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Rate Chasing 101: Do you have the personality for it?

by J. Money on Tuesday, June 16, 2009

Rate Chasing 101Do you spend hours each week searching for the best interest rates around? Do you bounce from one bank to another, living on the thrill of that extra .01%? If so, you, my friend, are a rate chaser. And you also have a lot of time & patience ;)

Many PF Bloggers consider this on a daily basis, but personally, I just can’t do it. The thought of opening & closing handfuls of bank accounts alone is enough to make me nauseous. All that paperwork & time to get it up and running, only to xfer out the money when a better rate pops up? Nah, not for this homeboy.

That’s not to say it isn’t financially smart though. Mathematically, it might totally make sense! If you can grab a higher interest rate or pay a lower % on debt, then more power to you! I support that 100%, hands down – especially if you have out of whack rates to begin with. Having the best rates is totally commendable, but it’s the frequency of switching accounts (sometimes every 3 months) and the research involved that separates the rate chasers from the average joe like myself.

Not only do they need the best of the best, but they need it now. After all, it’s just a matter of time until it changes again! Gotta bring in that extra dough while it’s hot off the press, right? They also don’t care if their accounts are scattered around town. If you’re chasing rates, you won’t always find the best ones at your favorite bank all the time (even at ING or Emigrant Direct, two of the usual favorites). This alone knocks me out of the running – I need everything possible under one roof, my bff USAA ;)

Then there’s the actual cash reserves that come into play. If you’ve got thousands of dollars saved up (or in credit card debt) where the slightest move in rates can be the difference of earning hundreds of dollars to THOUSANDS of dollars, then yeah by all means get on that $hit! I’d do the same thing. As it stands, however, most of my our money (still not used to being married) are invested in our 401ks and Roth IRAs, with the remainder in a decent money market account which we tap every month. Without a huge cash reserve, it makes no sense for us to bounce around and follow the place w/ the higher rates – and I’m guessing the same goes for most of you reading this as well.

As you can see, it certainly takes the right type of personality (and bankroll) to play with the rate chasers. Financially, it certainly has its perks. But the real question at stake is if chasing rates actually makes SENSE for you? If it does, great. If not, then do your best and watch from the sidelines ;) More often than not, it doesn’t pay to play.


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