Consider Trip Time in Rate Chasing
In an ideal world of instant transfers, you would always transfer your savings to the bank account with the highest rate. Choosing between a 3.06% APY (WTDirect) and a 3.25% APY (FNBO Direct)? Don’t bother, always go with the higher rate. If your money is at WTDirect, transfer it to FNBO Direct. No brainer.
However, banks have been using float for as long banking has existed and some banks float longer than others. On average, it takes about 5 days to get funds from one bank to another. Five whole days. In our era of electrons flying back and forth, it seems amazing something like a transfer would take that long, right? That’s because of the float, where the bank earns money while the money is in transit.
So, the next time you’re going to rate chase, consider how much interest you’re losing when the funds are in between banks.