Has anyone given up on rewards checking?

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SteelyEyed
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Has anyone given up on rewards checking?

Post by SteelyEyed »

Hi everybody,

I have been using rewards checking for about two years now. I even opened an account at a second bank. The interest rates have fallen (as they have everywhere) and I'm just about ready to stop going through the hassle of making all of the small purchases in order to satisfy the requirements. I use checking accounts that came with attached savings accounts that earned a lower, but still above market, rate and recently both of the savings accounts went below the 0.95% available in an Ally MMA. I moved all of the cash from the savings accounts to Ally. I am debating closing the checking accounts. I currently get 2% on a max of $25,000 in one account and 1.5% on a max of $50,000 in the other.

Between these two accounts and Ally, I have a lot of cash because I may upgrade for a new home in about two to three years. I would combine the cash with the proceeds from the existing home to purchase the new home without debt. I have resisted holding everything at Ally due to the lower interest rates and I have resisted bond funds because of the interest rate risk.

Are these accounts still worth it? Should I move it all to Ally and forget about it? I'm not sure I'd want that much in a CD either, due to the small possibility of not having the funds when I go to buy the home. Should I just suck it up and buy VG limited term tax-exempt or short-term corporate bond funds? I have been in the 28% federal bracket up until this year, and it looks like I will be low in the 33% bracket and have some AMT liability as well. My state bracket is 5%, but only on wage income, not investment income. Am I over-thinking this?
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nisiprius
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Re: Has anyone given up on rewards checking?

Post by nisiprius »

(Shrug) I thought long and hard before opening the account, because among other things I did not want to close the account we've had at "our" bank for thirty years.

I determined that I could live pretty easily with the restrictions by making one simple change in my routine: using the new account as our "supermarket" account. That, in turn is because my retirement fitness plan calls for buying at least half of our groceries on foot, there being a supermarket 1/4 mile from our house. So I buy groceries at least three times a week. That pretty well takes care of the POS card swipes. And an automatic transfer from my ING Direct account into the rewards checking account takes care of that requirement. And I paid $20 for a wad of checks which I haven't used them up. So, having readjusted my life to take advantage of the account, there's some inertia that keeps me there.

Is there anything to overcome that inertia? No. Although the rate is no longer significantly better than anything else, it's still marginally better than ING Direct's. It's way better than the checking account at "our" bank which pays essentially zero interest. The most competitive local bank does have some kind of super-duper-checking/savings account that pays 1.1% but you need to maintain a minimum $10,000 balance to qualify for the rate.

In short, I don't have any compelling reasons to stay with the rewards checking but there's nothing tempting me to leave.
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tfb
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Re: Has anyone given up on rewards checking?

Post by tfb »

SteelyEyed wrote:I am debating closing the checking accounts. I currently get 2% on a max of $25,000 in one account and 1.5% on a max of $50,000 in the other.
Both accounts give you extra $250/yr over the alternative of a 1% savings account. $25k * (2% - 1%) = $250. $50k * (1.5% - 1%) = $250. There are a few more efficient ways to earn extra $250/yr without worrying about using your debit card 10 times per month or tying as much principal. Mango prepaid is one. BBVA savings is another. I'm currently working on a 3rd one.
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john94549
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Re: Has anyone given up on rewards checking?

Post by john94549 »

I remember when Rewards Checking first appeared. The interest rates were quite tasty. However, the balance caps would have required keeping track of too much. I recall posters at Ken Tumin's blog semi-bragging about how they had well into the six figures in rewards accounts, spread out all over the country. I mean, really? The thought of carrying around an additional ten pieces of plastic, and then trying to use them all, and don't forget the direct deposit from here to there, and there to ...

For those who can manage these types of accounts, my congratulations.

I have to come down on the side of "tfb". There must be an easier way to play.
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happymob
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Re: Has anyone given up on rewards checking?

Post by happymob »

We're still at 2.5% on the first 25,000, so it is a pretty good deal, and we try to keep our balance around the cutoff.
kaneohe
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Re: Has anyone given up on rewards checking?

Post by kaneohe »

tfb wrote:
SteelyEyed wrote: BBVA savings is another.
What has been your experience w/ this? Sounds interesting but there are some scary sounding reviews of the bank's operations at the local level on the internet (by angry customers so don't know how to weight their input).
Last edited by kaneohe on Sat Dec 01, 2012 6:03 pm, edited 1 time in total.
john94549
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Re: Has anyone given up on rewards checking?

Post by john94549 »

Stretching for yield on what are essentially garden-variety savings account balances comes up here over, and over, and over.

As a "hot money" rate-chaser myself, I applaud anyone who can squeeze even one more dollar from his or her cash.

But, at some point, one has to ask whether it's worth the effort.

For example, if you seek to "open" a modestly-higher-yielding account (just inquire, mind you), will that result in a "hard inquiry" on your credit? Or, perhaps, you inquire at five or ten institutions? I know it's weird, but for some reason financial institutions want to know YOUR creditworthiness before they accept your deposit. Some also want a photocopy of your driver's license and passport. I added up the marginal cost of opening a new savings account once, and figured (with copy charges, mail, etc.), it fell into the "never mind" category.
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tfb
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Re: Has anyone given up on rewards checking?

Post by tfb »

kaneohe wrote:
tfb wrote:BBVA savings is another.
What has been your experience w/ this? Sounds interesting but there are some scary sounding reviews of the bank's operations at the local level on the internet.
It took some time to set up because I didn't know this bank hasn't embraced dealing with customers completely online yet. Now it's just running on autopilot. $1,500 dead money holds down the checking account for the fee waiver. $1,050 arrives in checking every month automatically via scheduled deposit from my main checking account. A week later BBVA automatically transfers them to two savings accounts. I received the promised $100 bonus for opening account online and using their online bill pay 3 times. The bonus posted in about two weeks after I satisfied the requirement.

So far so good, I would say. Of course the match bonus won't post until a year later. I don't worry about it. Employees in the branch are very friendly. They made me feel like I'm the only customer. The banker who helped me with account opening took me to the branch manager's office. The branch manager gave me his direct line.

If you actually use the checking account as your main checking account you may run into problems you see reported on the Internet. For the way I'm using it, I don't anticipate any problems.

If you are used to the state-of-the-art online technology at mega banks like Citibank or Chase (I'm comparing my recent experience with opening accounts at both), you need some patience with BBVA if you are trying to do everything online. If you don't care about the $100 bonus, I would suggest opening all three accounts at the same time in a branch. It will go much faster.
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AlohaJoe
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Re: Has anyone given up on rewards checking?

Post by AlohaJoe »

john94549 wrote:But, at some point, one has to ask whether it's worth the effort.
Don't forget the other costs:

- Opportunity cost. What would you have been doing if you hadn't spend these minutes/hours/day researching rewards checking, making comparisons, asking questions, sifting through the answers? Are those other activities more rewarding from a happiness or family point of view?

- Research has shown that we have a limited amount of will-power and decision making capacity. How much does it cost to spend some of that fixed capital on these questions? (i.e. what other decisions later on do you make poorly because you're then suffering from decision fatigue?)
Auream
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Re: Has anyone given up on rewards checking?

Post by Auream »

Still pretty happy with my 3.25% rate on up to $25,000. Local credit union with restrictive membership though, which probably actually keeps it alive (limits rate-chasers).
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Re: Has anyone given up on rewards checking?

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (credit cards).
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letsgobobby
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Re: Has anyone given up on rewards checking?

Post by letsgobobby »

we keep about $35k in two accounts earning 2.25%, and it doesn't take much effort to make a total of 24 transactions to earn the $400 or so that we earn over the course of the year. It is a better hourly wage than my day job.
Default User BR
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Re: Has anyone given up on rewards checking?

Post by Default User BR »

Even Inner Cheap Guy couldn't get excited by rewards checking. Too much effort.


Brian
john94549
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Re: Has anyone given up on rewards checking?

Post by john94549 »

Default User BR wrote: "Inner Cheap Guy"
My goodness, you described me perfectly. Don't tell my wife.
tj
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Re: Has anyone given up on rewards checking?

Post by tj »

tfb wrote:
SteelyEyed wrote:I am debating closing the checking accounts. I currently get 2% on a max of $25,000 in one account and 1.5% on a max of $50,000 in the other.
Both accounts give you extra $250/yr over the alternative of a 1% savings account. $25k * (2% - 1%) = $250. $50k * (1.5% - 1%) = $250. There are a few more efficient ways to earn extra $250/yr without worrying about using your debit card 10 times per month or tying as much principal. Mango prepaid is one. BBVA savings is another. I'm currently working on a 3rd one.

Here's another one:

https://www.mycontrolcard.com/features.shtml#savings
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SteelyEyed
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Re: Has anyone given up on rewards checking?

Post by SteelyEyed »

Thanks for the responses everyone.

Nisi, yes I will probably just stick with it for the time being. The rates are comparatively good. It requires a little tracking, but I use the two cards to pay all of my online bills and fulfill the remaining requirements with a few small purchases. I don't use them at the grocery store or gas station because I use my PenFed 5%/3% rewards credit card there.

tfb, thanks, I will look into those. I just wish that the caps were not so small.

tj, thanks, that is another one to consider.

I still need something to do with the large amount of cash on hand. I rather do not like holding so much, but that is the environment we are in, I suppose.
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SteelyEyed
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Re: Has anyone given up on rewards checking?

Post by SteelyEyed »

tfb wrote:There are a few more efficient ways to earn extra $250/yr without worrying about using your debit card 10 times per month or tying as much principal. Mango prepaid is one. BBVA savings is another. I'm currently working on a 3rd one.
tfb,

Can I open accounts (Mango/Unionplus/BBVA) in my name and in my wife's name and fund them from the same source? This could double the benefit.

My tax rate is getting higher, so all of this interest will be taxed at 33% (35% depending on AMT, I think). Perhaps the remainder should be to tax-exempt funds. Also, I suppose that I can buy some I-bonds.
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tfb
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Re: Has anyone given up on rewards checking?

Post by tfb »

SteelyEyed wrote:Can I open accounts (Mango/Unionplus/BBVA) in my name and in my wife's name and fund them from the same source? This could double the benefit.
Yes.
SteelyEyed wrote:My tax rate is getting higher, so all of this interest will be taxed at 33% (35% depending on AMT, I think). Perhaps the remainder should be to tax-exempt funds. Also, I suppose that I can buy some I-bonds.
Rewards checking accounts are fully taxable as well. 4-5% taxable is better than I bonds.
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SteelyEyed
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Re: Has anyone given up on rewards checking?

Post by SteelyEyed »

tfb wrote:
SteelyEyed wrote:Can I open accounts (Mango/Unionplus/BBVA) in my name and in my wife's name and fund them from the same source? This could double the benefit.
Yes.
Thanks, I'll do that.
tfb wrote:
SteelyEyed wrote:My tax rate is getting higher, so all of this interest will be taxed at 33% (35% depending on AMT, I think). Perhaps the remainder should be to tax-exempt funds. Also, I suppose that I can buy some I-bonds.
Rewards checking accounts are fully taxable as well. 4-5% taxable is better than I bonds.
I agree. The excess needs somewhere to go though, so I'll still use them.
sscritic
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Re: Has anyone given up on rewards checking?

Post by sscritic »

So who offers tax-exempt rewards checking? This could be the next big think for cities and states to finance their operations. Pay 1/2% tax free in a checking account rather than 2.5 - 3% in the open market.
armeliusc
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Re: Has anyone given up on rewards checking?

Post by armeliusc »

tfb wrote:
SteelyEyed wrote:I am debating closing the checking accounts. I currently get 2% on a max of $25,000 in one account and 1.5% on a max of $50,000 in the other.
Both accounts give you extra $250/yr over the alternative of a 1% savings account. $25k * (2% - 1%) = $250. $50k * (1.5% - 1%) = $250. There are a few more efficient ways to earn extra $250/yr without worrying about using your debit card 10 times per month or tying as much principal. Mango prepaid is one. ...
It seems that Mango now gives 6% APY just for saving account with direct deposit. Would that not be somewhat simpler than having to deal with the prepaid card ? For example, 1) split a small amount of the paycheck to Mango for direct deposit, 2). add initial amount via ACH push to Mango to get quickly to the limit ($5000), 3) withdraw money from Mango account as needed (.e.g. back to the primary checking account). Or am I missing something ?

AC
tj
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Re: Has anyone given up on rewards checking?

Post by tj »

armeliusc wrote:
tfb wrote:
SteelyEyed wrote:I am debating closing the checking accounts. I currently get 2% on a max of $25,000 in one account and 1.5% on a max of $50,000 in the other.
Both accounts give you extra $250/yr over the alternative of a 1% savings account. $25k * (2% - 1%) = $250. $50k * (1.5% - 1%) = $250. There are a few more efficient ways to earn extra $250/yr without worrying about using your debit card 10 times per month or tying as much principal. Mango prepaid is one. ...
It seems that Mango now gives 6% APY just for saving account with direct deposit. Would that not be somewhat simpler than having to deal with the prepaid card ? For example, 1) split a small amount of the paycheck to Mango for direct deposit, 2). add initial amount via ACH push to Mango to get quickly to the limit ($5000), 3) withdraw money from Mango account as needed (.e.g. back to the primary checking account). Or am I missing something ?

AC
Can you even have a savings account there without the prepaid card?
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tfb
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Re: Has anyone given up on rewards checking?

Post by tfb »

armeliusc wrote:3) withdraw money from Mango account as needed (.e.g. back to the primary checking account). Or am I missing something ?
There is no ACH out. If by withdrawing you mean withdrawing cash using the card, that's exactly what you would do.
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armeliusc
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Re: Has anyone given up on rewards checking?

Post by armeliusc »

tfb wrote:
armeliusc wrote:3) withdraw money from Mango account as needed (.e.g. back to the primary checking account). Or am I missing something ?
There is no ACH out. If by withdrawing you mean withdrawing cash using the card, that's exactly what you would do.
I was thinking ACH out since its website on Saving says "You can enjoy up to 6 free transfers out each month." Not sure what that means, but I suppose if they don't have ACH push, I can do ACH pull from my other account ? Otherwise I guess the pre-paid card has to be the only way to withdraw.

In anycase, thanks to bring this to our attention.
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tfb
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Re: Has anyone given up on rewards checking?

Post by tfb »

armeliusc wrote:I was thinking ACH out since its website on Saving says "You can enjoy up to 6 free transfers out each month." Not sure what that means, but I suppose if they don't have ACH push, I can do ACH pull from my other account ? Otherwise I guess the pre-paid card has to be the only way to withdraw.
6 transfers out per month means 6 transfers from the savings account to the card. ACH-out is blocked in the same way Vanguard does. Vanguard will give you a routing number and account number for direct deposit. You can't do ACH pull with those numbers. It's one-way in.
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