Disclaimer: I am not selling anything, doing affiliate marketing, or any other shenanigans. In no way will I make any money if anyone follows my lead and signs up for the account I describe in this post.
I went into more details on this previously, but for a while now, I have mainly kept my cash in a combination of a credit union checking account and an online savings account. First, it would flow into the checking account from my paychecks and various other sources. I was paid 7.5% on the first $500 in the account and .2% on the rest. Each month, I would pay my bills, transfer some to investments, transfer some to my online savings account, and leave a few thousand in checking. The online savings account paid me a better rate than the .2% I would otherwise have been paid on the balance above $500 left in the checking account and of course the investments paid significantly more (at least most of the time). Today, that online savings account is paying 2.45% and if the FED would stop letting the stock market and our very stock market oriented president intimidate it, that rate would continue to go higher.
Mostly, this is a pretty awesome system. I only keep around $10k of cash on hand (any excess usually gets invested) and of that $10k, the first $500 makes $37.50 a year and the last $6500 makes $159.25 for an average ROI of 2.8% which covers inflation and just a little bit extra – not bad for my emergency/float cash. So what’s the problem? I’m getting crushed on the other $3k I usually keep in my checking account, which makes only .2%. Previously, I had simply lived with this and considered it a small price to pay to have enough cash on hand to deal with any minor to moderate issues that came along. But no mas! Introducing the SoFi Checking Account!
The SoFi Checking Account is a hybrid account with a ton to offer. First and foremost, it pays 2.25%. Second, there are basically no fees of any kind to have to dodge using direct deposit, minimum balances, an absurd number of debit card transactions each month, etc. Third, and this is a big one for some folks, there are no ATM fees – ANYWHERE. There is a little bit of weirdness as SoFi itself is not an actual bank. So it uses partner banks to actually store the money. But not to worry; all of them are FDIC insured, which makes them just as secure as any other US bank.
It’s not every day that I change primary bank accounts but today is one of them! My new setup will be as follows. I will leave $500 sitting in the existing checking account since I’m not about to give up my 7.5% rate on that money. A minimum monthly direct deposit of $250 is required to avoid a monthly maintenance fee so I will deposit that much and then move it into an investment from there on a monthly basis. But the rest of the incoming cash will be destined for this new SoFi account, meaning the $3k average balance will earn me $73.50 per year. Subtract the paltry $6 a year that money was making me before and I’m left with a profit of $67.50. And if the FED gets its head out of its ass and continues its long, slow march back towards responsible currency management, that return is likely to go up rapidly. If it increases its funds rate to a historically normal level, this payoff would more than double!
What did it cost me to get this money? About ten minutes. The account setup process was actually incredibly easy and that took about five. The other five minutes involved printing out the ol’ direct deposit change form, filling it out, and emailing it over to our payroll lady, who is accustomed to getting these from me on a fairly regular basis and I’m quite sure loves me for it. For those ten beautiful minutes, I made a cool $405 an hour! I would work that job 24/7/365 if I could. And every year this account keeps paying out at this rate, or preferably higher, those ten minutes become retroactively that much more valuable. Sweet!