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by achilles19282 on July 17th, 2009

achilles19282

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Should I have a lot of saving accounts with different banks and frequently move money around to keep it in the bank with highest APY? Any downside of this approach (my bank has been consistently dropping its APY)?

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  • by Wide Awake @ has closing date woo hoo on July 17th, 2009

    Wide Awake @ has closing date woo hoo

    Yes.

    1. Most banks now pay interest on the "average monthly balance" and not the balance on the date they pay interest. Thus moving your money as you describe would only serve to AVERAGE, not multiply, the interest received on all the accounts.

    2. If you do not have a sufficient balance, some accounts may charge you transaction fees, which would negate any interest benefit you may be hoping to accrue.

    Comments

    • Thanks for the answer! Could you clarify #1 a bit for me - considering this scenario:

      Jan - Bank1 pays 2%
      Feb - Bank1 drops to 1% but now Bank2 increases to 2%
      So, if I move the money to Bank2 in Feb and keep it there for the whole month, I'd get paid 2% for Feb, right? Is there any flaw in the reasoning?

      achilles19282

      by achilles19282 on July 17th, 2009

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