GREAT INTEREST RATES - EARN 3.42% INTEREST RIGHT NOWWe know it may come as quite a shock, but federally insured liquid bank accounts paying great interest rates are still out there and available today. Right now, and even in this extremely low interest rate environment, we are invested in FDIC-insured, completely liquid bank accounts easily earning 3.42% interest. It is harder than ever to find them, and we may have to jump through a few hoops in order to actually take advantage of them, but it is well worth it and very easy now that we have established an automated system for earning our high payout. If you are reading this for the first time, you are probably thinking, "what do you mean? The highest rate I've seen anywhere for a federally insured liquid bank account is barely over 1%." And you're right, even the very most competitive CDs (where you are forced to lock your money up for a set period time) are yielding well under half of the rates we are earning in our completely liquid rewards checking accounts.
SmartMoney Magazine published an article in 2009 highlighting various types of FDIC-insured high interest paying bank accounts. Take a look at the article and pay close attention to the section on Rewards Checking Accounts: SmartMoney Article highlights great interest rates Great interest rates indeed! When this article was written, the very best of these rewards checking accounts were returning 6%. As of the date I'm writing this (5/10/2010) the highest yielding of these types of accounts are returning 5% (and for the most part, these 5% deals are only available for residents of certain states). However, there are a number of banks paying as high as 4% on their rewards checking accounts which are available to residents of all states. Not as high as in the SmartMoney article but still unbelievably great interest rates considering the times. If you have significant amounts of cash ($10,000-$25,000) that must remain liquid and FDIC-protected, you simply must learn more about rewards checking. You probably noticed from the SmartMoney article that there is a small "catch" with these accounts. Some pretty significant hoops to jump through in order to "qualify" for these great rates. GOOD. There should be! Otherwise they could not afford to pay these kinds of rates. The banks that offer these are fully aware that a high percentage of the people that sign up for these accounts will not remember to meet every single one of the monthly requirements on a consistent basis and will therefore not always qualify for their out-sized returns. They lure in a lot of depositors with the high rates but have built in their own safety mechanism to prevent a large percentage of them from actually earning these rates. Again, GOOD! If you know anything about us by now it is that we love to find loopholes and systems to exploit a great opportunity when we see one. So don't worry about all the hoops. We have figured out how to easily jump through each of them. Note that our strategy for caputuring these significant returns pertains solely to accounts where you will be keeping a significant amount of money ($10,000 or more). We have tons of experience with rewards checking accounts as we have opened and maintained many different accounts over the years to hold and grow our Show-Me money as part of our Show-Me-Their-Money strategy. (If you are just popping onto this page as your initial entry to our site, don't worry for now if you are not clear on what our "Show-Me" money or strategy is. In a nutshell, we simply borrow money for 12 months at 0% and invest it at more than 0%, keeping whatever interest we earn before returning the originally borrowed money. As of 2009, we were borrowing as much as $500,000 at 0% and storing and growing it in multiple rewards checking accounts. So yeah, we have experience in opening and maintaining these accounts). Let's dive in and explore rewards checking accounts a bit further and talk about the hoops that need to be hurdled each month. In general, and with most rewards checking accounts, there are 3 main requirements that must be met every month in order to qualify for a great interest rate (we will go into greater detail later on exactly how to automate each of these steps): 1. Use your ATM/Check Card for credit card purchases a minimum of 12 times each month. 2. Perform at least one direct deposit or ACH payment each month. 3. Log-on to your account at least once a month and agree to receive your monthly statement electronically.
Factor #3 is easy enough as we are just giving up paper statements in favor of reviewing our balance electronically. No problem. It is fun to go online each month and see how quickly our account is growing. We log on multiple times a month anyway but, just to be safe, we have also set up an outlook reminder on our calendar to pop up once a month signaling us to log in to our account. Factor #2 should not be particularly difficult either. Direct your employer to direct deposit a small portion of your monthly paycheck to this account each month. This is a simpler process than you may realize so contact your employer and find out how to do it. If for some reason you can't or don't want to choose the direct deposit option, you need only to set up one ACH payment per month. Put simply, an ACH (Automated Clearing House) payment involves paying any bill of your choosing directly from your checking account by providing your vendor with your bank account info. You are probably already paying your credit cards this way. Or your electricity bill. Or your mortgage. Or your cable bill. You are simply giving the vendor the authorization to debit your bank account every month to pay your bill as opposed to sending them a check in the mail. When we implement our Show-Me strategy, we just have our credit card payment pulled each month directly from this account. If you're not implementing or familiar with our Show-Me strategy currently, don't worry about it right now. This page is specifically about showing you how to earn great interest rates on your money in Rewards Checking accounts whether it be your own money or your Show-Me money. Factor #1 is clearly the most restrictive of the hoops to jump through. We have to remember to use our bank card for credit card purchases a minimum of 12 times every month. Can we really remember to make 12 separate credit card purchases using our bank card every month? And if we are constantly using our bank card for credit card purchases a minimum of 12 times a month, then our bank account is going to quickly get smaller instead of bigger. In a perfect world, we would not be whittling down the balance in this account at all because we want all of our money to be earning the high interest rates. It makes a lot more sense to have our day-to-day transactional expenses come out of one of our accounts that is not earning such exceptionally high yields. Good news, we have a solution.
In order to clear this hurdle, we need only set up 12 payments to be drawn automatically from our rewards checking credit card each month (when you open a rewards checking account you will receive a credit/debit card linked to your new account). If we can find a way to make 12 separate credit card purchases at a low enough price each month (say $1 each) then we can meet this requirement with very little impact to our bottom line (we will explain this math in a little bit). If the price is low enough, it doesn't even matter if what we are paying for is actually worth nothing to us. This may sound odd at first glance but let me explain. If you currently have $25,000 which must remain liquid and FDIC-insured sitting in a money market account which earns 1% annually, you are effectively earning $250 on that money for the year ($25,000 x 1%). If, instead of leaving it in the money market account, you were to shift it into a rewards checking account earning 4% annually, that $25,000 would earn $1,000 for the year ($25,000 x 4%). Now, assume that each month you are making a total of 12 separate $1 automatic payments that you have set up so that you don't have to remember to do anything to qualify for the rate. $12 x 12 months equals $144 total in payments for the year. Now, even if you were literally buying chunks of absolutely nothing with your $1 payments, you would end up earning $856 total for the year ($1,000 - $144) a return more than 3 times what you are currently earning. At $1 per transaction we knock down our total overall return for the year by only a few points and allow ourselves the freedom to earn an incredible rate, on auto pilot. The $12 we are "giving away" each month is a low enough amount that we are still earning an exceptional interest rate even when figuring this in to our total return. Let's show the math quickly on one of these rewards checking accounts that pays 4% on the first $25,000 in our account: $25,000 x 4% interest = $1,000 in interest for the year $12 each month for 12 months = $144 going to vendors each year $1,000 - $144 = $856 (our total return for the year) $856 divided by our $25,000 = actual return of 3.42% If we only have $10,000 to invest, our "actual" interest rate drops correspondingly (but still remains huge in comparison to any other liquid FDIC-insured choice). Here's that math: $10,000 x 4% interest = $400 in interest for the year $12 each month for 12 months = $144 going to vendors each year $400 - $144 = $256 (our total return for the year) $256 divided by $10,000 = actual return of 2.56% The initial problem with this idea was that we were unable to find any vendor who would accept a monthly payment as low as $1 per month for any product or service they provided. Initially we envisioned the perfect vendor to be a newspaper or magazine that we were already interested in. If we could find a newspaper or magazine with an annual subscription price of $12, then we could try to set up a payment plan with them where they could automatically pull $1 from our bank card each month in order to get to their $12 annual subscription rate. We'd get the benefit of monthly delivery of their magazine plus it would count towards one of our 12 monthly credit card transactions. Just repeat this process with 12 different magazine or newspaper subscriptions and we'd be on auto pilot. Alas, the $1 per month plan was not appealing to any of them. Nor to any other vendor or for any other service or product we could find. What we quickly learned was that, by the time a vendor pays all of the associated processing, postage, and other cost-of-doing-business fees per transaction, $1 per month quickly gets whittled away to almost no profit. And so the structure made no sense to anyone selling an actual product or service. In most cases, they'd actually be LOSING money by structuring their billing this way. So we gave up. Yeah right! We kept the wheels turning, doing Google and Yahoo searches, trying to find ANY vendor selling ANY product (we didn't care what it was) that would willingly accept monthly payments as low as $1. Everywhere we looked was a dead end. No one could afford to do business at this threshold no matter how cheap their product was to manufacture or ship out. Finally we ran across a website where users had already discovered these magical Rewards Checking Accounts and had devised their own ingenious way of clearing this hurdle. Charity! They had discovered that there were a number of charities who would gladly accept monthly donations in amounts as low as $1 per month. These donations could be set up by going onto the individual charity's website and signing up to have the $1 payment pulled automatically at the beginning of the month each month. Why didn't we think of that? Who cares? We were thrilled. Return from Great-Interest-Rates Page to Credit-Card-Rich Page
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