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Move emergency fund from money market to miles earning/high interest checking acct?

Move emergency fund from money market to miles earning/high interest checking acct?

Old Nov 3, 12, 7:31 am
  #1  
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Move emergency fund from money market to miles earning/high interest checking acct?

Apologies in advance if this isn't the right forum to post in. OMNI seemed too generic.

Here's the scenario: I have about one year's worth of expenses in a money market account paying a tiny fraction of one percent--maybe 0.25 % or less. I expect to grow the account to possibly 1.5 year's worth of expenses--or perhaps 2. It's painful to earn so little in interest as well as not even be FDIC insured (although money market accounts are pretty safe).

What are some good options for making this money at least slightly more productive while keeping it liquid for unexpected events (job loss, etc):

A) Putting the money into a checking account that earns points or miles?
B) Putting the money into a "high" interest checking account (maybe Ally Bank or Chase)?

If I'm earning practically zero interest, I may as well get some miles. Although some compound interest might be nice.

Can anyone recommend specific accounts / good deals for either A) or B)? I currently am interested in building up additional UA, BA, SW, and to a lesser extent AA miles. Love my Chase Sapphire card due to the swiss-army-knife transfer options (a bit like SPG). Might Chase have a checking account that might fit my needs? I'm thinking a high interest checking account might be best. But if there are any particularly good mile/points promos for opening a checking account, maybe that's a better pay-off?

In any event, I want out of my money market account since it's doing nearly nothing for me.
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Old Nov 3, 12, 8:06 am
  #2  
 
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BankDirect offers AA miles (although no more interest) for money sitting in checking and savings.

Other than that, how about float for bluebird and all the other FF tricks talked about in this forum. Some require a lot of float.

Brett

Last edited by mia; Nov 4, 12 at 9:00 am Reason: Remove referral.
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Old Nov 3, 12, 8:15 am
  #3  
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Originally Posted by brettalb View Post
BankDirect offers AA miles (although no more interest) for money sitting in checking and savings. PM me for a referral, since we both get AA miles as a bonus.

Other than that, how about float for bluebird and all the other FF tricks talked about in this forum. Some require a lot of float.

Brett
Thanks Brett. I'm aware of BankDirect. Not aware of any others. AA miles would be my last choice if I went the miles/points route. So I'm interested in other potential options. Not sure what you mean by float tricks. If that requires a lot of moving around of funds from month to month, or every few months, I'm not sure I'm interested in that approach. Would just like a good, solid long-term place to park emergency fund money that yields a bit more than a money market account.
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Old Nov 3, 12, 10:12 am
  #4  
 
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Ladder it across CDs maturing every 3 months and reduce the cash in your MM account to 3 months.
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Old Nov 3, 12, 10:35 am
  #5  
 
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What skylane said, with the caveat that there is no longer any such thing as a high interest checking account. And BankDirect actually would cost you money -- something like $12 a month if I remember correctly to earn an essentially trivial value in interest and AA miles. Keep in mind that anything earned from a savings/money market/bank account is supposed to be reported on a 1099, so you pay tax on the marginal value of the interest/miles you have earned. If the miles are valued too high, you gain nothing and have lost flexibility over holding cash.

SO, yes, the CD ladder, while sad when you look at the interest rates of time gone by, is probably the answer -- it's easy, any taxes or 1099s will be straightforward based on what you actually earned instead of arguable and invented amounts (as may occur with miles), and while ANY savings/money market/CD is currently losing money to inflation, it's the least ugly of a lot of ugly choices.

Float/churning etc. for miles is not for the person looking for park emergency funds. It's for the extremely well-organized player who lives in an area where they can actually take advantage of some of these rather complicated schemes. If you're looking for an equivalent of parking your money in a money market, but earning more than a money market's 0.0007% return, then better ally or ingdirect or whatever. But you cannot go from 12 months expenses in an emergency fund to 18 months expenses on interest rates alone. THere is simply no safe, legal, FDIC insured way to do this. Interest rates in a mature economy are just too low. My personal choice is the ING account plus adding to it in other ways besides interest, such as rebates, bonuses from getting their (free) checking account (I got a $50 bonus which I think is still available), and other little hobby ways of adding money. Good luck. I'm old enough to remember the days of 18% returns on our money markets but, alas, those days will not come again. Well, maybe if inflation hits 36% but otherwise no...As things stand, I get FDIC insurance but not much in the way of interest payments. To grow my savings, or to at least keep on track with inflation, there is no substitute for continuing to add new money.
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Old Nov 3, 12, 11:00 am
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Capital One offers a checking account paying about 1% for the first year; Ever Bank offers a similar rate, but only guarantees it for six months.

You might also consider moving some money into Series I U.S. Savings Bonds. You cannot redeem for the first year, and after that, there is an interest penalty if you redeem within five years of purchase. But even with that penalty, you're still likely to do better than with a bank, as long as you do not need to touch the money in the first year. You can elect to defer paying income tax on a bond's earnings until you redeem it, and the interest earned is exempt from state and local income tax. But there is an annual purchase limit of $10,000 per calendar year per person. Note that bonds earn interest from the first day of the month when purchased, so it's wise to buy bonds near the end of the month, and redeem them at the start of a month. More info at:

http://www.savingsbonds.gov
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Old Nov 3, 12, 11:29 am
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Move emergency fund from money market to miles earning/high interest checking acct?

Not sure much money we are talking about but Fidelity has some good deals on new accounts of $100,000 or additional funding. Check the Fidelity thread. Once your money is in there you can buy CDs or other low risk investments.

Not to go too far off topic but is an index fund too risky for you? Over time inflation is going to kill your investments true value.
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Old Nov 3, 12, 11:49 am
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I put virtually all my savings in municipal bonds.
They're quite safe.
Tax-free bonds earn about 4%, taxable around 5%.
They can be cashed in within 3 business days.
Works great for me.
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Old Nov 3, 12, 11:55 am
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Originally Posted by onthego15 View Post
I put virtually all my savings in municipal bonds.
They're quite safe.
Tax-free bonds earn about 4%, taxable around 5%.
They can be cashed in within 3 business days.
Works great for me.

they are not risk free though, unless you hold to maturity. 4-5% is probably a longer term note.
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Old Nov 3, 12, 12:06 pm
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Originally Posted by peachfront View Post
What skylane said, with the caveat that there is no longer any such thing as a high interest checking account. And BankDirect actually would cost you money -- something like $12 a month if I remember correctly to earn an essentially trivial value in interest and AA miles. Keep in mind that anything earned from a savings/money market/bank account is supposed to be reported on a 1099, so you pay tax on the marginal value of the interest/miles you have earned. If the miles are valued too high, you gain nothing and have lost flexibility over holding cash.
First of all, regardless of how the IRS views mileage earning from banking accounts, BankDirect has never issued 1099s in the past, to my knowledge. In fact, I looked through this helpful thread: http://www.flyertalk.com/forum/miles...all-banks.html and as of March 2012 they still weren't. Will that continue? It's unclear. But their past history has been to treat the mileage as not subject to reporting.

Furthermore, $12/month could easily be worthwhile. With $200k on deposit, the checking account would pay 20,000 miles per month. At a conservative valuation of 1.5 cents/mile, that's worth $300. It's a net yearly return of almost 2%. You're also looking at a 22k signup bonus.

There is a risk that BankDirect will change its mind about 1099s... but so far they haven't.

There is a lengthy discussion about the value of these accounts, right down to a mathematical model for calculating breakeven: http://www.flyertalk.com/forum/miles...nk-direct.html

Last edited by mia; Nov 4, 12 at 9:08 am Reason: Inflammatory characterization
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Old Nov 3, 12, 1:09 pm
  #11  
 
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No reason to go with a CD.

As said above,
Cap1 gives 1% for a year.
After 1 year it dropped to 0.5 %.
Called Cap1, they said they would reset the 1% but it never happened,
so I moved everything to ING for 0.7-0.8%,
and now moving to an AMEX savings at 0.9%.

Last edited by MrHalliday; Nov 3, 12 at 1:32 pm
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Old Nov 3, 12, 2:32 pm
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+1 for AMEX savings account. The rate is 0.9% and the money is FDIC insured. Also I have been using it for a few months now, and it is very easy to transfer money between this and your bank's checking account electronically any time you need it. Also you can setup automatic transfers, to save a little bit from every paycheck if you wanted to.
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Old Nov 3, 12, 3:10 pm
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Have you ever heard of kasasa checking? They are FDIC insured and can give you up to 3% up to $10,000. Only catch is you have to make 10 or so transactions each month.
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Old Nov 3, 12, 4:19 pm
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Originally Posted by nocloud View Post
they are not risk free though, unless you hold to maturity. 4-5% is probably a longer term note.
No need to hold until maturity. If you need your money back, you can always sell. Any investment has some risk. Most municipal bonds are low risk comparatively.4-5% is what my portfolio holds right now.
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Old Nov 3, 12, 4:31 pm
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Originally Posted by onthego15 View Post
I put virtually all my savings in municipal bonds.
They're quite safe.
Those wouldn't be Harrisburg, PA, municipal bonds, by any chance? No? Perhaps Stockton, CA, then?
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