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“But I earn $300/year from switching banks!”

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A little comment exchange on yesterday’s post about not switching banks to get an extra 0.25% interest:

Mike:

I’m one of those rate-chasers, so [with $40k in emergency savings], I’ve consistently been earning anywhere between 0.65-0.85% higher than my operating money market account… That’s an extra $300/year in interest, which is definitely worth changing banks every 4-6 months for me.

My response:

Mike: If you were smart enough to sock away $40k in an emergency fund (which is really impressive, btw), I bet you’re smart enough to spend your time doing something better than earning $300 year — something that will sustainably let you earn much more. You’re only earning $0.82/day doing that!

How about spending the same time optimizing your asset allocation? That step alone is probably worth thousands per year. Or starting a side business? Have you considered reading 5 new books about personal finance, entrepreneurship, psychology, whatever? Or even spending those few hours with your family? I don’t know what you value, but in my eyes, any of those things would produce more value than $300/year…especially for someone who’s so far ahead of everyone else, like you are.

This is just my 2 cents…~1/40th of what you earned today (sorry, couldn’t resist).

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33 Comments on "“But I earn $300/year from switching banks!”"

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Eric
Eric
8 years 1 month ago

I don’t understand. While your suggestions are sound in general, I don’t see anywhere in Mike’s response where he said he didn’t do any of those things. Nor did I see anywhere in Mike’s response where it said his constant switching of banks cost him a lot of time. What if he does all of those things? Isn’t that extra $300 worth it then?

aa
aa
8 years 1 month ago

You are carrying the same logic as the people who receive minimal interest with their local banks… “It’s just a few cents more PER DAY!”

Anne Keckler | ACSM Certified Personal Trainer

It’s not 82 cents per day if it only takes him a few minutes three or four times a year to do it.

And how do you know he’s not optimizing his asset allocation, starting a side business, or reading finance books, as well?

Joe
Joe
8 years 1 month ago

Dude! You are assuming that Mike is a young man…
What if he is a 65 year old man who has enough in his 401k and does not want the market to do any more damage to his net worth?

Bethany
Bethany
8 years 1 month ago

It’s not like it really takes all that long to switch your savings account. Why not take a few minutes to get an extra $300 or so?

Anyway, the posts here have been pretty bad lately and this is just another example. Unsubscribed.

Kevin
Kevin
8 years 1 month ago

Ramit, sometimes you come across as a real dick. This is one of those times. Let the guy do his thing, and try not to accuse him of being a horrible father, person, idiot, etc.

Tom
8 years 1 month ago

Well, I know the other people are saying Ramit is coming across as a dick, but that’s the reason I like him: he doesn’t sugar coat it. The guy should really consider diversifying, or just putting it all in a good long term stock. Berkshire Hathaway typically does 5-10% of growth a year, and right now it’s at an extreme discount. Put his 40k in a few shares of BRK.B, come back in a few years, and he’ll be doing much better than $300/yr.

Lucifer
8 years 1 month ago
Lets see, First off, yeah, the posts have been quite sucky of late. I demand a full refund of the $0 I paid. But seriously, can we have more cowbell please? Second, yes, the we do not have enough details to draw an informed conclusion. That said, in 90% of the cases, I’d say its a bad idea to jump around banks. Umm… when did Ramit accuse the guy as being a horrible person? Saying that you could spend more time with family does not imply that I think you are a horrible dad. Family is like ice cream, theres… Read more »
Eric
Eric
8 years 1 month ago

@Tom

The money is his emergency fund. He needs it to be liquid. Investing it in stock kind of defeats that purpose.

I don’t even know what the reason was behind Ramit’s surly response, but it was uncalled for IMO. There is a big difference between not sugar-coating something and being an a**hole.

Shane
8 years 1 month ago

Wow…everyone’s being harsh here, including the commenters. I think Ramit’s trying to point out that sometimes we have to consider if the money is worth our effort.

And Ramit, I agree that your posts have been under-par recently, but perhaps that’s because you’ve set the bar so high in the past. Keep up the good work.

Adam
Adam
8 years 1 month ago

I agree with Ramit on this. He is merely pointing out the value over a year. I don’t jump around banks so I don’t know, but unless transferring savings is as easy as eating a ham sandwich, I don’t see how it would be worth it. Also, couldn’t something go wrong with the transfer? Just the risk of getting that much money tied up in a customer service snafu would be a turn off for me. About like jumping for joy over the money you make from jury duty.

ekrabs
ekrabs
8 years 1 month ago
Peace, everyone. Let us be calm and consider what both sides have to offer. Cash investments have their place (such as parking your emergency fund) but there are also times when over-using it would not be appropriate. There’s an issue regarding whether 0.25% is worth chasing after. Normally, I would say no, but with a 40k balance, I can see why it would be worthwhile to chase after. However, there’s is also a bigger issue regarding whether having 40k in cash is even necessary. If one does not need all of the money liquid, then one could be missing out… Read more »
Moneymonk
8 years 1 month ago

This seem like the Mike and Ramit hour, LOL

Personal finance is “personal”

I think that putting $10K in a bank to get $25 is crappy. However, not sure why this turned into another subject.

I agree with Tom. Investing $40K elsewhere you will get more bang for your buck.

Igor L
Igor L
8 years 1 month ago

maybe ramit is trying to tell us something, I just thought of.. well.. why put my money into an IMG account when I can invest that money into IMG lol =)

Mike
Mike
8 years 1 month ago
I think I got my 15 minutes of fame here! To address a few points, I am still pretty young (in my late 20s), but I’m married with a kid and own a house in a relatively expensive area of the country. Ramit has a good point — although I do most of the things he said, I really want to start a side business to create extra income to free myself of my 8 to 5 (or 8 to 8) job and retire early. I consider myself well-versed in the area of personal finance, but I would like to… Read more »
Jim
8 years 1 month ago
It’s just opinion. That’s what a blog is for! He’s not writing an encyclopedia of personal finance here. Ramit, don’t let the naysayer(s) get you down. I enjoy this blog a lot. I don’t blindly follow your advice, mind you. I find some of your arguments convincing, and others don’t appeal to me as much. In a similar way, my boss uses Dave Ramsey’s method (to the very last word), and that’s great, because it works for him. I’ve heard a whole lot about it, and I’ve gleaned some good ideas from him, but a lot of what he says… Read more »
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[…] I Will Teach You to Be Rich “But I earn $300/year from switching banks!” […]

Anand
Anand
8 years 1 month ago
Ramit, I must admit I’m a HUGE fan of your blog; but with each day I visit it, there’s more ads, more giveaways, less quality posts, less interviews with entrepreneurs…The quality has gone down remarkably. I think of it as what happened to Myspace after it was bought by a large corporation. Now, since its free, who am I to complain – but I have a feeling your blog has a LOT to do with your future, and your karma, and I’d love to see you go back to your roots and do some hard-core writing, the good ole way… Read more »
DMH
DMH
8 years 1 month ago

I agree with Anand, Ramit I’d like to see more of your thoughts. At the end of the day personal finance is a constant learning process and it would be great to know how your experience has influenced your decision making. I think you have a great opportunity to build on this community by addressing that.

Expat Finance
8 years 1 month ago

Err I cant see Ramit being sharp with Mike, despite the description of being a sugar-coated iceberg, but Mike you could easily get a better return on your 40k for very little risk and effort.

Brandon Carroll
8 years 1 month ago
Hey Ramit, I have money spread out in different banks. The majority of my money goes to ING -> in terms of liquidity. I also think it is important to put a small percentage in a local bank, as well as a small percentage in a commercial bank. Here is why: 1) ATM fees ->talk about wasting money. A finance instructor told me that if you compounding the interest on say the ATM fee over your life, you end up paying like 98258259838583% interest on your money. It is a complete waste 2) The service of a local bank ->wherever… Read more »
David
David
8 years 1 month ago

Wow, I’m officially deleting your site off my bookmarks jerk.

NM
NM
8 years 1 month ago

Ramit, I still love you and appreciate the time you take to share your knowledge. 🙂

Would have loved to hear suggestions as to what to do with that 40k. Did you mean diversify within his 401k? i wasn’t sure.

thanks!
NM

Alex
Alex
8 years 1 month ago

Ohhh… shut up allaya!!

ehcomunicacion
8 years 1 month ago

$300/year is nothing

YatMIT
YatMIT
8 years 1 month ago
Hey Ramit, I saw you 2 years go when you came to MIT. (I graduated in 2006.) Weird that I’m revisiting your site now, but thanks for coming. Your advice has helped me immeasurably! Anyways, here’s my take on this. I currently have 2 sets of banking/checking accounts, and plan to open one or two more. I pay all my bills online and manage via MS Money to keep track of expense w/ credit cards (I never carry a balance) so it’s very easy for me to manage multiple accounts. I have: Bank of America Why: Great ATM network, but… Read more »
Carlin
Carlin
8 years 1 month ago
$0.82 a day makes it sound like he’s wasting an entire day for $0.82 cents. The invested cash is earning $0.82 more a day passively with much less active time on his part to move the money. I can’t say how long it takes, but if it’s every 4 to 6 months, and let’s guess he’s got a few banks bookmarked to check the rates since he’s done this before so say it takes an hour to switch (generous, since opening an ING account takes like 10 minutes). That’s 3 hours a year. That’s $100 an HOUR.
anotherguy
anotherguy
8 years 1 month ago

hmmm…$300 is nothing when you have $40K?

I have close to $500K saved up and even a $1 means a lot to me.
Technically, for Warren Buffet with assets more than $60 Billion, $2 million should mean nothing. He should have donated that money himself and avoid that lunch those investment guys from Hong Kong bid on ebay. His time is certainly worth more than that. Especially last year when the auction only closed for few hundred thousand.

Ryan McLean
8 years 1 month ago

I love your savyness in this post. I also write a financial blog at http://www.smarterwealth.net and I love the way you have responded to this reader.
Time is so valuable, and to be earning less than $1/day making all this effort it could definately be spent better by starting a side business or something. I definately would
Thankyou for your advice

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[…] roadside assistance or purchase protection or extended warranty, you save more than you would with stupid 0%-balance-transfer/bank-transfer games. no comments yet.Gallery of Thunderstorm Wallpaper [Wallpaper] »« Episode 61- IWF […]

Robin Majumdar
7 years 10 months ago

Ironically, while many commenters here mention unsubscribing, this is my first visit to Ramit”s blog from a link on another site… watched the 2 minute CNBC video clip and read this post.

Subscribed – at least for a few months 🙂

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