I have at least two RCA accounts whose rates have dropped significantly. I've moved most of my money out of these accounts and transferred them to others paying better rates. These accounts are no longer available nationally so if I were to close the account, I couldn't just apply and get back in. It is a hassle to maintain the lower rate (i.e. debits). I would like to know what others are doing - keep the old accounts open in hopes that rates will rise when interest rates start coming back up or just close it? Thanks.
Answers
My spreadsheet shows them all sorted by rate, then the cap in each account. When a rate changes (up or down), then go to the lowest account that has money in it, and billpay it to the better account. Billpay avoids losing a week's interest that you get from using ACH. In fact billpay lets you overlap interest payments, so if you billpay on a Monday, typically the bank receives it on a Friday and both accounts show the balance all weekend. Double interest! And most billpays don't have arbitrary limits on the amount you can pay either. Of course the downside is bank hold on $5k+ checks, but you typically get access to the first $100 quickly which is all you need to qualify for the month.
You can then do the required monthly ACH to 'fix' the account and bring it back exactly to the cap.
To avoid any idle account fees, I do a quick ACH every month or two of a minimal amount to keep the account 'active' even if I'm not actively using it.
Open:
Watch out for inactivity fee; and fraudulent exposure (i.e., need to examine accounts frequently).
Close:
Watch out for early closure fee (some set it at six month) and loss of interest if closed un-scheduledly.
I close many accounts since once the RCA falls out of the elite group, it seldom (or never) comes back and since it is a real drag to keep too many accounts. I still keep some open for a specific reason; e.g., Rockland keeps giving me high rate (3%) without my meeting any requirements; I paid a fee (joining a museum) to get into Marines FCU; I still use Danvers as a primary checking account for Billpay and the grandfathered limit of $50K (at 3% APY).
With dormant RCAs, I keep $10 in the accounts, make an occasional transaction and essentially let them default to "free checking" mode, thus also addressing the inactivity/dormancy issue.
51hh mentioned the fraudulent exposure concern, which is relevant regardless of how much is on deposit. I check active RCAs daily, and dormant ones weekly. For all accounts, I also activate any relevant alerts (typically balance-related ones) to let me know if/when there is activity. It can mean a flood of Emails after a day of shopping, but Emails can be deleted easily.
51hh also mentioned membership fees as another reason to consider leaving an account open. That is another important factor, especially relevant for accounts at credit unions. Generally, if you are not part of a credit union's field of membership but join through association with some other organization (example: joining Alliant CU by being a member of your local PTA) you can continue to be a member of the credit union even if you do not renew your membership in the association (once a member always a member). If you close your account and sever all ties to the CU, should you change your mind at a later date, you will have to re-qualify.
PB
Also, I have occassionally found nice bonuses from these dormant accounts. For example I still have a Malvern Federal account that hasn't been competitive in years, but I kept it open. Much to my surprise I logged in one day and found an offer to pay me $1 for each bill payment I made in the next month, up to $20. I transferred in some money and made 20 small bill payments, and got $20. Then I let the account sit for a while, and got another offer to get $10 for making three bill payments in the following month. Again, I did this and collected the bonus cash. I'm currently experimenting to see how long I have to let the account sit unused before getting another bonus offer.
You can then sign in to your current bank, add a new payee using the address from above and your account number.
I always test it with a small amount (say $10) to make sure it works, to see how long it takes, and whether the amount is deducted from your account immediately or when the check is cashed by the receiving bank. I like accounts that don't debit until the check is received so I can transfer money with no lost interest.
The receiving bank might put a hold on those funds, so you may not be able to withdraw the money immediately.
The final caveat is that some banks charge for online billpay (rare, but some do), or charge if you exceed a limited number of billpay transactions (typically 20 in a given cycle).
When I use Bill Pay they mail a check and the money is deducted right away. I only did it once. I do have my credit card bill debited from this reward account and the bill is marked paid on the due date but the money is not deducted from my RCA until 5 days later. This payment is initiated by the credit card company after I signed papers to allow them to do it.
