Reward Checking Rates Over The Next Three Years? Switch To CDs?

PastTense | Jun 4, 2012 | 9 posts since 2010

Any predictions on reward checking rates over the next three years? Are they going to get worse? Stay the same? Improve?

I am thinking of switching part of my funds to a three year CD (three year because the rates are better than 1 or 2 years, but not longer than 3 years because I think the rates will start to go up by then).

What CD length would others here consider optimal?

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Answers

51hh | Jun 4, 2012 | 1,693 posts since 2010

Like Ken stated, one pays a dear price to be profitable in RCAs. With 4-5 years under my belt, here are some strategies/pains:

1. Always be aware of the highest RCAs and utilize all skills to get into them.

2. Be agile to change as soon as the rate/limit drops below desired threshold; (a) move funds via checks, often through shared branches of credit unions; (b) close RCAs when not needed. I prefer closures due to my forgetfulness (and avoid inactivity fees). Watch out for early closure fees.

3. Do RCAs requirements like clock work for the first few days of the qualification cycle.

4. Avoid sharing RCA information to keep the rate/limit longer (sorry to be selfish:D).

5. Set up fraud alert (balance alert, etc.) when available.

6. Check in mid-month to ensure all requirements are met and check every 2-3 days to ensure no fraudulant activities.

7. Always be on the look out for RCA stars and be diversified (so that one rate/limit drop will impact little for my RCA portfolio).

With the above principles, I have been successful to stay on top of the RCA game; but I paid the price with added white hair and a few panic attacks.

I think it is time for me to retire from RCAs soon.

CD is not my cup of tea since it is boring and low rate (just my humble opinion without retribution). RCA trend: going down in both rate and limit; but one still can find several (hint hint -- credit unions) that keep a relatively higher rate/limit. I conjecture that RCAs will still outperform savings/MM and even long term CDs for the next year or two. I simply get burned out with RCAs, not due to lack of high rate/benefits of RCAs.

Of course, I reserve my right to change my mind when I come to the RCA decision bridge.:D

Ally6770 | Jun 5, 2012 | 4,290 posts since 2010

It has been brought to my attention in the past when closing a credit union CD that you can keep your membership open but have no active accounts except the required $5 or so in the savings account. That way you can always come back if you want.

51hh | Jun 5, 2012 | 1,693 posts since 2010

If you close an account and come back you would have to re-order checks for a new account--which will cost a few bucks.

But doesn't anyone else have any thoughts about my original post (which depends on the trends of Reward Checking rates vs CD rates over the next three years).

Thank you.

Comparing RCA to CD is an apples-to-oranges comparison to begin with. The former is a checking account with liquidity while the latter is basically dormant money with penalty to early withdrawal. RCAs require tons of monthly work while CDs are for people who put the fund there for the long term.

Your guess is as good as mine as far as RCA/CD rate trend; nobody can predict the future. But if the current rate provides an indication, RCA rate will compare favorably with a 5-year CD for the next few years.

pearlbrown | Jun 5, 2012 | 2,298 posts since 2010

51hh, excellent recommendations and thanks for sharing. We can agree to disagree on #2. If you have been actively involved with RCAs for 4-5 years, I can well understand why you might want to "declutter" and close accounts when not needed. My experience is relatively newer, so I keep RCAs open especially if they are with a credit union and the original way of qualifying for membership (ex.: joining an association) is no longer an option. However, you do have to watch out for inactivity fees, as you point out. Another reason why I keep RCAs open is that, as conditions change, what may have been "not great" in the past becomes "not bad". In those cases, I have been able to return quickly and at times in better conditions than someone opening the account for the first time because I was grandfathered into certain privileges / caps, etc.

I call "first dibs" on the rest of your list of strategies/plans if you decide to leave the game. ;-)

PastTense | Jun 5, 2012 | 9 posts since 2010

If you close an account and come back you would have to re-order checks for a new account--which will cost a few bucks.

But doesn't anyone else have any thoughts about my original post (which depends on the trends of Reward Checking rates vs CD rates over the next three years).

Thank you.

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