Saturday, October 13, 2007

My first post...

So I decided that since I've started writing again, and I'm really enjoying blogging about our life here in Italy, I'd start my own random blog. I'll write about random things I think about, spiritual, financial, medical, whatever. Some of my girlfriends and I are into discussing things via blogs, and I've been in a really creative mood lately, so here goes. This will be an online journal of sorts.

Today's thought: rate chasing.

Definition: people move their savings money around to different internet savings accounts in order to take advantage of higher interest rates.

Neal and I are doing this currently (sort of). We started an HSBC online savings last year for our emergency fund because the highest we could get with our bank was somewhere around 3%. HSBC had 5.05% at the time, with a special of 5.5% for a month. Given that the difference was so huge, and that we knew HSBC by name, we went for it. Now just this past month HSBC, along with many other banks, lowered their rates (down to 4.5% - ouch!) because of the Fed rate cut, so we went window-shopping. We found a bank that had a much higher rate (5.19%), so we've opened an account, and are going to sit back and see how it goes.

Although ours is just being savings-wise, apparently this is a big thing to do. I've heard of people opening credit cards to take advantage of an introductory 0% offer, then using that money to invest until the offer expires, and paying it off the day before. So you're essentially doing the same thing the banks do: using someone else's money to invest with, and keeping the interest income. While I believe I'm pretty money-savvy (it took a long time unfortunately), I think this is still a little bit more risky than I'm comfortable with right now. But more power to those who are doing it, I guess.

Here's an interesting article on this phenomena:

So anyway, this is an interesting topic to me. I guess I just don't feel quite as much like a bank snob now for moving our savings for the higher rate. And I guess it's essentially the same as playing the stock market - just a lot safer!

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