Where to Park $5000 for the Best
Return (Savings/Checking)
The method described below will
bring in approximately $289 on the initial $5000 for an overall rate of return
of 5.78%.In order to maximize the $5000 that we have available we are going to spread the money across multiple accounts. We first will establish a primary account that will be our main hub for earning interest, and then we will borrow money from this account to earn money from special bank promotions. While the banks offering these promotions do not offer competitive interest rates, we are only after the short-term gain from the promotion. If the rate is greater than the 2.05% APY that we will make in our checking account and the fine print seems attainable, then we go through with the deal.
The highest paying checking account currently available in Clark County is at People’s Community Credit Union. This will be our interest hub. They currently pay 2.05% on their Loyalty Checking account and hey also pay 7.5% on their Loyalty Savings account (On first $750. After that the rate decreases significantly to 0.05%). The more money you keep in this account, the more money will be paid to you each month in the form of a dividend check. It may seem small at first, but it will gradually build to a significant amount of extra cash.
To maximize your profits on this account: Maintain a balance of $750 in the savings account,
no more and no less. When you receive your quarterly dividend check, transfer
the dividend amount into your Loyalty Checking where it will make 2.05% instead
of the 0.05% (Remember anything over $750 only makes 0.05% so we’d rather have
it making 2.05%). Be sure you meet all
of the requirements each month to get your 2.05%. I have posted the requirements below.
There is a way to ALWAYS qualify for the dividend on your
bank / credit union account. Typically there is a minimum of 5-12 debit
transactions each month in order to qualify for a high interest dividend rate
(@ Peoples it is 10 debit transactions per month). When it gets towards the end
of the month and you know you don’t have enough transactions to qualify, you
can use the following strategies. One way is to donate $1 to a charity online
10 times each month. While this does work, must of us are unwilling to spare
that many funds every month, but we can adapt that concept to benefit
ourselves.
This will
require you create a blog page (I recommend www.Blogger.com), and a PayPal account at www.paypal.com. Both accounts are free and take minimal time to setup.
Once you have established these accounts, create a "Donate" button
through PayPal and copy and paste the code into your blog
Every month “donate” to your page and meet the transaction requirement for your
account.
For example, if each month you needed to hit a minimum of 10 transactions for a
People’s CU Loyalty Checking account, you would “donate” 10 times @ $0.01 per
donation costing $0.10 overall. Note you will need to use a different email
address for the donation than the one you provided to open the PayPal account.
After the 10 transactions have cleared, you can transfer the money from your
PayPal account right back into your checking account.
Chart from http://www.peoplescu.org/save-loyalrate
We will then take advantage of the following
promotional offers:
$25 for opening an account with ING Direct.
The minimum balance is $250 to open the account.
$25 is a 10% return on $250
$10 for opening an account with Virtualbank.The minimum balance is $250 to open the account.
$25 is a 10% return on $250
The minimum balance is $100 to open the account.
$10 is a 10% return on $100.
$125 for opening an account with Chase
The minimum balance on this account is $1500 to not be charged a $10 service fee each month. It is more beneficial for us to keep the money from the bonus and not pay out the fee of $60 ($10 per month times the minimum number of months the account must remain open) than to leave the $1500 in our hub where it will only make $30.75 @ 2.05% for the year.
$125 is an 8.33% return on $1500.
Keep in mind on the ING Account and the Virtualbank accounts we only need to keep $5 in the accounts to keep them open. After the account is open we can transfer the remaining funds back to our hub at People’s CU where we will make more interest. After the accounts are open we will transfer $245 from ING and $95 from Virtualbank. These accounts just need to remain open for 6 months to not forfeit the bonus. The bonus generally takes 30 days to be deposited into the accounts and cannot be withdrawn until the minimum time frame for opening the account has been completed.
Investment Breakdown
5000 – 750 (Loyalty Savings) - 250 (ING) – 100 (Virtualbank) – 1500 (Chase) = $2400
$2400 in Loyalty Checking @ 2.05% with monthly dividends
$750 in Loyalty Savings @ 7.5% with quarterly dividends
$250 in ING Direct for 1 month then reduce to $5 and transfer $245 to Loyalty Checking @ 2.05%
$100 in Virtualbank for 1 month then reduce to $5 and transfer $95 to Loyalty Checking @ 2.05%
$1500 in Chase for 6 months then close account and transfer funds to Loyalty Checking @ 2.05%
$2400 @ 2.05% for 12 months = $49.20
$750 @ 7.5% for 12 months = $56.25
$5 @ 0.8% for 12 months = $0.04 (ING Direct)
$5 @0.83% for 12 months = $0.04 (Virtualbank)
$245 + $95 = $340 @ 2.05% for 11 months = $6.40
$1500 @ 0.01% for 6 months = $0.07
$125 @ 0.01% for 5 months = $0
$1625 @ 2.05% for 6 months = $16.65
$35 @ 2.05% for 6 months = $0.35
$5000 + 160 (bonus $) + $129 (interest) = $5289
Average return of 5.78%
This number is an overall estimate. The end number will vary as I used the APY rather than the APR in the calculations. I also used round number estimates instead of computing the average daily balances.
We can increase our return by opening as many promotional accounts as we can find using money from the hub to fund the accounts. ING, Virtualbank, and other banks also offer referral bonuses when your friend opens an account so you can take advantage of this as well.
Resources
https://home.ingdirect.com/orange-savings-account
http://www.peoplescu.org/save-loyalrate
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