The reason why Robinhood was venturing into "too good to be true" territory was they required no minimum balance, no minimum activities (direct deposit, debit card purchases), no maximum balance for the high interest rate., plus ATM reimbursements.
In contrast, for LMCU:
Maximum of $15,000 for the 3% interest rate, most people with houses and/or families are going to want to have an emergency fund greater than $15,000, I spent almost $10,000 on emergency house repairs a couple weeks ago. If you're saving for a major purchase (car, down payment on house, major purchase, etc.) you're probably going to have more than $15,000. There is ZERO interest paid over $15,000!!!
The following are required to earn the 3% interest:
Direct deposit (self employed need not apply)
Minimum 10 debit card purchases per month (this alone should be a dealbreaker, one should almost always be using a credit card over a debit card if you're going to use plastic)
Minimum 4 logins to home banking per month
Requires eStatements
You're only getting an extra $12.50 a month over if you're keeping $15,000 in an Ally or Discover Savings account, and if you spend a modest $500/month on your debit card you're leaving at least $10 on the table in credit card cash back, not to mention the other benefits that come with using a credit card (extended warranty, price protection, purchase protection, travel insurance, etc. - depending on your card)
>if you spend a modest $500/month on your debit card you're leaving at least $10 on the table in credit card cash back, not to mention the other benefits that come with using a credit card
I use a credit card and then pay it off with the money in my LMCU checking account, the day after the interest hits :) I only do the minimum number of transactions with the debit card and I use them on low cost purchases.
>You're only getting an extra $12.50 a month over if you're keeping $15,000 in an Ally or Discover Savings account
Savings accounts have restrictions on the amount of times you can move money in and out of them. Checking accounts do not have that restriction. I'm sure I could find a savings account with better interest, but in my current life position I need a checking account.
I am unemployed right now, but I am meeting the direct deposit requirement with my monthly dividend from a stock I own, O. They also accept things like transfers from PayPal towards the direct deposit requirement.
If I were instead a homeowner with a family, I could get my spouse to make a separate checking account to double up on the amount emergency reserve money kept in a checking account. But again, it makes way more sense for emergency reserve money to be kept in a savings account. That's what they're made for.
IM(potentially uninformed)O, if your family is keeping more than $30K in a checking account, then you should probably be investing in stocks or bonds or mutual funds at that point anyways. It's not like you can't sell off investments to pay for emergency costs.
Well, my point is getting the higher interest rate for those "high interest checking accounts" is a major pain in the ass and rarely "worth it" for many (most?) people. On top of that the limits are so low they have limited usefulness. Robinhood was promising all the interest (and more) with none of the pain in the ass/effort.
>IM(potentially uninformed)O, if your family is keeping more than $30K in a checking account, then you should probably be investing in stocks or bonds or mutual funds at that point anyways. It's not like you can't sell off investments to pay for emergency costs.
Emergency fund should not be invested! It needs to be in a liquid account that has zero (or near zero) risk to the principal. How big your emergency fund should be is dependent on your life situation. You're most likely to need your emergency fund at the same time the market tanked. I'm not selling securities (maybe at a loss) when I have an emergency, I'm going to use the money I've already set aside for such an occasion.
>Financial advisers view an investment strategy as a pyramid. A strong base is fundamentally important to support the levels of risk an investor bears as securities with varying levels of volatility layer over the foundation. Before an individual ventures into intermediate- or long-term investment vehicles, the establishment of an emergency fund is recommended as the first step toward creating stability and minimizing risk. Stashing three or even six months’ income in a highly liquid account, such as a money market, should preclude the purchase of any instrument that holds risk to principal or requires lock-in periods during which penalties are assessed for early withdrawal. As more volatile securities sit atop above the base of savings accounts or Treasury bills, overall portfolio volatility is minimized and necessary access to risk-free capital is optimized.
It's great you can make it work, but astura's response was specifically that two (at least one, anyway) of the requirements are specifically designed to make you jump through hoops in order to get the highest interest rate.
What possible benefit could LMCU receive if you log in four times a month instead of just the one time to pay off your credit card? There is none, it's a dark pattern.
> What possible benefit could LMCU receive if you log in four times a month instead of just the one time to pay off your credit card? There is none, it's a dark pattern.
I don't login to pay off my credit card, that's set up to happen automatically on the credit card company's side.
I basically just login to see if I've done 10 transactions yet. If I've met that but haven't logged in enough, I'll just logout and login real quick until that part is done. It's really not that big of a deal.
The benefit LMCU could receive from requiring monthly logins is:
- Not having to pay interest to a dead person
- Potentially being the institution you go to when you need a loan. This is where they (and other financial institutions) really make their money. In this respect, it's in their best interest to be with the customer as they become more financially savvy.
In contrast, for LMCU:
Maximum of $15,000 for the 3% interest rate, most people with houses and/or families are going to want to have an emergency fund greater than $15,000, I spent almost $10,000 on emergency house repairs a couple weeks ago. If you're saving for a major purchase (car, down payment on house, major purchase, etc.) you're probably going to have more than $15,000. There is ZERO interest paid over $15,000!!!
The following are required to earn the 3% interest:
Direct deposit (self employed need not apply)
Minimum 10 debit card purchases per month (this alone should be a dealbreaker, one should almost always be using a credit card over a debit card if you're going to use plastic)
Minimum 4 logins to home banking per month
Requires eStatements
You're only getting an extra $12.50 a month over if you're keeping $15,000 in an Ally or Discover Savings account, and if you spend a modest $500/month on your debit card you're leaving at least $10 on the table in credit card cash back, not to mention the other benefits that come with using a credit card (extended warranty, price protection, purchase protection, travel insurance, etc. - depending on your card)