I often speak to bank executives who are pursuing capital with the goal of bringing in large deposit volumes and who are setting their rate strategies. These folks will tell me that they are trying to avoid “fast cash”. In other words, they do not want depositors that will come only for the rate and leave as soon as they find a higher rate. My advice to these bankers is always that if they want their asset base to be more permanent, they should offer competitive CD rates as well as savings rates, and they should keep their savings rate competitive and not launch a huge campaign to advertise a great rate, only to later quietly lower it to a rate that is not competitive.

My advice to depositors is likewise pretty simple. If you have an online savings account or a local savings account that is not competitive or no longer competitive, you should consider moving your assets to one that is. By regularly checking online rates and local rates at BestCashCow.com, you can ensure that your money is compounding at the highest rate available over time.

In any environment, depositors need to consider the opportunity costs of moving cash from one savings account to another. You will always loose a day or two of interest getting your money out of an account through an ACH transfer, and may lose more if ACH is not available. Then your money may sit at a hub account paying only nominal interest that you hold (like Morgan Stanley or Merrill or Bank of America or Wells Fargo) for a day or two before you can get it transferred again. And, then by the time your money is earning the higher rate, it may no longer be the higher rate.

In a declining rate environment – like the current one – the opportunity costs of moving cash from one account to another may be lower, but you run the risk that the bank that you are moving your money to will shortly be lowering its rates too.

This, in fact, is what happened to me. I held a maturing one-year CD at a major online bank at 2.85% APY. Rather than allow the CD to renew at 2.00% or to keep the principal at that bank earning 1.70%, I decided to move it to a local bank near me that was still paying 2.00% APY on savings. However, by the time I finally got the money deposited in that bank, it had actually lowered its rate below 1.70%, causing me to have to move the money back to the bank where I had held the CD. In the end, I had lost almost a week’s worth of interest.

This strategy, of course, makes sense if you are chasing a higher CD rate and have locked in a rate by beginning the application process before you begin to transfer your money, but it just does not make sense for money that you have allocated to savings only. Read my recent article discussing whether to lock money in short-term CDs here.

The moral of the story here is that you cannot fight falling savings rates, but you sure can lose interest trying.

Think very carefully about your opportunity costs and about the direction of rates generally before you chase a few more basis points at another bank. You are often better off leaving your money where it is.

January 2020 ended with more than enough headlines to scare anyone into cash. Between Coronavirus spreading in China and the possibility that it may be a generation before the U.S. has a president not named Trump, there is a lot to be scared about. Friday, January 31 saw the Dow drop 600 points and the S&P go down by 58.

Just because you are moving to cash doesn’t mean you have to sit by and take any rate offered.

Most of the major online banks have recently lowered their rates, as the Fed has lowered its rate, to 1.70%. Since that rate still lies on the top end of the Fed Funds target rate of 1.50% to 1.75%, we think a 1.70% APY in an online savings account is fair. It just isn’t the best you can do.

Here are five ways to beat that rate:

First, as of February 1, 2020, BestCashCow shows several online savings rates above 2.00% and many more that are close to 2.00%. Some of these are new entrants and some of these banks have held their rates at or above the best savings rates for a while. In particular, Fitness Bank is offering 2.20% for those who are active (or looking to become active), and CFG Bank is still offering 2.15% in their online savings account.

Second, consider savings rates at local banks and credit unions near you.

Third, you may want to look to short-term CDs with that money in excess of that you require to maintain your liquidity. Many one-year CDs are still being offered above 2.00%, and they will protect you from the possibility of further declines in the savings rate as we work our way through 2020. Read this article for more of my thoughts on short-term CDs here.

Fourth, consider one-year CD rates at local banks and credit unions near you.

Fifth, if all else fails and you find earning so little in interest to be upsetting, infuriating, etc., this could be a good time to consider depositing money with a bank that pays you in American Airlines AAdvantage miles instead of interest. You can learn more about Bask Bank's AAdvantage miles-earning account here.

Have a great month!

There are very few things or people that get my attention on CNBC. I usually find myself switching over to Bloomberg when Joe Kernen or Jim Cramer start rambling. I guess neither were around on Christmas Eve morning because I ended up leaving the channel where it was to catch the tail end of a discussion between David Faber and Jim Stewart where Faber seemed to suggest that a lot of people on Wall Street were concerned about a debilitating cyber attack on our financial institutions.

This has been bothering me more than a little over Christmas. David Faber and Jim Stewart are serious journalists and they speak to a lot of people. They were suggesting the type of a cyber attack where you wake up and check your bank account and it is gone --the bank’s records and its back-ups have all been destroyed. They were not speaking about an attack where accounts cannot easily be recreated, where you log back in after a few minutes and everything is fine.

We all know that the banks – big and small – have multiple back ups, redundancies and active and passive protections. But, we also know that Kim Jong-un needs a win. Vladimir Putin does nothing but win and may feel newly emboldened by Moscow Mitch McConnell and the Republicans support to probe further and deeper into our society than he already has. In either case, these guys have teams of very talented people working to disrupt our lives and our financial systems. Either one would celebrate taking down Ally or Goldman Sachs in the same way that they celebrate Trump.

If nothing else, it seems to me that this is an awfully good time to download your latest bank and brokerage statements and to take screenshots daily of all your savings and CD account balances if you can. If we find ourselves in a situation where everything needs to be retraced, you will be way ahead of the game.