It’s always a cat and mouse game to get the best interest rates. Don’t just believe whatever your local banker tells you. They’re getting paid to secure your investment! Just because they say that’s the best rate available doesn’t mean it is.
I surprised a bank employee who was trying to get me to get into an investment account when I told her how I’d calculated out how breaking a CD, taking a penalty, and moving to another bank would actually save me money. Since I was infact paying off a car loan, and investing in a new CD that would be several points higher than what they were offering. It pays to do your home work.
Sometimes you may have to go beyond your home town to get the best rates though! My local bank of choice has been Sun Trust partly because of the abundence of free ATMs, but mostly because at the time they were offering me a very attractive CD rate. Since then their numbers have reached almost painful lows. They were offering my something in the 2% range some months ago, and I told them no thanks.
I moved my cash investment to Capital One, and got a much more attractive 5.50% - since I’ve locked in my rate their tiers have dropped significantly too. I also had a nice High Yield Savings for 4% that has since took a tumble.
I still believe the best deals are online, and I’m even pondering an elaborate strategy of bouncing money from one account to the other when the return gets too low to bare it anymore.
The amount of time you plan to invest, and the amount of money you have typically effect the outcome of your interest rate. Gmac is looking promising, but no clue how long they’ll hold that position. I’m looking into an account with them as I’m no longer impressed with Capital One.
Savings Accounts
Capital One - 3 % * On balances over $10k (I’d just invest that amount in a CD for higher return..)
GMAC - 3.20 % (Starting at $500)
At first glance it doesn’t seem like a big deal, but if you read the fine print you’ll see that any investment under $10,000 will only garner you a 1.5% interest rate.. ouch.
Certificate Of Deposits
Again the differences aren’t apparent until you read the fine print, and compare the amount of time you have to invest, and amount of cash you have to put in to the rate you’ll be getting.
Capital One - 4.00% (Minimum $5,000 deposit, and a term of 5 years)
GMAC - 4.00% (Minimum of $500, and a term of 5 years)
Capital One’s highest rate is actually 4.75%, but you’ll have to invest for an additional 5 years to get that extra bit! Gmac has much better deals for shorter term CDs or people without a lot to invest.
12 months - 3.75%
18 months - 3.50%
2 years - 3.65%
If you noticed the fee tiers shrink a bit when you get into certain date ranges. I would presume that’s supposed to make you hand over your money for the longest amount of time since it offers the most attractive rate.
I will say Capital One has an interesting account that I haven’t tried yet. It offers a lower interest rate than their main account, but also gives you rewards for savings instead of spending. Though, since I never got anything in the way of rewards from their credit cards I asssumed their saving account would be the same way, and took a higher interest rate instead. If anybody has tried this account I’d love to hear how it went for you though!
Banks are being stingy with their interest rates, and you’re going to have to bum around for the deal that works best for you. If all of this seems like too much work you might want to go with a longer CD term if you don’t need your money for too long. Be careful in calculating though or you’ll have to pay a fee to get your funds. I think CDs are a good balance of stablity, and liquid funds personally. Some people need that lingering ‘penalty’ to keep them from spending up their savings on every whim! My Uncle comes to mind - He told his family they’d be having a cheap Christmas, and then he bought a boat.
Sounds like you take a very analytical approach to saving and investing. It’s not for the faint of heart but you might want to research credit card arbitrage. If you haven’t already, it follows similar principles that you’ve discussed here. I personally couldn’t do it, as it only takes one missed payment to lose money.
Hmm.. I recently read an article about taking out cash on credit cards, and popping it into CDs for the interest money. Is that what you’re talking about when you say ‘credit card arbitrage’?
It seems like a clever idea to me, but I don’t want to hurt my credit score with it. The person who was posting said they got an extra $1,000 a year, but I don’t think the reward is worth it. Especially if somebody were to be brave enough to invest borrowed money in a failing investment.
I’m very paranoid about debt - If I lose money I at least want it to belong to me! Whether this is helping or holding me back though is debatable.
January 15th, 2009 at 12:31 pm
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January 28th, 2009 at 11:57 am
Where are the best interest rates hiding?…
It’s always a cat and mouse game to get the best interest rates. Don’t just believe whatever your local banker tells you. They’re getting paid to secure your investment! Just…
Regretfully, the result is more often than not an thought that is so simple it would simply require a brief period of time to secure into position, but is regularly left out.
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