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Do most SD'ers Pay Monthly Bills thru Multiple Hi Interest Savings Acts Instead of Ck Acts?

66 30 March 6, 2018 at 11:22 AM
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Question for the SD Finance Gurus,

I retired recently and been exploring ways to increase interest income. It dawned on me that I have probably been loosing money by keeping too much cash in a low interest checking act for monthly auto-withdrawls payment to the folks I owe.

After doing some researching, I found that some folks claim to make more interest income by paying creditors thru MULTIPLE hi interest savings accounts at institutions such as Ally, Dollar Savings Direct, etc. In general, these "High Interest Earners" (HIE) do not use a checking act.

These HIE's have their credit card (CC) companies and other vendors such as utlilities (who either won't take a CC, or require an uneconomical service charge) make monthly automatic withdrawls from their high interest savings accounts (Not their checking account).

Additionally, these HIE's have their paychecks or other income sources deposited directly in their High Interest Saving's accounts.

Multiple hi interest savings accounts may be needed due to Banking Regulation D" Section §204.2(d)(2) which limits six savings account withdrawals per month (seems silly, but that's a different topic). In my case, I have around 10 cash back CCs & monthly WDs, several utilities payments (won't accept CCs) and some other miscellaneous debtors that I pay thru Auto WDs.

I am considering restructuring my monthly bill payment structure to mirror above methodology, but would like to hear from those who have already gone down this path.

Also, if this methodology is sound, your suggestions will no doubtfully help others.

Thanks in advance!

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#2
Wanted to provide some more background on this by providing some background links.

https://hubpages.com/money/How-to-Bypass-the-Six-Withdrawl-Limit-on-Savings-Accounts

https://www.nerdwallet.com/blog/b...thdrawals/

Obviously, to use this strategy, the account owner would have to dilligently manage monthly transfers. Am hoping to get feedback from anyone who has gone down this path.

Thanks!

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I've never actually done it but I did look into it years ago, it to me seemed like a lot of work managing the money for very little extra savings. We're taking a few dollars a month saved for the average person, checking accounts earn almost no money, savings accounts earn more but its still just too little to justify the money management involved in this thread.

Investing in bonds through stock purchase will net more money annually, obviously, there are other things to invest in that carry more risk too but overall. I guess it comes back to each their own, maybe the few bucks a month is worth all that effort to some.
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I find myself doing funny silly things to save a buck here or there. Still discovering.
I think I started putting my funds into a savings account with high interest, of course it's not all that high.. it's 1% ish.. .. so currently it's 1.4% i believe.. obviously the more money u have, the more interest u accrue. And it's not a fixed percentage, unfortunately, otherwise we'd all be rich.

So, this is what I do. I have a savings and checking account with one company. The checking acct is at 0.50-0.6% interest rate which is higher than your normal wells fargo/chase/boa, etc. I have direct deposit with some of these major banks then I deposit it mostly into my checking for all the bills I have to pay that are kind of small. I pick 3-4 big ones to be paid from savings account (bills that are higher > $1k) then all the other smaller ones deducted from checking account. I keep a $1-3k buffer in checking account and majority. I pick 3-4 since u R only allotted 6 and you don't ever wanna go over the 6. I know with chase, I had an accident one time where I thought transfers from savings to checking were free, but they're not. It's unlimited deposits into savings but anytime things deducted from ur savings acct that counts as 1 out of the 6. I leave 2-3 remaining (buffer) for "just in case" scenarios: if I don't have enough $$ from checking acct to pay for it and i was unexpected, since the majority of $$ is in savings, I'd just use the savings. If you expect 2-3 big purchases, and rather than deducting those 2-3 directly from savings, just make a one time transfer for the amount of those 2-3 purchases added up to ur checking acct. For example, you already had used 4X and u have 3 more credit card bills with the amounts $2k, $3k, $5k. Just make a one time transfer for the amount of $10k and then have all these credit card bills deduct from ur checking acct. Yes, it is tricky since the day u make the transfer, you lose interest accrual, so try to time it 2-3 day before the due date for the transfer and then for me, 1-2 days before the actual due date. I know if you pay directly from the credit card company side (pay bill), it counts on that date you click submit. If it's due 3/10, you can pay on 3/10. I always like to pay 1-2 days before the due date, but that's just me. I always pay manually as opposed to automatic pay. I'm still learning and i'm afraid to pay on the due date for "just in case" scenarios. So with that scenario: if $2k bill is due on 3/20, $3k due on 3/18, $5k due on 3/28, I'd do a one time trsfr like 3/15 or 3/16 from savings to checkings and have those 3 bills pay closer to the due date. If you know for sure you don't go over the 6 and you just want to use the 6th to pay for the big huge payment on last day of month, then do 1 transfer of $3k + $2k = $5k and then another direct pay from ur creidt card company using savings acct closer to 3/28 deadline since once u pull $5k from savings out on 3/15-3/16 u already lose interest.

With the major banks wise - I just put the minimum into direct deposit to waive monthly fees: $250 for BOA; $500 for chase, etc. And then the rest of my paycheck goes directly into my savings account. Every time I have excess money (less credit card bills, I'd just deposit it to savings account).

Hope that makes sense. Lemme know if you need further clarification. I know it sounds complicated but if you get your system set up, it'll be okay.

Like frozenthorn said though, not worth the little amounts of $$.. and I kind of agree with him, but as long as you set it up in a way that makes sense to you, it's all good. I say that because the interest you earn from the high yield checking acct is taxable, so you're gonna pay taxes on that, lol rofl. So it seems like it's so much easier to invest your $$ elsewhere and earn higher than 1% APR or APY, i forget which.
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what do you call hi interest 1-2% is not hi


https://seekingalpha.com/article/...led-saving
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It is sound as long as it works for you.

I choose not to use automatic payments because I don't want to risk a third party accidentally taking out too much or making multiple withdrawals unexpectedly.

I use online bill pay for nearly all of my bills and I schedule them to be paid a few days in advance of the due date. I have requested that my credit card due dates be around the same time of the month as each other. This way, I can keep my checking account balance fairly low most of the time and schedule one big transfer from high interest savings to checking just before it is needed for the bill payments out of the checking account. Ally does not allow me to use a savings account as the source of money for payments through their online bill payment system.
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I use Lake Michigan Credit Union for checking (3% interest on first $15k if you have a direct deposit and make 10 debit transactions/month) and Discover Online Savings (1.5% interest). I make 4 payments from Discover since max is 6 and pay everything else from LMCU. After bills are paid each month, I transfer anything over $15k from LMCU to Discover. Discover also offers free checking (checks included) so I occasionally transfer money there if I need to write a check but I keep a very low balance since no interest is earned in that account.
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Seems way too complicated to me. Mentioned more or less already, but all you have to do is transfer whatever amount you need to pay your bills from savings to checking each month\prior to when you decide to have them auto bill. You can schedule that automatically or do it manually. Really not that hard to do and not that complicated. Leave a decent buffer so you do not get hit with a low balance service charge.

Or use Bill Pay and push the payments as opposed to having them pull (which is safer imo anyway).
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Quote from phillint
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what do you call hi interest 1-2% is not hi


https://seekingalpha.com/article/...led-saving [seekingalpha.com]
1-2% is high interest in the current savings account climate. There are also some 2%+ options but they have requirements & require some work.
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Thanks guys for opening my eyes to other possiblities and saving me lots of work for little return! I am still sort of contemplating how to design my banking/bill payment system. I love the idea of using one of the bill pay services and some of the other info you guys posted.

Was wondering if anyone was aware of any financial forums that discuss strategies for banking and bill payment? If so, please post these links.

Based upon your input, I now have new questions/concerns that perhaps a dedicated forum could address. For instance:

On the one hand, I can see the benefit and ease of using your bank's bill payment system. On the other hand, free bill pay services such as MInt Bill Pay are portable and would allow me the ease of changing banks, without a lot work, if banking circumstances changes.

Lastly, I realize the term "Hi Interest Savings Rates" is an oxymoron. I was simply using this term to distinguish between low interest rates offered by brick & mortar banks (USAA) as compared to higher interest rates paid by "Internet Banks" such as Ally. I realize these rates are pawltry and not comparable to other rates of return offered by other investments; however, I am revamping my banking / bill payment process and I would sort of like to automate the process in the most efficient manner with the greatest possible return and leave it alone.

Thanks again!

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I have my income direct deposited into my checking, and then manually transfer to savings whatever I don't need to cover my regular expenses. I'm still using Microsoft Money to keep track of my checking account, and the Cash Flow view is invaluable for this. It shows me my approximate account balance over the next 30/90 days based on my average income and upcoming bills, and whatever is over my buffer I transfer to savings. I have yet to find any other software with a similar feature.

All my bills are setup for automatic drafts. The amount due is drafted on the due date, so I maximize the float. The only issue I've had with this is being charged late fees, and it has only happened 2-3 times that I recall. Each time, I called the biller and pointed out that I have automatic payments set up and their system didn't process the payment when it should have had. The late fee was always reversed.

The beauty of my system is that it pretty much runs itself. Maybe I'm not maximizing what I have in savings, but if I'm lying in the hospital or something, I can rest easy knowing my bills are taken care of for a few weeks.
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Quote from PaCuLard
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For instance:

On the one hand, I can see the benefit and ease of using your bank's bill payment system. On the other hand, free bill pay services such as MInt Bill Pay are portable and would allow me the ease of changing banks, without a lot work, if banking circumstances changes.

Imo, there is nothing to be gained by trying to put your banking into some free service provider that gets in the middle. Opening up a new personal checking account takes all of 5 minutes with any of the online banks and maybe 20 minutes if you walk into a B&M branch. Transfers can all be done electronically. You are not really achieving anything outside of potentially degrading your security imo.

All a service like Mint does is expose your banking info to a 3rd party with no associated responsibility for your data security outside of potentially going out of business (which is a concern with third parties like this in and of itself) by being sued for a massive data breach. The banks at least have to answer to various government entities and are directly responsible for your money on account. If mint goes belly up they file Chapter 11 or 7 and shrug their shoulders. And that is to say nothing of who a service like Mint has working for them and what kind of screening and security policies they have both in hiring and in operation. Store it yourself locally. Login to your bank's website because they already have your data when doing online transactions and do so from a secure PC with a VPN service running. The fewer points or entities you release your info to, the more secure it is.


My 2 cents.
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Quote from YanksIn2009
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Imo, there is nothing to be gained by trying to put your banking into some free service provider that gets in the middle. Opening up a new personal checking account takes all of 5 minutes with any of the online banks a....
YanksIn2009,

Great advice! Question: If you are implying using your bank's own native bill pay service and you subsequently change banks, don't you also have to repopulate all your creditors into (account no, payment date, etc.) into the new banks bill payment service? Or is there a way to transfer all your creditor data bill pay data from the old tbank to the new bank? I am just trying to get a feel for the nonrecurring/recurring effort in addition to $ interest and security in my banking / bill pay system before implementation.

Thanks in advance! Some great posts here that will probably benefit many.
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Quote from PaCuLard
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YanksIn2009,

Great advice! Question: If you are implying using your bank's own native bill pay service and you subsequently change banks, don't you also have to repopulate all your creditors into (account no, payment date, etc.) into the new banks bill payment service? Or is there a way to transfer all your creditor data bill pay data from the old tbank to the new bank? I am just trying to get a feel for the nonrecurring/recurring effort in addition to $ interest and security in my banking / bill pay system before implementation.

Thanks in advance! Some great posts here that will probably benefit many.

As far as know, yes you would have to re-populate it, but that is a one time, minor inconvenience imo. Plus, if you basically put everything on a credit card or two, then the only things outside of the credit cards you likely need to re-enter are your utility (gas, electric, water) info and maybe some small business type stuff like a landscaper, electrician, etc. Most everything else you can pay by CC, pay in full each month and get the 1-5% kickback on.
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Quote from YanksIn2009
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Imo, there is nothing to be gained by trying to put your banking into some free service provider that gets in the middle. Opening up a new personal checking account takes all of 5 minutes with any of the online banks a....
YanksIn2009,

Thanks. Got to thinking about this and came up with a work-around. I can simply create a document that contains all the creditor data and securily store. When I change banks, I can copy and paste all the account info into the new bank's bill pay system.
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