DQOTD: Why Do I Keep Money at Ally (or other Savings Accounts)?

[Midpack]

It's dawned on me that I could pay less state tax if I held nothing at Ally, and had that cash in a Vanguard MMF (that we already own), where the Govt Obligations portion wouldn't be subject to state taxes and MMFs are paying higher interest as dividends. I keep about $50K at Ally for fast access, but access to our Vanguard VMFXX or VUSXX would be just as easy. I guess I've kept some cash at Ally in case we lost access to Vanguard for some reason, costs me less than $100 a year in state taxes.

I looked into holding my Ally cash in a MMF but IIRC that required an investment account and there were fees involved.

 

[pb4uski]

While most of our accounts are with Schwab, I keep some money outside Schwab for that exact reason... as a backup in case we were to temporarily lose access to those funds.

 

[audreyh1]

I keep a good chunk of our annual expense needs including estimated taxes to be paid during the year in a HYSA separate from Fidelity.

But we don’t pay state taxes, so I don’t have that consideration.

I’ve always had a B&M bank checking account separate from Fidelity. That used to be the only account we paid bills from. It’s still where we pay most of our bills electronically. Monthly transfers from the HYSA cover monthly expenses.

 

[jazz4cash]

“I keep about $50K at Ally for fast access, but access to our Vanguard VMFXX or VUSXX would be just as easy. ”
I was gonna ask how long it takes to transfer funds from Fidelity but it sounds like you’ve answered your own question. I do something similar but I use a B&M account for easy access even if I give up some interest or have to use a CD and risk the penalty if I need early access.

 

[FLSUnFIRE]

My cash (which is really just my annual expenses plus a cushion) is just in MMF at my brokerage. Moving it is pretty fast and if I have some sort of emergency that I need significant cash and can't float on a card I can access my HELOC instantly. Short of being ransomed, I cannot think of too many scenarios I'd need more than a few hundred dollars instantly available in cash.

 

[jollystomper]

I do not believe in putting all my eggs in one basket, so I have both Ally and Vanguard as my primary cash holdings and shift between them as needed or desired. I do not worry about the tax tail wagging the dog. My DW also finds the Ally interface easier to deal with than the Vanguard interface.

 

[PaunchyPirate]

I stopped using online-only banks (other than a small one at Schwab that I use for travel purposes) when the rates they offered dropped back down to nearly the same level as my MMFs at Schwab. I don't see the need for it. Most of my cash is in a Schwab MMF. I do keep $25,000 at my local brick and mortar PNC bank here in town just in case I need it NOW (and this also gets me free checking). I don't worry about the interest rate on this PNC account. It's not good. But it's not bad either.

 

[Dash man]

Our investment accounts are at Schwab and Fidelity, and we keep some cash in a MM at Schwab. We also keep cash in our USAA checking for general use expenses and about $75k at a local credit union for easy and fast access. We do have accounts at ALLY and Synchrony with small balances, just in case they become more competitive again.

 

[mebden]

I keep my needed cash at a HYSA online Bank paying over 4 APR and use Capital One for their Free checking and leave my IRA's alone on Schwab except for buying and selling my investments and dividends

 

[Purslane]

I do not believe in putting all my eggs in one basket either but then I am left wondering how many baskets I need.

I have accounts at Fidelity and Vanguard that I use solely for investments (fixed income, mutual funds, a few individual stocks). Compared to Vanguard, Fidelity has a better platform for learners, and brick and mortar stores. I am currently 2:1 for dollars in Fidelity vs Vanguard. I have considered moving more money into Fidelity but I don't know if it is a 'smart, safe' thing to do. How much money should one keep in a brokerage account? At a single brokerage firm?

I have 2 standard checking accounts at banks in my home state that I use to pay bills. One of them has a great bill pay platform and consistently terrible CD rates, the other bank is just the opposite.

I have 2 standard accounts at banks in my work state. My mortgage company 'made me' open a checking account to avoid some sort of idiotic and arbitrary (IMHO) monthly mortgage fees. For spite I keep the bare minimum in that account. It probably costs them more to maintain it. The other bank I keep for local emergencies and ATM purposes.

 

[sailor]

Related question: Why not SGOV vs. VMFXX for easily accessible cash?
VMFXX has a big transaction fee at my Schwab account.

 

[jebmke]

I keep enough at AMEX HYSA to fund our estimated taxes. The whole process can proceed without me once I get it set up each April. That is more for convenience of having it all on automatic.

 

[Midpack]

Related question: Why not SGOV vs. VMFXX for easily accessible cash?
VMFXX has a big transaction fee at my Schwab account.

Because I’m holding VMFXX at Vanguard with no transaction fees…

 

[spencnor]

Related question: Why not SGOV vs. VMFXX for easily accessible cash?
VMFXX has a big transaction fee at my Schwab account.

Here’s another good alternative to SGOV, a new ETF available at any brokerage.

VBIL -Vanguard 0-3 Month Treasury Bill ETF​

 

[OldShooter]

This idea of holding cash for fast access, purpose unstated, has always been a mystery to me. Our large TIPS holding can be liquidated in a couple of days; SWVXX settles in a day, and there are many other options for someone who doesn't need same-day settlement. I also have an unused $250K HELOC that IIRC can provide same-day cash.

I don't recall ever needing a chunk of cash so urgently that these options wouldn't have sufficed and I don't recall ever being in a situation where these options have not been available to me. So ... no "cash" for us.

 

[Sunset]

If one were in dire need of actual cash, to pay off (drug debt? , mafia ?) one could always get a cash advance on a credit card. Then pay off the credit card 3-4 days later with other cash, to keep the charges low.

 

[Sunset]

This idea of holding cash for fast access, purpose unstated, has always been a mystery to me. Our large TIPS holding can be liquidated in a couple of days; SWVXX settles in a day, and there are many other options for someone who doesn't need same-day settlement. I also have an unused $250K HELOC that IIRC can provide same-day cash.

I don't recall ever needing a chunk of cash so urgently that these options wouldn't have sufficed and I don't recall ever being in a situation where these options have not been available to me. So ... no "cash" for us.

I just thought of one situation that occurred long ago. The great blackout, where 5 states had a power failure.

No internet, no credit card usage, the only thing that worked was cash.

So I think keep a few thousand at home would be cheap insurance. Might be so low, some folks just think of that as wallet money.

 

[OldShooter]

I just thought of one situation that occurred long ago. The great blackout, where 5 states had a power failure.

No internet, no credit card usage, the only thing that worked was cash.

Very low probability event & actually some of the things that didn't work included store lighting and the in-tank pumps at gas stations. In such a situation I'd rather have a little cash than to not have cash, but having the cash would not be a major factor in my happiness. Our backup generator and its 10 gallons of gas would have been a bigger factor.

 

[mystang52]

We hold vast majority of our cash in Vanguard's VSUXX (Treasuries), after closing my Ally account. New Jersey taxes interest income, and because we have a sizeable cash holding may as well keep most of it in Federal obligations. My brick and mortar bank has a High Yield Savings account where we hold some cash as well.

 

[Al18]

My plan is very similar, though my dollar amount is smaller than yours. I don’t like keeping all my savings in one spot. I have automatic monthly transfer from savings to checking.

Since retiring, my NJ income tax rate has averaged less than 1%-no complaints.

Your current method sounds good.

 

[Koolau]

It's dawned on me that I could pay less state tax if I held nothing at Ally, and had that cash in a Vanguard MMF (that we already own), where the Govt Obligations portion wouldn't be subject to state taxes and MMFs are paying higher interest as dividends. I keep about $50K at Ally for fast access, but access to our Vanguard VMFXX or VUSXX would be just as easy. I guess I've kept some cash at Ally in case we lost access to Vanguard for some reason, costs me less than $100 a year in state taxes.

I looked into holding my Ally cash in a MMF but IIRC that required an investment account and there were fees involved.

While most of our accounts are with Schwab, I keep some money outside Schwab for that exact reason... as a backup in case we were to temporarily lose access to those funds.

I use a total of 3 B&M institutions to spread some extra cash in case I need it and I can't access Vanguard or one or two of the 3. Belt and suspenders, I suppose. Probably costs me way more than state taxes (in lost interest). But still better than hiding under the mattress.

 

[Jerry1]

We keep some funds in our credit union. It may be silly but I can’t imagine having all my funds in one institution. At home there’s some cash and some gold. Nothing significant. In the credit union is about a years worth of funds (assuming we had no other income), so proportionally a significant amount. The rest is in Fidelity and Midland (a MYGA). All our income gets deposited into the credit union and we transfer money out to Fidelity to keep the amount where we want it. Most of our bills are paid on the credit card so that money comes out of Fidelity.

Re: the OP, I guess I’d leave a smaller amount of money in Ally if the $100 cost concerned me but I’d still keep something in there.

 

[mrfeh]

This idea of holding cash for fast access, purpose unstated, has always been a mystery to me.

+1

Never kept more than a month's expenses in a savings/checking account. And starting last year, we're now using a Fido CMA account for "checking".

All near-cash is kept in a MMF with government debt obligations to reduce state taxes.

 

[audreyh1]

For the longest time we only had a Fidelity brokerage and our banking account. Sometime after 2008 when MMF interest went to 0 and stayed there for a very long time, I opened an online high yield savings account which paid higher interest than MMFs. We’ll probably always keep a HYSA for current year expenses.

 

[Midpack]

I use a total of 3 B&M institutions to spread some extra cash in case I need it and I can't access Vanguard or one or two of the 3. Belt and suspenders, I suppose. Probably costs me way more than state taxes (in lost interest). But still better than hiding under the mattress.

That’s overkill IMO, but whatever suits you.