While growing up my parents emphasized that I should save money. When receiving pay checks from working at the family restaurant I was required to put at least half of each paycheck into my savings account. This was smart because at that time I remember interest rates for savings accounts being around 5% and possibly even as high as 8%.
In addition, when I would save $1,000 I would start a 12 month CD at an even better rate. Things were pretty good on the interest front and these options were extremely safe.
Fast forward to present day and we find savings accounts returning less than 1% and CDs returning 2% to 3%. This is great for a lot of new home owners because they have much lower interest rates on their mortgages but for us we found that it left savings accounts and CDs much less appealing.
I currently have two main issues with savings accounts.
1) The return is not good (poor interest)
2) You are limited in the ability to move money (Only 6 withdraws a month from savings before a penalty)
This caused me to seek out alternative opportunities for holding my money. I thought about just holding onto my cash in a quality safe, but that takes an investment and is not as safe.
Next, I considered just keeping a checking account at 0% interest because that was all I knew. I figured giving up the 1% interest was made up for by my ability to access and move money at my will.
Upon further research I found two gems in the Grand Rapids, MI area and have also found some examples elsewhere. I found two credit unions that offer great interest rates for CHECKING ACCOUNTS!!!
The first one is called Community West Credit Union.
They have a checking account that yields 7% APY on up to $2,000. I did not type that incorrectly...7%!!!!!!!!!
There are a few stipulations to obtain the interest but they are worth it. 1. The debit card has to be used "regularly". I make a small purchase once a week with the debit card (when I remember to use it!) 2. You need to have direct deposit of at least $200 monthly. And the catch! 3. You need to have a savings account with them but don't worry just put in the bare minimum amount (usually $5-10) leave it there and forget about it. You do not need to do anything else with that account after you set it up.
Once a month we go withdraw any money that is over $2,000 to put elsewhere since it will not make interest. If you are a married couple you can open two accounts with each spouse being the primary on one of them. This way you have $4,000 in fluid/accessible money that is earning 7%! (ALMOST AS GOOD AS SOME INVESTMENTS!)
To sum it up, a married couple can earn almost $300/yearly in interest off of an easy and risk free checking account that allows you to move money at will.
So that is one way to tie up accessible "savings" that can incur quality interest without risk.
We also found another checking account in our area that provided 3% APY on up to $15,000. In this case we found no need to open two checking accounts as we do not feel the need that much cash available. The rest is applied to retirement and investments that yield higher percentages.
This checking account is through Lake Michigan Credit Union.
This account has taken the place of our savings. 3% APY doesn't sounds like a lot but it results in up to $450 in interest annually for having money that is easy to access and has no risk. It is almost crazy!
There are stipulations on obtaining the interest on this account as well. 1. You must have at least 4 log ins on the website to check your account (I get that in a few days!), 2. you must set up direct deposit, 3. get e statements, 4. use your debit card at least 10 times for the month and 5. have a saving account with them (remember just put in the bare minimum and leave it there).
Here's how I spend less than I earn in interest each month. I look to use the debit card for the smallest purchases possible. I look to use it when I can make a purchase of $2 or less. Produce at the self checkout is one of the best ways to get really small amounts per swipe. I've been known to buy four lemons (or a fruit of equal value) and check out one lemon at a time. This way I am getting my 10 swipes while not making myself get there through spending. I like to use my credit card to charge everything else in order to get kick back rewards. You can read about that in an earlier blog of mine.
Ditch your low interest savings account for a high interest checking account and have more flexibility.
You can find other high yield checking accounts here.
If you have a credit union or bank that is pumping out some good interest please make sure that you post that information in the comments.
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