This is a guest post from Martin of Studenomics. Martin loves to write about financial issues on helping you find out what is a good credit score and more fun topics like deciding what to do after college.
For the longest time I was hesitant to join ING Direct. The interest rates were pretty decent a few years, but I simply felt a sense of loyalty towards my local bank that wouldn’t let me leave them. The employees at the local bank knew me on a first name basis. Some of the employees at the bank were even high school friends of mine. If any issues ever came up, I could walk over to the bank in 5 minutes and have everything resolved. Long story short, I’ve never been good at chasing the highest interest rates.
This is why I decided to keep my brick-and-mortar account even after I joined ING Direct.
Before you call me out on this, I wanted to share with you guys the problems with chasing banking rates:
Most great rate offers are temporary.
The advanced investors reading this can tell us all about introductory rates and the classic bait-and switch. For the new investor, introductory rates are simply not worth switching banks for because you’ll only get that rate for a certain amount of time. Then it’s back to the original rate that you had at your previous bank.
There’s always going to be fluctuations in interest rates.
Most of us will learn this the hard way because it seems like the grass is always greener on the other side. Now every time I receive an email from ING Direct, I don’t feel like opening it. Why? Because it’s about reduced interest rates. When I first signed up, they were offering very competitive rates. To be brutally honest, when I tried to find the best online bank account I realized that it was really difficult to come to a conclusion. Interest rates are simply not impressive at the moment for those of us looking to keep our money in a savings account.
You have a trusted financial advisor.
Why leave a financial advisor that you trust? I’ve heard horror stories from some of my readers when it comes to finding a trustworthy financial planner. Then there are those that find a successful financial advisor and have nothing but rave reviews about their experiences. I wouldn’t recommend that you ditch a relationship you have built with your financial advisor at the local bank for a few extra bucks per month.
Don’t you have better things to do with your time?
As a young investor you’re going to be much better off doing something else with your time. You can buy an investment property or focus on investing your money into your own career. I’ve seen the greatest results come from buying a condo in my early-20s and spending my money on courses and activities that would improve my standing in my field. There’s very little to gain from chasing interest rates. When you invest in yourself you just can’t go wrong.
Those are my thoughts on chasing banking rates. There are bigger battles to fight in the financial world. Why waste your time on this?
SB’s Thoughts: I do agree that when you have this kind of deep relationship with a bank or a specific branch of it, it’s not wise to switch bank just to avoid a few fees here and there. Unfortunately, I don’t have the relationship of any kind with my banks. I bank at many of their branches and I do not turn to them for financial advice. In the past I switched my bank account, and, very recently I wrote a post on 9 steps to switch bank accounts, this article caught mainstream media attention and was also included by consumerist in their round up.
It should be very wise on your part if you try to switch banks to earn interest on your checking account, many banks, especially the local credit unions offer high interest rates. Over time, the interest accumulation shall exceed any of the above opportunity losses described by Martin.
As always, I’ll repeat that there is no hard and fast rule of finance beyond one simple rule that, your spending should be less than your income, and the difference should go in to savings. It is up to you to decide whether you need to change your bank or keep the old trusted one.
Many thanks for reading this post through. I will appreciate your feedback and opinion.