How much do you save a month on average? Does your money earn any interest? Online banks are where you will find the best interest rates outside of a CD or using the stock market. We were previously with ING, the once hyped, now Capital One-owned online bank. We decided to transfer our funds elsewhere once the buyout happened and I realized how many times they had dropped our interest rate in one year. The brick and mortar banks are useless if you are trying to earn interest. We only bank with Wells Fargo for checking, linked to a small savings that we use as an emergency fund because it’s easily accessible. Their savings account rates range from .01% to .08%. With figures like that, you better believe our savings for a quality frugal lifestyle are not with them.
While hunting for an online bank, you will find mostly bad reviews because everyone hates banks. Do not be deterred dear stranger, as banks aren’t the happy place you go for fun. Unless we’re talking about some no-name suspicious looking website–pick your bank based off their savings account interest rate, buzz or presence on the web, whether they are FDIC insured and how much the interest rate has gone up or down in the last few years. As of today, CIT Bank, Barclays, Discover and Ally are the highest online rates out there– ranging from .85% to .95%. Still historically low, but better than the bigger banks.
In addition to your separate online savings, Wells Fargo customers can sign up for an account called Way2Save. Every debit purchase and automatic bill withdraw (or bill pay transaction) is tallied. At the end of each business day, $1 for every one transaction is transferred from your checking to your linked savings. In other words, if on Thursday I use my debit to grocery shop, fill my gas tank, buy a coffee and shop at Target; $4 would be transferred into my Way2Save on Friday. Last fall, we converted our crappy WFB savings into the less crappy W2S. It’s the most thoughtless saving I have ever done–not once have I felt the hit in our checking from the constant deductions. The interest rate is a pathetic .01%, which is why the money outside of the emergency fund shouldn’t stay there for long.
The possibilities with the additional cash are really exciting. For the strict saver, it’s probably an extra $200 a month that you didn’t have to think about putting away. The most we have had transfer over was $21 (after the weekend), which felt simultaneously good and bad. Add that to what you’re hopefully already putting toward saving every month and things are looking pretty good. So far it has been more of a luxury sum for us, where we use the set aside money for a calculated purchase of our choice. It’s a sweet spot where we can pay for something without feeling like we’re actually spending our money. Next week I’ll talk about something Way2Save bought us and you’ll see what I mean. I would recommend this approach to people who are comfortable in their saving methods outside of this system and just want to have a little guilt-free spending money. For others, it could be all they save that month and that’s really great (in fact, better). Another use is to link it to your retirement account and have your monthly contributions made that way. I might even take my own advice and switch it up!
While this account charges a $5 monthly service fee, it is waived if you have ten debit transactions a month. Remember the part about $21 in one weekend? Yeah, not a problem for us. But you can also avoid the fee by keeping at least $300 in the account at all times or forgoing the entire debit idea and just setting up an automatic transfer into the W2S account of $25+ a month. I know it’s only $5, but if the bank offers a way to avoid those fees, why wouldn’t you take it? The key here is to recognize that even if you’re looking at $1 a day, you just added $365 to your year-end savings that you wouldn’t have otherwise. Or you just paid for your round trip airfare for that weekend getaway. The AppleCare that used to add insult to injury? You just bought it. Let’s face it: we’re a financially undisciplined society and more likely to pull from savings or spontaneously swipe even if we can’t afford to. Here’s a way to mitigate that urge. Do you have a crappy Wells Fargo Bank account? It just got cooler.