Chasing Rates on Savings Acct

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Nurseninja

Confused about dryer sheets
Joined
Jun 24, 2022
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I have around 130k sitting in Cap One HYSA at 4.3. My Vanguard settlement fund is paying 5.27, roughly 1 percent more, but I’m not sure if there are expenses on the settlement fund.

This fund is my general emergency, high deductible, crap hitting the fan fund. It’s easy access with a checking account and debit card.

Would you chase the higher rate or let it ride? Are there any tax advantages to using the settlement fund or fees?
 
Do what’s right for you. An emergency fund should be in an insured account and not just the highest interest. I have cash spread across FDIC insured bank accounts with easy access, and some in money market accounts.
 
Check depositaccounts.com if you want FDIC/FSLIC insurance on that money. I like treasury mm funds, but be aware they most of them juice their yields with repurchase agreements. Vanguard changed their treasury-only fund a few years ago for the extra yield. Not a lot of risk, but just something to understand.
 
If you don't need the money right away, buying short term Treasuries with auto renewal is an easy way to go. Also exempt from state tax, if you have one. I generally buy in 25k increments at varying durations, and when I need some money, I take one off auto-renewal and let it go to my bank.
 
CIT Saving pays 5.05% (>$5k) FDIC insured and ACH transfer in 1 business day. I have both CIT and Capital One, CIT for saving and Capital One for paying bills.
 
As long as Government Money Market funds are paying near 5%, I don't see a reason to mess with savings accounts.
 
I don’t know your circumstances, but $130K in a rainy day fund seems like a lot. You can write checks on the settlement fund, so the things you don’t have that you do with the savings account are ATM access and safety.
I’d be very surprised if Vanguard’s money market funds ran into trouble. If that happens, I expect everything else will have also crashed.
For safety, you allocate some of the money to a CD/Treasury ladder with rungs maturing each month.
 
I don't maintain an emergency fund per se. Just have cash for the year (early in the year it's a pretty substantial "emergency fund" and I would liquidate investments or could utilize my HELOC for short term liquidity if I have an emergency (after CC float the first 3-4 weeks to figure things out).


I haven't chased HYSA or deposit incentives at banks. I am just keeping my cash in FMFXX at current rates. Before the yield was competitive I was buying T-Bills in varying maturities to get a better return on my cash. I'll probably do the same thing if the spread is worth the additional return again -especially if I expect rates to drop.


$130 is a pretty big chunk for emergencies. Biggest emergency I could see happening to me is my house being knocked down by a hurricane or my car being totaled and both are insured so my losses are somewhat limited. Healthcare could be one but hopefully the insurance would kick in after max OOP and if insurance failed me I have a decent balance in my HSA I would hit before any "emergency fund". Are you considering other mitigating accounts/insurance in deciding on holding so much cash (assuming that is emergency allocation and not just part of your investment AA).
 
We have a couple of CD ladders & a slew of 5 yr CDs, even a callable 10 yr.

The callable 10yr is 5.2% for 2 years guaranteed and then callable. We just feel like 5% CD's are better than the uncertain, next year for new money for now and could live, basic stuff, from the 5% average for the next 5 years...

Vanguard settlement for ours is 5.27 & I think it's a .09% expense ratio, not enough cost to push me away...
 
It's so easy to move money online these days, I wouldn't hesitate to move funds. Maybe move $100k over to your MMF and leave $30k at the bank for now.

I had a high yield savings account at an online bank and a MMF at my brokerage. When I saw that my MMF was earning more interest than the HYSA I just moved all of my cash to the MMF.

If/when HYSA's start earning more than my MMF, I may just re-open a HYSA and just move the cash back.
 
I am not a big fan of lots of cash. I am 60 and never had an emergency fund. We keep a few months of expenses in cash at Fidelity paying 5.17%. We use Billpay to draw off of it for all our bills. The cash is replenished about every 2-4 weeks with interest from a bond ladder. The ladder throws off 145% of our income requirements.
If I ever needed tons of cash, I am 24 hours away from liquidating millions.
 
FLSUnFIRE said:
I don't maintain an emergency fund per se. Just have cash for the year (early in the year it's a pretty substantial "emergency fund" and I would liquidate investments or could utilize my HELOC for short term liquidity if I have an emergency (after CC float the first 3-4 weeks to figure things out).


I haven't chased HYSA or deposit incentives at banks. I am just keeping my cash in FMFXX at current rates. Before the yield was competitive I was buying T-Bills in varying maturities to get a better return on my cash. I'll probably do the same thing if the spread is worth the additional return again -especially if I expect rates to drop.


$130 is a pretty big chunk for emergencies. Biggest emergency I could see happening to me is my house being knocked down by a hurricane or my car being totaled and both are insured so my losses are somewhat limited. Healthcare could be one but hopefully the insurance would kick in after max OOP and if insurance failed me I have a decent balance in my HSA I would hit before any "emergency fund". Are you considering other mitigating accounts/insurance in deciding on holding so much cash (assuming that is emergency allocation and not just part of your investment AA).
Click to expand...

How did you decide on FMFXX? I'm not familiar with that fund.
 
When all savings accounts and money market accounts were paying interest well under 1% (before about July 2022), I didn't mind keeping a large balance in my no interest checking account. In light of recent events, I have changed my ways.
 
Gumby said:
When all savings accounts and money market accounts were paying interest well under 1% (before about July 2022), I didn't mind keeping a large balance in my no interest checking account. In light of recent events, I have changed my ways.
Click to expand...

Back then I even paid my property taxes early just to get that out of the way for the year. Not today.
 
I’m all MM and T-Bills.

No reason to stick with HYS accounts if they offer subpar yields. It’s easy to move money around.
 
Chuckanut said:
Back then I even paid my property taxes early just to get that out of the way for the year. Not today.
Click to expand...

Back in the early 80s, when I was first starting out, I would write a check for my bills as soon as they arrived and put it in a stamped envelope. Then, I would write a date in the corner of the envelope, which was the day I planned to put it in the mail in time to get there by the due date. All to maximize the interest I was getting. Seems like we've come full circle.
 
I balance chasing rates with keeping things simple. I have to consider DW, who not as financially astute as I am, so I do not make it too complex. I will transfer between our 2 online savings accounts and our Fidelity and Vanguard Money markets to a certain degree. We have more in cash than the OP but it is spread among those four, based on the rates. They are linked so it is very easy to do.

I am not concerned about the Vanguard and Fidelity MMs. If those 2 companies have problems, we are likely in an end-of-days dogs and cats living together scenario :).
 
Last edited:
Morgan22 said:
It's so easy to move money online these days, I wouldn't hesitate to move funds. Maybe move $100k over to your MMF and leave $30k at the bank for now.



.
Click to expand...


+1. It’s not chasing unless you are making multiple moves, closing accounts, etc.
 
OP - I had the same issue with about $80K , I moved it to Vanguard settlement fund to:
Earn 1% more at ~5.25%
Pay less State tax, as the settlement fund earns interest from State tax exempt sources (I think this year it was ~50% tax free).

When I am clever, I will buy 4 week treasuries with some of it, figuring no emergency in the next 4 weeks.

Lastly, it only takes a couple of days to send the money to my checking account if I need to buy something big.
Besides I have credit cards to buy stuff, and then can pay them off weeks later.

You are giving up ~ $1,300 in income, and probably paying extra State tax
 
jollystomper said:
I balance chasing rates with keeping things simple. I have to consider DW, who not as financially astute as I am, so I do not make it too complex. ...
Click to expand...
This. I have told the story of my Uncle Pat here before: Pat was the ultimate rate chaser. Every time a CD matured he would shop the town (population 60,000) for the best rates. When Pat died his executor had to contact every single S&L and bank in town, looking for places Pat had put money. He kept no organized records.

These days, an Uncle Pat can put money anywhere in the world. Worst case the modern Uncle Pat's estate would probably have to be kept open for a year or more while the executor watched the emails and the snail mail for clues to assets he didn't know about.

All of our stuff is at Schwab..
 
I think CITI = Citibank.
 
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