ING - Why

[joseblanco]

Re: ING - Why

That's why I'm not bothering to move my savings with ING over to Emigrant or GMAC or HSBC online because it sounds like a lot of hassle. I don't want to deal with opening and closing lots of accounts for an additional <$1 month. If I had more money I might be concerned, but if I had more money it would be in a CD.

I would advise against locking money up in CD's right now. High interest savings like Bankunited, GMAC & presidential are equal to many bank's prevailing CD rates and rates are rising. Having money in these high interest savings accounts maximizes rate while retaining liquidity. On if you want to diversify your saving (i.e. you've got alot in savings) would I lock in a CD rate in a rising rate environment.

[abowers]

Re: ING - Why

I know. I'm not actually going to put money in a CD right now, or any time soon. Because I don't have the money, and I need the money available to me, as I am returning to school (grad school) and will be in grad school for the next 2ish years.

[joseblanco]

Re: ING - Why

Just wanted to be sure as I see many banks pushing CDs with a currently above average rate, but which I know have the potential to be left in the dust if current trends continue. Marketing often causes us to to the opposite of what is right for us. JUst look at the low interest rate environment these last few years. People should have been getting fixed rate mortgages, but instead they were getting ARMS. I remember in the 80's a relative got a 10 year CD that paid 10%!! It did not expire until sometime in the mid 90's and CD rates were much lower, that was forsight or luck or both. They were wondering what to do as they wanted to retain the safety of a bank but got so use to that healthy return their only option was to look to things more volatile like stocks.

[jmjj215]

Re: ING - Why

I would advise against locking money up in CD's right now. High interest savings like Bankunited, GMAC & presidential are equal to many bank's prevailing CD rates and rates are rising. Having money in these high interest savings accounts maximizes rate while retaining liquidity. On if you want to diversify your saving (i.e. you've got alot in savings) would I lock in a CD rate in a rising rate environment.

I think it's funny when we talk about "diversifying" savings through different online banks - all FDIC insured. When you diversify it's because you want to mitigate risk. Since risk for any of those vehicles is essentially zero, 'diversifying' is hardly applicable.

For the pure math of it, it makes no sense to diversify across different online banks - you should always be going for the higher rate (taking into account the lost interest that happens when you transfer money and it's in limbo). The only time I would consider diversifying with your savings accounts applicable is when you have an absolutely enormous amount of money in there and are beginning to approach the FDIC limits.

[BTC]

Re: ING - Why

I mean this as a serious question. Does this mean that you move your savings account around a lot?

I get the feeling that some people (not necessarily you) open a new savings account and shift their balance over whenever some bank offers a .05% better yield.

I move my funds around when I feel it's worth it. Float time and yield differential are ultimately the determining factors.

I think I originally moved most of my money out of ING to ED when they were offering a 4.0% yield, which was the highest yield available at the time. I believe ING was at 3.25 or so at that point. At some point I transferred my funds from ED back to ING for their Winter Save Up Sale. In the meantime I also opened an account with HSBC. I don't have much money there because the speed at which they handle transactions leaves something to be desired, imo Most of my money is currently in ED. I'm considering opening GMAC & Bank United accounts because I feel their consistenly higher yields may be worth it. I'm not sure of the history of Bank United, but they are currently offering 5.0%, which is an almost 18% improvement in comparison to ING's yield and almost 8% over what I'm currently getting at ED.

So, I guess the answer would be yes that I move my money around, but only when I feel there is something substantial to be gained from doing so.

[sweeps]

Re: ING - Why

Jesse, actually diversifying does make sense even in FDIC-insured accounts. Not because of investment risk, but because of transaction risk. It's possible that a catastrophe at a bank (caused by a financial problem, computer problem, terrorism, act of God, whatever) could make it impossible to access your money at that bank for an extended period of time. Your money is "safe" but you just can't access it.

The chances of that simultaneously happening at more than one of your banks is much lower.

[disneysteve]

Re: ING - Why

Jesse, actually diversifying does make sense even in FDIC-insured accounts. Not because of investment risk, but because of transaction risk.

I was also thinking about liquidity/access. For example, I can write checks from my money market fund, but only for $500 and up. But from my checking account, I can write for any amount, go to an ATM, use my debit card, make electronic transfers or walk into the bank and get cash in person. So it doesn't earn high interest, but in return I get much greater access. So I keep some money in there and the rest in higher yielding but less accessible accounts.

[joseblanco]

Re: ING - Why

I think it's funny when we talk about "diversifying" savings through different online banks - all FDIC insured. When you diversify it's because you want to mitigate risk. Since risk for any of those vehicles is essentially zero, 'diversifying' is hardly applicable.

For the pure math of it, it makes no sense to diversify across different online banks - you should always be going for the higher rate (taking into account the lost interest that happens when you transfer money and it's in limbo). The only time I would consider diversifying with your savings accounts applicable is when you have an absolutely enormous amount of money in there and are beginning to approach the FDIC limits.

I do not agree with your version of the definition of "diversify". Diversification motives are not for risk mitigation alone. Diversification in the context of savings also looks to liquidity. I do not know of any one who would put their entire cash position in CDs because they would lose liquidity. Regaining liquidity would require payment of a penalty to the bank. So a diverse cash position puts cash in a standard savings account, if you have a large cash position then you can gain a higher rate by surrendering liquidity in the form of CDs. I would not recommend this in our current rate market, but instead leverage online backs that are offering savings rates that are equal to CD rates but allow you to retain maximum liquidity.

[sweeps]

Re: ING - Why

I was also thinking about liquidity/access. For example, I can write checks from my money market fund, but only for $500 and up. But from my checking account, I can write for any amount, go to an ATM, use my debit card, make electronic transfers or walk into the bank and get cash in person. So it doesn't earn high interest, but in return I get much greater access. So I keep some money in there and the rest in higher yielding but less accessible accounts.

Yes, and this is also why it's good to keep a couple hundred bucks in cash stashed at home too.

[disneysteve]

Re: ING - Why

Yes, and this is also why it's good to keep a couple hundred bucks in cash stashed at home too.

Absolutely, and keep it in small bills. A lot of folks here on the east coast learned this after 9/11 and the blackout a few summers ago. ATMs and credit card systems don't always work. Sometimes cash is king.

[sweeps]

Re: ING - Why

Small bills, that's a good idea.

[WellManicuredMan]

Re: ING - Why

I remember in the 80's a relative got a 10 year CD that paid 10%!! It did not expire until sometime in the mid 90's and CD rates were much lower, that was forsight or luck or both. They were wondering what to do as they wanted to retain the safety of a bank but got so use to that healthy return their only option was to look to things more volatile like stocks.

YES! This is exactly the point I was trying to make in this thread:

http://www.savingadvice.com/forums/showthread.php?t=18371

I would say that if you ever see rates in the double digits again, you should buy the longest term CD you can because you can bet the rate won't stay that high and it is a safe investment.

[joseblanco]

Re: ING - Why

YES! This is exactly the point I was trying to make in this thread:

http://www.savingadvice.com/forums/showthread.php?t=18371

I would say that if you ever see rates in the double digits again, you should buy the longest term CD you can because you can bet the rate won't stay that high and it is a safe investment.

You now have at least one jedi savings apprentice on this issue master yoda.

[WellManicuredMan]

Re: ING - Why

You now have at least one jedi savings apprentice on this issue master yoda.

Yoda is no more. Your post made me decide to get more creative with my avatar by not choosing one of the choices given on this forum. I think this one fits a littler better

[Ima saver]

Re: ING - Why

Putting your money into the envelope method insures that you will always have some cash at home.