry about? I worry about having $25,000 sitting in my checking account and being more open to fraud than having $3,000-$5,000 in my checking account and $20,000 in my savings account.

Readers, do you use a rewards checking account? Did you have this same worry? How did you overcome it?