Since realizing the vulnerability of my finances at the hand of a clerk, where by getting my one-and-only checking account with Bank Of America frozen, apparently for no fault, I started considering having another account as a back-up.
I wanted a back-up from where I can pay monthly bills and can meet any emergency expenses when primary checking account becomes unusable for any reason. This is not second chance checking account, but a second checking account in addition to an existing one.
I wanted a safety net around my finance. I wonder what could have happened had I been late by few more days in paying my credit card bills? A delinquency on all 4 cards could have resulted in a loss of 40 points of FICO credit score. Especially since I am planning to go for a car loan and a mortgage in near future, it would have had hurt me real bad.
I couldn’t have taken any more risk, and started with my research immediately after the Bank of America incident. Even my wife, who has very little interest in finances (she’s not exactly a big spender as well and gives value to money), mentioned once to me about the need for another checking.
Why we all should a second backup checking account?
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Tip: Do not use the debit card and checks that comes with your second checking account. better, store and lock them in a secure place. You don’t want to tap in to this account unless there is a real emergency situation. Come emergency, you pick up the check book or the debit card.
Now the next big step for me was to zero in on one bank, that will give me all freedom I need, a freedom from paying fees, a freedom from minimum balance obligation and a freedom to bank anywhere in this country.
As far as checking accounts go, you have options. Chase offers a $150 one time incentive which, they carefully mention with smaller font, is taxable at the end of the year. I had Wells Fargo offering in bold, “FREE checking account’. Well, both offers were great. They were free and had nation-wide branch network. But I was not really looking for a big branch network, I had Bank of America as primary checking account holder, which is largest bank in US, in spite of all its recent troubles to satisfy my need for a teller access. Luckily around the same time, a paper mailer came in our mailbox about Capital One interest checking account.
I found an answer
Capital one is the natural option for me to turn in to, because I was, in fact, more inclined toward an online or internet banking. I prefer everything in its ‘e’ form these days. Below are the reasons why, even after looking for other options, I went with Cap One.
* It offers 1% interest compared to my no interest bearing BofA account. * It is fee free, natural! * Reimbursement of $10 every month for ATM withdrawal, since it has none to limited ATM network * It offers check books, ATM card, bill pay and online account management. need less to say its FDIC insured. |
It took around 10 days since I hit that ‘Submit’ button to create online account, that I received the new Debit card and checkbook.
Since then, I moved most of the fund lying in BofA account to Capital One, Now I earn a dinner cost every month by the dollar I get from monthly interest.
Important: Why I did not go for other banks promoting cash incentives to open a checking account. Even $150 reward from Chase Checking is nothing as compared to the accumulated monthly interest I will earn from Capital one every month. I can surpass $150 within 2 years, with $10K balance in my account.
If I keep $5000 for 20 years, I would earn a sum of $6.2K with 1.1% interest rate, now, place it against Chase offer. As per financial experts we should keep $30K in emergency fund always. I do try to keep similar amount in my checking account, a compound Interest Calculator tells me that I will make $38K in 20 years if I continue to maintain $30k balance in Capital One.
Why Capital One offer is so lucrative
Credit card companies generally give interest on checking account because cost of fund for them is reduced via retail route, it is easy money for card companies to fund their credit loans this way. A 1.1 % interest rate is very cheap source of fund for them, if you put another 0.2% for administration and marketing costs, cost of fund to card companies is at most 1.3% when they borrow money from you, which is a lot cheaper than borrowing from market at 3% – 4% rate.
Capital one allows only one checking account per SSN, per their latest policy.
| Advice: Checking account is by no means an investment option, You should only put your emergency fund, an extra cushion of around $3 to 5 K and sufficient money for paying monthly bills. You might want to invest the rest of your savings in higher-return alternative investments. |
What’s my strategy from now on?
I made Capital One my primary checking account and BofA as the secondary account. I also adjusted payroll direct deposit with my employer and bulk of my salary will now go to Capital One and a lesser sum BofA will receive.
Disclaimer: This is not an advertisement for Capital One, you do your own research. My research found Capital One is most suited to my need.
Refer to this link for a list of banks offering interest checking accounts and compare the interest rates.
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[...] One Cent At A Time says open a second backup checking account. [...]
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Thanks for your nice comments, continue reading
Hope my future posts shall also help you
thanks for the offer, but I am not looking for it at the moment
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Why wouldn’t you get a reward checking account where you could get say 3-4% interest if you meet the qualifications and say 1% if you don’t (the equivalent of what capital one is giving you). Seems like you’d get more bang for your buck.
In this market, I wonder where are you getting 3-4% rate, do let us know, it will be helpful for our readers.
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Thanks you Lisa!
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