Savings accounts

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rafkg29
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Savings accounts

Post by rafkg29 » Mon Jan 07, 2019 12:10 am

Im thinking of opening another savings account with higher interest but I was wondering if its bad to have two savings accounts? Pros and cons?

hunterg
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Re: Savings accounts

Post by hunterg » Mon Jan 07, 2019 12:29 am

Not sure what pros and cons there are but many on this forum would advocate for taking advantage of the 2.00%+ interest rates offered by online banks. For example Marcus by Goldman Sachs is offering 2.25% with no min. If you have another savings account without a decent rate you can close it or keep a minimum amount of money in it.

spooky105
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Re: Savings accounts

Post by spooky105 » Mon Jan 07, 2019 10:12 am

I use two online savings accounts:
1) Cash reserve for home expenses (insurance deductible, water heater fails, etc.)
2) Surplus cash above and beyond what I need in the checking account to cover regular bills

Wouldn't open another account to chase rates as long as your current savings account is competitive (2% and rising). Otherwise dump your current savings account for one of the many online accounts (Marcus, American Express, Ally, etc.) They're all more or less interchangeable and keep up with each other when it comes to interest rates.

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RickBoglehead
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Re: Savings accounts

Post by RickBoglehead » Mon Jan 07, 2019 10:26 am

rafkg29 wrote:
Mon Jan 07, 2019 12:10 am
Im thinking of opening another savings account with higher interest but I was wondering if its bad to have two savings accounts? Pros and cons?
Why would it be bad to have more than one savings account?

You should have a 2% rate or higher. I have savings accounts in 4 institutions.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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rafkg29
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Re: Savings accounts

Post by rafkg29 » Mon Jan 07, 2019 2:02 pm

RickBoglehead wrote:
Mon Jan 07, 2019 10:26 am
rafkg29 wrote:
Mon Jan 07, 2019 12:10 am
Im thinking of opening another savings account with higher interest but I was wondering if its bad to have two savings accounts? Pros and cons?
Why would it be bad to have more than one savings account?

You should have a 2% rate or higher. I have savings accounts in 4 institutions.

Now I’m not entirely sure if this is true, but would having two savings accounts put you in a higher tax bracket or involve you paying more taxes for the interest you get?

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RickBoglehead
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Re: Savings accounts

Post by RickBoglehead » Mon Jan 07, 2019 2:09 pm

rafkg29 wrote:
Mon Jan 07, 2019 2:02 pm

Now I’m not entirely sure if this is true, but would having two savings accounts put you in a higher tax bracket or involve you paying more taxes for the interest you get?
That's absolutely not true. You can have 500 savings accounts. The number of accounts, whether savings, checking, mutual fund, brokerage, or any other type of account has zero impact on your tax bracket or taxes.

What you EARN in interest, dividends, capital gains (and of course income) affects your taxes.

Of course if you have $10,000 in one savings account paying 1%, and move that to a different savings account paying 2%, you'll earn twice as much interest and have to pay taxes on that.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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sperry8
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Re: Savings accounts

Post by sperry8 » Mon Jan 07, 2019 2:14 pm

I have over 15 savings accounts. I use them for multiple reasons (some are older accounts opened when the bank offered a high interest rate). As their rates became uncompetitive, I left them open with a dollar in them - in case they become competitive in the future. Second, each account is only FDIC insured up to $250k, so I use multiple accounts to hold monies. No issues - no downsides. In fact, there is upside as I ensure I get the highest rates available at all times.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282

Beatle Boots
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Re: Savings accounts

Post by Beatle Boots » Wed Jan 09, 2019 1:59 pm

sperry8 wrote:
Mon Jan 07, 2019 2:14 pm
I have over 15 savings accounts. I use them for multiple reasons (some are older accounts opened when the bank offered a high interest rate). As their rates became uncompetitive, I left them open with a dollar in them - in case they become competitive in the future. Second, each account is only FDIC insured up to $250k, so I use multiple accounts to hold monies. No issues - no downsides. In fact, there is upside as I ensure I get the highest rates available at all times.
Sperry8, Like this approach and may adapt. Question/Dilemma:

How did you determine which 15 high interest banks to use and how do you periodically evalidate whether you should drop a bank and pick up a different bank?

There's a lot of daily/weekly/etc advertised hi interest BAITING & SWITCHING amongst the these banks. I have been looking for a site that posts daily/cumulative year to date interest rates so I can figure out who the true Hi Interest Rate Paying Banks are and also to find out who the worst hi interest BAIT & SWITCH Banks are. Once I get this type of information or something similar, I would like to use your strategy.

Thanks!

lukestuckenhymer
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Re: Savings accounts

Post by lukestuckenhymer » Wed Jan 09, 2019 2:16 pm

The only issue is trying to meet minimum balance requirements between multiple accounts.

I will always need a checking account (depositing/withdrawing cash) and an online money market with check-writing capabilities. But I only will keep enough in these accounts to meet immediate needs. The rest of my emergency fund I park in VMMXX.

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willthrill81
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Re: Savings accounts

Post by willthrill81 » Wed Jan 09, 2019 2:26 pm

sperry8 wrote:
Mon Jan 07, 2019 2:14 pm
I have over 15 savings accounts. I use them for multiple reasons (some are older accounts opened when the bank offered a high interest rate). As their rates became uncompetitive, I left them open with a dollar in them - in case they become competitive in the future. Second, each account is only FDIC insured up to $250k, so I use multiple accounts to hold monies. No issues - no downsides. In fact, there is upside as I ensure I get the highest rates available at all times.
You must have a lot of funds to make it worth the effort to chase a few basis points.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

sport
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Re: Savings accounts

Post by sport » Wed Jan 09, 2019 3:47 pm

I just use Vanguard Money Market Prime fund. The current SEC yield is 2.44%. It is linked to my local checking account. Easy transfers in either direction, with no restrictions on the number of transactions.

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sperry8
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Re: Savings accounts

Post by sperry8 » Wed Jan 09, 2019 5:54 pm

Beatle Boots wrote:
Wed Jan 09, 2019 1:59 pm
sperry8 wrote:
Mon Jan 07, 2019 2:14 pm
I have over 15 savings accounts. I use them for multiple reasons (some are older accounts opened when the bank offered a high interest rate). As their rates became uncompetitive, I left them open with a dollar in them - in case they become competitive in the future. Second, each account is only FDIC insured up to $250k, so I use multiple accounts to hold monies. No issues - no downsides. In fact, there is upside as I ensure I get the highest rates available at all times.
Sperry8, Like this approach and may adapt. Question/Dilemma:

How did you determine which 15 high interest banks to use and how do you periodically evalidate whether you should drop a bank and pick up a different bank?

There's a lot of daily/weekly/etc advertised hi interest BAITING & SWITCHING amongst the these banks. I have been looking for a site that posts daily/cumulative year to date interest rates so I can figure out who the true Hi Interest Rate Paying Banks are and also to find out who the worst hi interest BAIT & SWITCH Banks are. Once I get this type of information or something similar, I would like to use your strategy.

Thanks!
I use a blog called depositaccounts.com to identify the highest payers. Over time you get a sense of who stays near the top and who is just a one off. First thing is to identify your proper hub bank (I use Ally as my online hub bank, they have the best website, best CS, and best policies IMO).

As for tiers, here is what I've found (this is NOT meant to be an exhaustive list):
Tier 1: (generally near the top) Popular Direct, CIT Bank, and PurePoint Financial.
Tier 2: (behind Tier 1 but still worthy) Synchrony, Goldman Sachs (Marcus), Sallie Mae Bank, Live Oak, and Barclays.
Unworthy: Salem Five Direct, Dime, and Emigrant (and their offshoots) are unworthy. They offer teaser rates that don't stay near the top or aren't offered to "current accounts". Don't bother with them.

The good part about the strategy is that it almost always doesn't cost anything to keep the account open (just $1). So you can circle back around if/when the bank becomes a rate leader in the future. Your hub bank (e.g., Ally) will allow you to easily ACH monies back/forth to capture the increased yield.

With all the above said, this strategy bore more fruit when rates were lower. Today, VG Prime is 2.44% and is right near the top. So I'd say just open Ally (to get your hub started) and EBSB Direct & CIT Bank (since they are on par with VG Prime). Then you can add banks if VG Prime doesn't stay competitive. Of course VG Prime isn't FDIC Insured - but I don't worry about the .000000000001% chance of default and don't care if my money is locked for a few weeks during some volatile time. If you do - perhaps the FDIC insured banks are a more worthy choice.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282

hunterg
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Re: Savings accounts

Post by hunterg » Wed Jan 23, 2019 11:51 pm

My primary savings is VMMXX

MnD
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Re: Savings accounts

Post by MnD » Thu Jan 24, 2019 9:44 am

I've found that brokerage money market and t-bills where I have other investments already makes having a savings account unnecessary and furthers my goal of reducing financial complexity. Likewise for stand-alone checking accounts if your brokerage has a decent checking or cash management option.
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radiowave
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Re: Savings accounts

Post by radiowave » Thu Jan 24, 2019 10:21 am

One approach is to have a primary brick and mortar (B&M) bank with a local branch and an online high yield savings. Think of the B&M bank as your main cash flow vehicle, getting income deposited, checks and online bill pay, perhaps a safe deposit box, the online bank is the cash reservoir with yields on savings and CDs keeping up with inflation. With ACH transfer, pretty simple to move money between bank accounts and brokerages, typically takes 2-3 business days (hint move money early in the week rather than on Friday).
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travelogue
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Re: Savings accounts

Post by travelogue » Thu Jan 24, 2019 10:47 am

radiowave wrote:
Thu Jan 24, 2019 10:21 am
One approach is to have a primary brick and mortar (B&M) bank with a local branch and an online high yield savings. Think of the B&M bank as your main cash flow vehicle, getting income deposited, checks and online bill pay, perhaps a safe deposit box, the online bank is the cash reservoir with yields on savings and CDs keeping up with inflation. With ACH transfer, pretty simple to move money between bank accounts and brokerages, typically takes 2-3 business days (hint move money early in the week rather than on Friday).
Depending on where you live, you can accomplish both of these with Capital One 360. We’ve been able to use the regular Capital One branches for ATM deposits and withdrawals as well as pulling MMA funds to a casheir’s check with a teller. Moving money between 360 accounts is instantaneous (no waiting for ACH).

radiowave
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Re: Savings accounts

Post by radiowave » Thu Jan 24, 2019 11:47 am

travelogue wrote:
Thu Jan 24, 2019 10:47 am
radiowave wrote:
Thu Jan 24, 2019 10:21 am
One approach is to have a primary brick and mortar (B&M) bank with a local branch and an online high yield savings. Think of the B&M bank as your main cash flow vehicle, getting income deposited, checks and online bill pay, perhaps a safe deposit box, the online bank is the cash reservoir with yields on savings and CDs keeping up with inflation. With ACH transfer, pretty simple to move money between bank accounts and brokerages, typically takes 2-3 business days (hint move money early in the week rather than on Friday).
Depending on where you live, you can accomplish both of these with Capital One 360. We’ve been able to use the regular Capital One branches for ATM deposits and withdrawals as well as pulling MMA funds to a casheir’s check with a teller. Moving money between 360 accounts is instantaneous (no waiting for ACH).
We have a CapOne café bank downtown near the train station. I went in there a few months back, it's basically a coffee shop with several ATMs and computer terminals where people can videoconference with bank employees. Didn't see anything that would allow cash/coin deposit and no safe deposit boxes. Maybe I'm missing something?
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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travelogue
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Re: Savings accounts

Post by travelogue » Thu Jan 24, 2019 12:02 pm

radiowave wrote:
Thu Jan 24, 2019 11:47 am
We have a CapOne café bank downtown near the train station. I went in there a few months back, it's basically a coffee shop with several ATMs and computer terminals where people can videoconference with bank employees. Didn't see anything that would allow cash/coin deposit and no safe deposit boxes. Maybe I'm missing something?
I used the old-line Capital One bank branch (not the 360 cafe) for handling this. They don’t seem to advertise the connection but I’ve been able to manage all my in-person banking needs (including depositing cash, etc.) through the Cap One branch for my 360 accounts (including ones brought over from ING Direct).

Convenient because I can’t deposit cash to my Schwab account using ATMs.

Independent George
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Re: Savings accounts

Post by Independent George » Thu Jan 24, 2019 12:07 pm

Probably the best reason to keep multiple savings accounts is as a way of diversifying in case of a security breach. Even if you eventually get all your money back, fraud investigations still take time. Assuming you're not recycling passwords (right?), spreading your savings around helps ensure that at least some of it available.

If you've got money in an online-only account, it can also be convenient to have some in a brick & mortar institution. I've been online-only for over a decade now, but I can still see the benefit of being able to walk into a branch for service.

Another good reason to keep multiple accounts is if you have more cash than is covered by the FDIC limit. Since I am nowhere close to even the old limit, that's pretty much academic to me.

ETA: there is no tax effect on having multiple accounts; the only thing that affects taxes is the total interest earned throughout the year. You will receive separate 1099's from each bank, but the amount reported on your tax form is the total of them.

DaftInvestor
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Re: Savings accounts

Post by DaftInvestor » Thu Jan 24, 2019 3:08 pm

lukestuckenhymer wrote:
Wed Jan 09, 2019 2:16 pm
The only issue is trying to meet minimum balance requirements between multiple accounts.
Most of the online banks don't have a minimum for their high-yield savings accounts. Folks in some threads have noted leaving them open with a one cent balance (in case they return to a higher yield from another offer found).

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Doom&Gloom
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Re: Savings accounts

Post by Doom&Gloom » Thu Jan 24, 2019 4:01 pm

Timely thread for me. Thanks, OP and everyone else!

I am preparing to open my first savings account in > 50 years. The first place I checked was my local B&M bank. Yikes! But I quickly understood why their website made it hard to locate their rates.
Last edited by Doom&Gloom on Thu Jan 24, 2019 11:19 pm, edited 1 time in total.

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willthrill81
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Re: Savings accounts

Post by willthrill81 » Thu Jan 24, 2019 10:36 pm

Doom&Gloom wrote:
Thu Jan 24, 2019 4:01 pm
Timely thread for me. Thanks, OP and everyone else!

I am preparing to open my first savings account in < 50 years. The first place I checked was my local B&M bank. Yikes! But I quickly understood why their website made it hard to locate their rates.
Yep. Online savings accounts rule!
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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