Do you chase high interest rates? Are you looking for the highest interest rate possible for your savings account?
Stop right now. Chasing rates is a waste of time when you’re trying to get your finances in order. I used to chase interest rates. Then I stopped when I realized that it wasn’t worth it.
What’s the argument against chasing high interest savings accounts? Why should you stop this right away?
I recently got a letter in the mail about an inactive online savings account. I totally forgot about this account and it went inactive. The reason that I even signed up for the account was because they offered a higher interest rate by a tiny percentage and a $20 sign up bonus. After logging in a few times I realized that the service was sub-par and that I couldn’t easily use the online banking feature. This simply wasn’t the best online banking account for me.
I never checked the account. I never thought about this account until I was notified that the account was inactive.
Along the way I learned that it just wasn’t worth chasing interest rates. It may sound sexy at first to go after a higher rate on your savings account, but it’s really not that big of a deal in the grand scheme of things. I no longer worry about interest rate changes on my savings account and I wanted to share why you shouldn’t care either.
Why should you stop chasing interest rates with bank accounts?
The user experience is more important.
This might sound a bit odd but I actually care about the user experience much more than I do about the interest rate. I want to be able to access my account from my laptop or cell phone and make moves with my money with ease. I do this all of the time with my online banking right now. I often create sub-accounts just to save for my various financial goals.
Here’s what I look for in the user experience when searching for a new bank account:
- Can I do everything from my phone? I don’t want to leave my bed to do my banking.
- Is the app easy to use? I want an app that’s easy to use. I don’t want it to be slow. I don’t wan the app to lag. I want a smooth experience.
- Are the staff helpful when I need something? I’ve had some terrible customer service at banks. I’m fed up with it.
That’s much more important than a few bucks that you could earn from the interest rate on that savings account.
Most decent interest rate offers are temporary.
When I first covered the idea of chasing interest rates, I figured out that most higher rates are simply introductory offers. For young investors, introductory rates are simply not worth switching bank accounts for because you’ll only get that rate for a certain amount of time. Then it’s back to the original rate, which will likely be similar to the rate that you had with your old savings account. Why bother switching for a temporary spike in interest?
I signed up for a new account recently so that I could review Wealthsimple and I got an email about a month later about the interest rate dropping.
There are better investments out there.
I find that there are many better investments out there than a savings account. It makes sense to get a competitive rate for your hard earned money. It doesn’t make sense to only keep your money in a basic savings account.
What are three better investments than a savings account?
- Unique experiences.
- Real estate.
As you can see, you can easily find a better investment tool out there than a savings account. On that note…
Grow your business.
As you may know by know I’m all about starting a side business and using your existing skills to earn more money. As fun as it is to sit on Facebook all day, I feel much better when I use the internet to generate some money and help others in some way. Your savings can be used to grow your business (theme work to outsourcing certain tasks) instead of sitting around in an account earning pennies a month.
There will always be fluctuations in interest rates.
When I tried to find the best online bank account I realized that rates will always fluctuate. Interest rates are simply not impressive at the moment for those of us looking to keep our money in a savings account. The rates could go lower. The rates could go higher. What’s guaranteed is that rates will fluctuate. You don’t want to close down that account and then go looking for a new bank whenever there’s a drop in rates.
Don’t you have better things to do with your time?
When I hear friends talking about interest rates and complex financial strategies, I wonder if they have a life. I would rather spend my time on growing my business, improving myself, and hanging out with awesome people than worrying about banking accounts.
Sure, you obviously want to earn the best bang for your buck, but there way better ways to invest your money than to chase interest rates and to worry about small moves.
Those are my thoughts on chasing banking rates. There are bigger battles to fight in the financial world. Why waste your time on this? I believe that you should find a bank that you’re happy with and move on with your life. Rates will fluctuate. The customer service should stay consistent.