Are you a rate chaser?

February 13, 2012 · 14 comments

I have a very big announcement to make on Wednesday, so big in fact, it’s taking up almost all of my free time and I literally can’t even sit down to write a blog post for you today. NO SOUP FOR YOU (always wanted to say that). Every now and again I get emailed guest posts from different companies and freelancers wanting to put stuff on my blog. Ninety-nine percent of the time I tell them no, but every now and again some useful information actually hits my inbox. Today’s guest submission is worth sharing. Enjoy :)

Rate Chasing – Is it worth it?

Due to the current economic climate, many people feel like they have to make their cash work harder for them in order to reap the rewards. It can be tempting to switch your credit card to a new card with a better rate of interest and in some cases it can be very beneficial to do so. However, if you compare credit cards and switch your cash from card to card, or if you compare savings accounts and switch from account to account, it does have its drawbacks that you should be aware of.

Do you know what rate chasing is?

Rate chasing is when you move your money from account to account or from card to card while you chase a better interest rate. Rate chasers are always chasing the best interest rates and promotional offers, and even if they’ve just moved account and a better account surfaces they will look to move again.

How much cash are you rate chasing with?

Rate chasing generally benefits those that have a lot of spare cash in their accounts. If you have $1000 worth of savings then moving savings account to one that offers you an extra 1% won’t really be that beneficial to you and it might not be worth your time. However if you have $100,000 in savings then 1% can make quite a big difference to your balance.

The potential worries of rate chasing

  • Risk Vs Reward – The main risk of rate chasing can be when a new product enters the market that offers a great interest rate, but it’s a product from a provider that isn’t very well known in the financial world.Do you risk transferring your funds to this new account even though you have worries about the provider? I have heard about times when people have moved to a new savings account in this scenario, some have really benefited by the improved interest rates, where others have been extremely disappointed due to the level of customer service that they received from the new provider. Ask yourself, is it really worth it?
  • The time and effort – Many people spend hours of their time checking for the latest high yield savings accounts interest rates, and whilst doing so they work out how much they could potentially save if they move their funds again. Doing this does take a lot of time and effort and for the majority of us who don’t have $100,000+ worth of savings it simply won’t be worth our time to move accounts.
  • The accounts terms and conditions – Some of the best high yield savings accounts have quite clear terms and conditions that don’t allow you to withdraw any money without incurring a penalty. Bearing this in mind, if you notice a savings account promotional offer that is better than your own, you need to take all your terms and conditions in to account before you decide to move or you could end up actually losing money.
  • Loses due to the transfer – It’s important to remember that if you decide to move account you won’t be accruing any interest whilst your cash is being moved, and also your funds will be unattainable at this time. So if your main reason for your savings account is to have an emergency fund, it’s definitely worth thinking about before you switch as it might take a while for your money to be available in the new account.

Rate chasing is really a question of risk Vs reward and you have to decide for yourself if you think it’s worth it. Have you ever rate chased? Does your current accounts offer any perks? Is it worth the hassle?

p.s. I hope to have a post up tomorrow, but I’m seriously staying so busy with this side project that it might not happen. Wednesday though, I’ll be spilling all the details and filling you guys in on what’s going on in my life. Are you excited, cause I sure as heck am :)

1 tom

I used to be, but with such low interest rates now, it’s not worth the time and effort. When banks were competing for your savings and interest rates were in the 4-6% range, that’s when it might be worth it, especially if you have a sizable cash fund.

2 Michelle

I’ve never been a rate chaser, but have thought about it.

3 StackingCash

Because savings is my sole investment I have to chase rates. Right now I’m at Costco’s Capital One online savings account because of the bonus interest rate. I’ve had my eye on American Express’s online savings account lately. I took advantage of Chase’s bribes to get me to open accounts with them. It was a hassle but after 6 months I will have $275 to show for that one day effort.

I think I have an idea of what your big announcement might be on Wed :)

4 Jennifer

Excited to hear your announcement! BTW, I got to eat at the real Soup Nazi’s “restaurant” (it wasn’t even a restaurant, it was a store front) when I was working on a project in NYC in the late 90’s. I so wanted to say that but feared I would not get any soup. It was a very regimented situation and you could tell by the signs next to his storefront that he didn’t particulary care for the show. Awesome soup, though!!

5 Savvy Scot

I think you hit the nail on the head when you say it isn’t worth the value of time that is required to searh for most people. Interesting post though – it may be more relevant rate chasing for 0% deals when you have a lot of Credit Card debt?

6 Mo D.

Not a rate chaser, but soooo looking forward to reading about the good news on Wednesday! I’ve got an idea what it might be… I’ll tell you on Wed. whether on not I was right!

7 BrokeElizabeth

I wish I had enough savings so that rate chasing would actually make a difference… maybe in about 10 years ;).

8 Angela

I may just have totally overlooked it at the end of a long day, but who wrote this guest post? I liked it, so I’m curious.

9 Jenna, Adaptu Community Manager

Can’t wait to hear what happening on Wednesday. Can honestly say I don’t chase rates. If it’s time to renew I’ll compare but that is about it.

10 c

I’m not a rate chaser.

I have no money.

The end.

11 C The Writer

Oops, that was me.

12 Drew @ Epicfinances.com

I’m not a rate chaser — I’m a return chaser.

Rate chasing is literally not worth my time.

13 Christopher

I was chasing rates a few years back when we had a ton of credit card debt. We were basically moving from one card to another to keep the no interest. We obviously would pay a balance transfer fee but it was no where near what they would charge in interest for the year or 2 yrs. Now I have about 12 credit cards in my name, I think that is plenty for me now. I keep the balances on a few cards and just let the others hang there in limbo. Yes sadly i was a rate chaser. :-(

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