Is Rate Chasing Bad?
“Rate chasing” is when you shift your funds between high yield online savings banks in an attempt to get the highest possible interest rate for your savings. The question on the table is whether rate chasing is “bad” for you, either from a savings or a credit perspective.
The answer is no. The act of opening a new bank account isn’t a negative event on your credit history. Some banks will do a hard inquiry, some will do a soft inquiry, but in general it is not seen as a negative event on your report. If you were to open a line of credit, that would be seen as a more negative event than opening a bank account.
As for whether it’s bad for your savings, it’s a little bad. You lose interest on the funds as they are being transferred so it takes a pretty big interest rate difference to make it worth it. However, it’s good to have a couple of them available for when you are moving new funds into the “high yield savings account” group. That way you can push it to the largest yielding account.
Who are the leaders now (As of August 1st, 2008)?
- Washington Mutual - 3.75% APY
- FNBO Direct - 3.50% APY
- HSBC Direct - 3.50% APY