Savings for convenience?
September 22, 2009 9:55 AM   Subscribe

Should I bother with a savings account?

I recently dug myself out of credit card debt and for the first time in years, I'm finding myself no longer living check to check. I've continued to use one of my cards for most of my expenses, partially for convenience, but mostly for the cash back rewards now in tandem with Chase Blueprint (specifically 0% APR on all purchases, as long as I completely pay my bill each month with extra points for having a Chase checking account).

Having said that, I now find the balance of my checking account growing and I feel as though I ought to be earning interest. The sticking point here is that I need the money to be very liquid and easily accessible. Most of my accounts are with Chase and I'd like to keep it that way. Unfortunately I don't have a high enough balance to qualify for their interest-bearing checking accounts and the interest on their savings accounts is currently a pathetic 0.01%.

Since I'm not sure of my financial needs over the next year and I want to keep my funds readily available at a moment's notice, is it worth bothering with a Chase Savings account -- if only to provide the convenience of separating theoretical savings from day-to-day funds?

I'm not at a point where I feel comfortable transferring funds to an online-only bank and, admittedly, convenience is huge to me. Are there any down sides to opening a new savings account (other than the obviously terrible interest rate)?

Note: Chase Savings accounts are free as long as you have a minimum balance of $300.
posted by Raze2k to Work & Money (29 answers total) 16 users marked this as a favorite
I recommend checking out ingdirect. They have a much better savings rate than most places you'll find and you can access the money if you need it. There is one caveat: It takes money about 3 days to make it's way between your checking account at one bank and the savings account at ING. So if three days notice isn't liquid enough for you then save somewhere else, otherwise ING is your best bet.
posted by scrutiny at 10:01 AM on September 22, 2009 [2 favorites]

Congratulations on getting out of debt!

There are no downsides to opening a new checking account. There's a benefit that it makes it psychologically harder for you to use the money, since most people view their checking account as for any expenses incurred, whereas savings accounts are only for large expenses/emergencies. Just separating money into different accounts, even if they are no different in terms of benefits, can be beneficial. I have multiple checking accounts for just that reason - one is for rent, one is for my paycheck deposits, and one is for my debit card.

Consider ING Direct to get 4% interest. It is not an online-only bank; ING has 85 million customers. There is, of course, much better deals if you consider other banks. You shouldn't be uncomfortable with transferring funds to an online-only bank anyway (that's what FDIC insurance is for). The path to fiscal independence does not include making irrational decisions based on emotion. It involves making decisions that make you money.
posted by saeculorum at 10:02 AM on September 22, 2009

I have an ING Orange savings account and I highly recommend it. You can have a set amount of money automatically transferred in monthy from your Chase account, and although the interest rate isn't super high, it's much better than leaving your money in your checking account. The money in your ING account remains accessible- at any time, you can transfer it back into your Chase checking or other account, although there is a 2-3 delay before the funds become available. Really, I see no reason not to set up an account like this. I managed to stash away a few thousand dollars by saving only $100 per month, and now I just a lump sum into my checking account to pay for a big vacation- no need to use my credit card! So far, the fact that the bank is online-only hasn't caused any problems for me.
posted by emd3737 at 10:02 AM on September 22, 2009

Usually you can do transfers from savings to checking instantly at that bank's ATM, so it would practically be as liquid as checking. Since you won't be earning any interest, I think this just comes down to personal preference. It is two accounts to juggle for very little gain.

It really is 0.1% up to $10k. PDF rate sheet IMHO, all the Chase savings accounts are a joke and no better than putting your money under the mattress.
posted by smackfu at 10:03 AM on September 22, 2009

Response by poster: Sadly, the rate as of today is actually 0.01%.
posted by Raze2k at 10:03 AM on September 22, 2009

Consider ING Direct to get 4% interest.

Let's not be crazy here. ING is giving 1.3%. The 4% is for a 5-year mortgage.
posted by smackfu at 10:06 AM on September 22, 2009

Response by poster: As a clarification, the Chase Savings rate CAN BE 0.1%, but only if you've got one of their premier checking accounts.
posted by Raze2k at 10:07 AM on September 22, 2009

Though they used to have their savings rate at a crazy 3% when I first joined. It's gone down steadily since then :(
posted by scrutiny at 10:08 AM on September 22, 2009

I would say the only benefit to having a savings account would be to prevent yourself from accessing your money impulsively. In which case, the Chase savings account would be the worst one, since you really want low liquidity.
posted by smackfu at 10:12 AM on September 22, 2009

They do adjust it - it once actually was as high as 3.5%... but I suspect those days are gone. Still, great interface, helpful customer service, and one of the better rates you'll find.
posted by canine epigram at 10:14 AM on September 22, 2009

The big online savings accounts used to give above 5% before the whole economic collapse thing. When I joined up with HSBC Direct, which was around late 2007, the rate was around 5.25%. It went steadily downhill along with the main Fed rate. It's 1.45% now. Still better than any regular savings account, at least.
posted by kmz at 10:18 AM on September 22, 2009

Back before the crash you could find online savings accounts that would pay 6% interest. Nowadays it's more like 1.5% has a list of checking and savings accounts you can get, but you might want to consider that 90 some banks have failed so far this year.

I wouldn't bother unless you have tens of thousands of dollars. With $9,000 the interest at 2% would only be $18/year.
posted by delmoi at 10:19 AM on September 22, 2009 [1 favorite]

Er wait, with $9,000 it would be $180 a year, which isn't too bad.
posted by delmoi at 10:21 AM on September 22, 2009

Best answer: I would say the only benefit to having a savings account would be to prevent yourself from accessing your money impulsively.

Related, you can set up your accounts at the bank so that your ATM and/or bank debit cards only touch checking. That way, you can keep more liquid money in the 'savings' cubbyhole away from the dangers and hassles of a stolen card, card number or checkbook. You can deposit your paycheck to savings, and only transfer to checking as needed.

A savings account can be a very useful temporary holding point for funds. But if you're expecting to earn money from it, not gonna happen, as others have pointed out.

The 'savings' name on those accounts is an artifact from the days when grandma would toddle in with her 'passbook' to get her $20 deposit recorded by the chunka-chunka machine in the teller cage.
posted by gimonca at 10:43 AM on September 22, 2009

Response by poster: I'm only 28 and my first savings account as a kid was a passbook savings! It's funny how quickly things have changed. I remember penny pinching and being upset with ~2-3% interest back then.
posted by Raze2k at 10:49 AM on September 22, 2009

Best answer: There are benefits to saving aside from interest - treating a component of your income as an "expense" helps to control spending, keeping a portion of your money separate from your usual money supply makes it easier to not look at that money as available to spend on every day desires, and it is a good thing to have cash on hand for unexpected necessary expenses - that will help keep those debt balances at zero.

A fairly straightforward downside of saving is that if you believe (as some do) that we're looking at a long period of sustained high inflation, savings are pretty much a loser: all that money is going to do is devalue. When you need cash, you need cash - but personally I'm favoring things like making sure the car is in tip top shape and not putting off necessary purchases (stuff like glasses and dental visits) in favor of building up savings beyond a basic emergency fund.
posted by nanojath at 10:50 AM on September 22, 2009

Consider ING Direct to get 4% interest. It is not an online-only bank; ING has 85 million customers.

"ING Direct" is an online only bank. It's not like you can go into a branch and take your money out. And, as others have pointed out, it doesn't offer anything close to 4% interest right now.

There is, of course, much better deals if you consider other banks.

Are you claiming that there are "much better deals" than 4% interest on a savings account available right now? I'm sorry, but you can't even get that kind of rate on a 5-year CD right now. I'm not sure where you're getting your information, but it's wrong. The best rate you'll get on a savings account right now is about 2%.
posted by mr_roboto at 10:55 AM on September 22, 2009

The best deals are in high yield checking at credit unions. If you're in the right state, you can get up to 6% interest. I can only manage 4.11% in my state, but it's certainly better than ING Direct. Yes, I do admit I screwed up the ING Direct link - that's what I get for not paying attention to what I link to. I do think, though, that the OP is misguided to avoid it.
posted by saeculorum at 11:11 AM on September 22, 2009 [1 favorite]

Best answer: I think it's good to have a savings account, but only because it separates your money into two distinct accounts rather than just one. By the time you have enough money to really care about the interest, you have enough money to make it worthwhile to put together an actual investment strategy (one that's diversified and includes various risk tiers, basically necessitating an account at a brokerage).

So really, the whole idea of having a savings account, the sole benefit in my opinion, is that it isn't quite as liquid as your checking account. (It's still "liquid" in the sense of being cash, but there's a barrier that you have to hop in order to spend it.) Either a 2-3 day transfer or actual trip to a bank branch to get a withdrawal are in some ways a feature, not a bug.

So I think you need to put some hard thought into why you feel you need so much liquidity and easy access to this money. You might be doing yourself a favor by putting it a bit further out of reach, even if it means you're not comfortable pulling quite as much out of your checking account to put into it.

Personally, I have a savings account at a very small B&M bank in the town where I grew up, which exists solely as a "rainy-day fund" (aka 'unemployment fund'). I send in deposits by mail and can check my balance online, but making withdrawals is (intentionally) a huge pain; I'd either have to drive there and do it in person, or call them during business hours and have a wire transfer arranged. That's about the only use case I have for a savings account anymore.

I keep other money in a money market account with my bank, which I can slosh back and forth to checking very easily. It's technically not FDIC insured (which is why I also have the savings account for emergency money), but the government has shown a willingness to prop up MM funds to keep them from going negative, so to me they're de facto insured to a risk level I find acceptable. YMMV. This might be something that you would have a use for, but I wouldn't go there until you have 6 months or so of expenses (rent, food, fuel, insurance, etc.) in an insured account that you can't easily spend.
posted by Kadin2048 at 11:11 AM on September 22, 2009

I used to have a checking and savings account at my bank and I would stuff money in the savings account whenever I could. However, I always ended up depleting it to pay off some expense or other. I recently opened an ING direct account and I find that my budgeting thought patterns have changed.

Because I always check my balance and pay my bills online, I got used to thinking that my total balance = checking balance plus savings balance. Now that the money is away, I think balance = checking balance plus some other money that's socked away, and I spend less and save more than I used to. Like what Kadin2048 says it is a good thing that the savings are less liquid. If needed the savings can be transferred in a few days, and there is always the credit card for emergencies. You don't necessarily have to go to a different bank to achieve this kind of setup.
posted by PercussivePaul at 11:26 AM on September 22, 2009

As a former retail banker, I will say that your primary savings goal should be to avoid monthly charges on your checking account. One service charge could wipe out a year's worth of interest earned in savings. To this end, always keep a base amount in your checking account, to stay above the bank's minimum requirement.

As a Chase checking account holder, I agree that the .01% interest rate is an insult. They should just cut it to 0%, and be done.

My strategy, over the years, has been to transfer money out of the checking to the savings whenever a sufficient cushion develops. The big banks will treat you like an annoyance if you have a savings account with them, however. Go to a local bank or a credit union for your savings.
posted by Midnight Skulker at 11:37 AM on September 22, 2009

I do believe that conventional wisdom applies. ALWAYS have a savings account, something for emergency savings, a minimum of $1K. Shit happens. That's what savings is for.

As to bank accounts, just a small one with whatever local bank is usually OK, and I wouldn't even worry about interest rates until you have $10K or more to concern yourself with. I just use my credit union.

If you want to do something just to get in the habit of savings, I have had success with SmartyPig but it isn't great if you need easy access to your cash when the muffler on your car drops out, etc.
posted by medea42 at 11:39 AM on September 22, 2009

I disagree with the posters above that say that you won't make any money from interest. I have been at ING Direct for checking/saving for a few years, and I make almost $200 a year on interest. Not enough to live off, of course, but better than a kick in the pants. Quite a few free cups of coffee, anyway. (FWIW, it was about $30 from the checking account, and $170 from the savings account. I keep more money in savings than checking, but it is nice to get $30 while waiting for transfers to the landlord, credit card company, etc.)
posted by jrockway at 11:46 AM on September 22, 2009 [1 favorite]

Best answer: Get a savings account. Hell, get more than one!

I have two. One for my house down payment and one for other things I'm saving for. Both get automatic monthly transfers into them.

The psychological effect of taking money out of those account is much greater than just spending money that's in my chequing account, so I don't do it unless it's something very important or one of the things I was saving for.

I know many people who have several of savings accounts -- one for a vacation, one for a new car, one for breast implants (seriously, I have a friend who has an account for breast implants), one for a skidoo, one for whatever other things they want to buy. As long as the account is free, do it, it'll really help make the savings real. Some accounts do offer better rates with higher deposit amounts, so I do try to keep my two accounts above $5k each to get the marginally better interest rate, so that might be a factor in how many you'd want to get.
posted by jacquilynne at 12:01 PM on September 22, 2009

I know many people who have several of savings accounts

I do this, I have something like 6 (emergency fund, new car, vacation, house downpayment, medical expenses, student expenses). Biweekly, it's set to have $15 transferred into every account, so I never even think about it, but my money grows (and I'm a starving grad student, if I can do it, you can too!). I also put most of any windfall into the accounts. It makes it tangible to me- I'm less likely to pull money out of one of these accounts because I know what I'm taking it away from. Plus, these will help prevent you from future debt- how awesome would it be to be able to buy a car without taking out a loan? ING makes it super easy to do this all in one place, I'm sure you could find a brick-and-mortar place that also has easy online management of multiple accounts.

ALWAYS have a savings account, something for emergency savings, a minimum of $1K

The minimum I've always heard is whatever will sustain you for 3 months. I don't have that anymore, since didn't get paid for a month and a half and needed to pull some out, but I'm working to get back there!
posted by emilyd22222 at 12:48 PM on September 22, 2009

Best answer: Money market account? Do they still have those?

Otherwise, figure out what your liquidity comfort level is. When you surpass that, buy a CD. Keep rolling it over. When you get another lump of "extra" money, buy another CD. If you worked for a couple of years at this, you would end up with a CD maturing and rolling over once a month (as well as your buffer), which should be liquid enough.

Or, look at the penalties for early withdrawal on the CD you are thinking of buying. Maybe the risk-reward of the potential of needing to pull money out early is outweighed by what you earn in interest.

In other words, suppose your buffer is $1000 a month. Keep 3 months in checking. The next month, buy a $1000 6 month CD, and continue doing that every month. When the CD matures in 6 months, buy another one for $1100 (or whatever 1/12 of your new savings is).

(Although, Chase's website seems to think that they don't have any CDs for sale. Which might make sense, they don't really need our stinkin' money at the moment.)
posted by gjc at 5:04 PM on September 22, 2009

Response by poster: Thanks for the feedback, folks. At this point, I'm thinking that my savings aren't nearly high enough to be concerned with interest, so I may wind up opening a Chase Savings account for the sole purpose of dividing funds.

Though this does seem a bit backwards, I'd most likely use a savings account to hold funds that are promised, but not needed for a few months at a time, to ensure that I don't make assumptions based off the balance of my checking account.

(Specifically, my landlords travel two to four months at a time, so I'd like to separate rent that is owed to them rather than leave it in my checking account and risk spending it mistakenly. Though the chances of that are very low -- since I've become anal with managing my checking account -- I think it's more of a psychological benefit. As the surplus in my checking account grows, I'll probably follow the suggestion of some of you and start buying short-term CDs).
posted by Raze2k at 5:20 AM on September 23, 2009

raze2k- a savings account can be for whatever you want it to be. You are wanting to use it as a sort of escrow account- that's a perfectly normal use of a savings account. I do the same thing, but I also keep normal savings in there too. Sort of like keeping sub-accounts. Every month, I put $10 toward the new cell phone account, $10 toward the new suit account, and keep a running tally of that. Then, everything else is general savings.
posted by gjc at 5:25 AM on September 23, 2009

BTW, Discover bank (which is older than the ubiquitous credit card of the same name) is pretty stable and offering about 2% yield.

I nth the suggestion about having two savings accounts: one that's short term (for HDTV, emergency car repairs, doctor bills, etc.) and one that's long term (for retirement, extended unemployment, trip to Europe, etc.). Occasionally take some of the money out of the short term account (when it reaches a cap of, say, $5K) and put it in the long-term account.
posted by parilous at 10:42 AM on September 23, 2009

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