Since I finally decided to close my FNBO Direct account, I’ve been thinking a lot about the multitude of savings accounts that I’ve created over the last few years. Most of them are now idle, practically abandoned with only a penny, or maybe a dollar in them.
Many of them I opened for some promotional reason, such as a high teaser rate. When the rate languished, so did my interest in the account. This happened for me at FNBO, HSBC, E*Trade, Washington Mutual (now Chase), and a few others. When my interest in the account waned, I usually just siphoned my balance elsewhere, save perhaps a dollar to keep the account open. Such is the life of a rate chaser.
My thought at the time was that it was better to keep the newly abandoned savings account open, just in case the bank in question decided to offer higher rates at a later point. If this were to happen, I could easily transfer some money back without going through any account opening process. It seemed, I thought, a convenience to keep these husks of accounts. Perhaps they would be useful later?
Maybe so, and I’ve written about this topic before, but I’m giving up on them and starting a spree of account closings. My reasons are threefold: First, savings interest rates have suffered more drastically and for a longer period than I thought they would. Even now, in 2010, it’s difficult to imagine rates rising anytime soon. Most people are lucky if they earn more than 1% in a savings account at present. Some of the popular money market mutual funds, such as the Vanguard Prime Money Market Fund, are paying a miserly 0.01%. That’s one one-hundredth of a percent! Pitiful. I’m tired of waiting for Godot.
Secondly, I confess that I’ve become angered and embittered by the actions of the too-big-to-fail banks. Watching them get rescued from their own greed and stupidity, and getting wrenched back from the brink of outright destruction by the hands of the taxpayers was bad enough. Watching them then raise fees, jack up credit card interest rates, foreclose on an untold number of homes, and fight tooth-and-nail against any financial regulation that could help prevent history from repeating itself was beyond all rational comprehension. There should be taxpayer outrage in this country, and to be clear, there is some. However, I believe it has largely manifested itself in the wrong way and in the wrong direction. There has been a backlash against big government, when in fact it should be against big financial corporations. I believe strongly in the power of individuals voting with their wallets, and that brings me to point three.
Thirdly, I discovered Alliant Credit Union back in 2009. Their savings account has held steadily at 2% for eight months now, and their regular checking account pays 1.75%, which is an excellent rate for a non-rewards-based checking account. Anyone can join with a membership in their local PTA, which was a one-time $6 fee in my former state of residence. Since joining, I have moved my primary checking and savings accounts to Alliant, as well as my tiny health savings account (HSA). I’m happy with Alliant so far, and since I’m the primary money manager in my household, my wife is comforted knowing that the bulk of our savings is stashed in a single location instead of being spread across ten accounts. Morbid as it sounds, if I were to meet an untimely demise, having our funds in a single location is preferable to her going on a wild goose chase.
Based on point two above, the appeal of smaller local banks and credit unions has grown on me. I love the idea of simplification as well – the thought of purging myself from all those empty account husks feels like a type of spring cleaning to me. It’s refreshing.
From this point forward, I choose not to keep my savings at a too-big-to-fail bank, and I’m going to begin a spree of account closings to simplify my financial life. I’ll still keep liquid accounts at two or three places, but the bulk of my savings will be with a local bank or credit union. Any accounts that I keep with a megabank will be entirely unprofitable for them. For example, I’ll keep a checking account that I opened (for a $75 bonus) with Bank of America, but I’ll keep it just for the ability to occasionally deposit a check while on the road, and then immediately siphon all the money elsewhere.
Maybe my plan is drastic or unreasonable, but gosh, it feels right from both an organizational and a moral perspective.