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Rate Chasing with High Yield Savings Accounts

Just as you secure your money in a savings account at a bank with the highest interest rate, another bank offers a higher interest rate. With a quarter million dollars [1] in the bank from credit card arbitrage [2], I’m always on the look out for the best rate.

What is Rate Chasing?

Rate chasers move their money to the savings account that offers the best interest rate. They only keep it there until a better rate is offered elsewhere, therefore always “chasing” the best rate.

For example, I opened an account with FNBO Direct [3] awhile ago when they offered 6%, beating everyone. At the time I hadn’t even heard of them, but it turned out to be a great account, one that I still use today.

Volume Matters

Chasing a rate when you have $500 in the bank doesn’t make much difference. However, if you have $50,000 in the bank, a few basis points can make a big difference.

However, the nice thing is, when you have a bunch of accounts that are already open, and you link them together, you can easily move money around when the rates change.

Current Online Savings Account Rates

Here are some of the online savings accounts that I currently have and how they stack up:

Bank APY (as of 1/27/09)
Etrade [4] 3.01% APY
WTDirect [5] 2.81% APY
FNBO Direct [3] 2.80% APY
HSBC Direct [6] 2.45% APY
ING Direct [7] 2.40% APY
Virtual Bank [8] 1.01% APY

If a bank offers different rates for different tiers, I displayed the lowest rate in the table.

My Story

It’s no wonder I have so many accounts [9]. The aftermath of rate-chasing, is a bunch of savings accounts left behind, each one with no more than a few dollars in it.

I considered closing some of them, but then they started offering some free money [10] signups for you. So now I keep them open, in hopes that they’ll offer a sign up bonus to share. Or who knows, maybe they’ll have an irresistible interest rate that I’ll need to jump on.

More on Rate Chasing