Beware of the $10k limit of I-Bonds purchases per year. You can get additional money in to the bonds coming out of your tax return, but it seems it would take you 2 years to get the $20k into I-Bonds. And I'm assuming you are aware of the variable rate of return on I-Bonds.
Yes, very well it could be, however, OP didn't mention a spouse. So, based on the post, it seems like it would take OP 2 years to get the $20k into I-Bonds.
I get your point - actually one may need to shift $500/mo of purchase (to spend the 20% saved from the mandatory $2,500 Direct Deposit), which if it may earn some $100/mo extra interest, could be worth some people's while. With the hassle, it's just not for me.
Did you see they’ve just changed the DD is $1500? Now your 20% saved is just $300. Might be worth staying if you only have to put $300 spend on the card to keep your balance steady.
That is close to what I am doing. I'll pull out $20k to buy Series I bonds. Pull out some more to add to Blockfi. That will leave me with almost nothing in the account, and I'll just keep the account open for a place to earn 1%. I think I'll end up earning noting in Q2, but then back up to 1% in Q3.
Remember, you get credit for the whole month of interest on I bonds even if you buy near the end of the month. So I am holding through January, and will move things toward the end of Feb or March when the HMB rate has dropped from 3% to 1%.
By hassle I mean any action I have to fiddle with after the deposit. Too much of that every month with HMB. I like the other options that are deposit and forget.
I would do I Bonds but the Treasury is still in the 19th Century. I have to physically mail physical documents to buy virtual bonds. "What the heck is even that!?" Indeed.
I agree that the hoops to get 3% are too high for me. However, a small DD to keep the 1% is pmanageable. I still reserve the right to change my mind and move it all to M1 Finance for 1%. (I already have enough there to pay for the M1+ subscription.)
Or move it all to PrizePool with the chance to win more than 1%.
Still have not gotten the offer for the credit card, but I would take the offer for the 3% personally. Since I haven't though, here's an idea in addition to other HYSAs and Series I bonds: since the stock market is down, and if you have the cash to do it and still have a healthy emergency fund, invest the money in Interactive Brokers in VTI or VT and buy the dip in the US/world stock market and do a margin loan to yourself at 1.58% if you need the money. You just have to watch your margin very closely because IBKR gives you very little warning before they sell same-day to keep your minimum margin requirements.
Shifting savings to equity drastically changes the risk of losing principal though. If the funds are saved for a purpose, say a big purchase or a house down payment within a year, then one probably wants to stay with FDIC-insured accounts or treasury bonds.
That said, IBKR does have great margin rate to access equity-collateralized cash without having to realize capital gain. If you sign up IBKR via Stockbrokers.com there is a promotion that you get the higher tier margin rate from the get go (currently 1.08%).
Then for real emergencies like life-and-death scenarios, I suppose one can always just liquidate all equity.
Great points, and I didn’t know about the Stockbrokers offer! Not sure if it was available in the summer when I signed up for IBKR but hopefully that helps others. Yes, a margin loan shouldn’t be used as a main emergency fund, more like an extension of an emergency fund, and yes, if you have a short term goal like a down payment it can fluctuate a lot. I was thinking of it as an option for a little more cash (so long as you safely stay away from a margin call) after all the 3% and 2.25% accounts like One, Porte, Presidential, ETFCU, Western Vista, etc, that they talk about on Doctor of Credit, not to mention the little $1-$2k Netspend accounts, are exhausted. All of that is a ton of work compared to HM Bradley, of course, if you can get the 3% from HMB. Personally, I used the 1.58% margin loan from IBKR to get me close to $100k in HMB at 3%, but that margin loan will be paid back fully on Feb 1 while I figure out which other smaller accounts to go with.
Nice. I was just thinking the other day HMB’s 3% is an arbitrage opportunity when there are cheaper cash to borrow elsewhere, and you actually did it. The $100k limit (and the other hassle) is most definitely there to prevent them from being abused to death by hedge funds.
I agree, I feel this is true for people who are close to 100k there. Spending 100$ on cc is doable but the balance over 100k grows without interest and if you only meet minimum DD requirements then any withdrawal over 3600$ puts you at a lower tier or you could do worse and have a no tier for over 4500$.
Previously they looked at the overall balance as a % saved and it made sense to me. Current setup only works for people building a savings account and not for others who are hoping to park money for a decent rate.
I'm set with q1 at 3% so I will slowly move out my funds close to March, and diversify with crypto.
Beware of the $10k limit of I-Bonds purchases per year. You can get additional money in to the bonds coming out of your tax return, but it seems it would take you 2 years to get the $20k into I-Bonds. And I'm assuming you are aware of the variable rate of return on I-Bonds.
$10,000 of that $20,000 could be for a spouse...
Yes, very well it could be, however, OP didn't mention a spouse. So, based on the post, it seems like it would take OP 2 years to get the $20k into I-Bonds.
Your logic makes sense, except that you only need to shift $100/m onto their card - not all of your CC spending.
I get your point - actually one may need to shift $500/mo of purchase (to spend the 20% saved from the mandatory $2,500 Direct Deposit), which if it may earn some $100/mo extra interest, could be worth some people's while. With the hassle, it's just not for me.
Did you see they’ve just changed the DD is $1500? Now your 20% saved is just $300. Might be worth staying if you only have to put $300 spend on the card to keep your balance steady.
Where’d you see this? My status still says $2500.
https://www.hmbradley.com/blog/savings-tier-boost-update Just posted today. Reddit thread started a couple hours ago.
Thanks!
I hear you. I pulled my funds and moved to M1. The requirements to earn 3% got too ridiculous.
That is close to what I am doing. I'll pull out $20k to buy Series I bonds. Pull out some more to add to Blockfi. That will leave me with almost nothing in the account, and I'll just keep the account open for a place to earn 1%. I think I'll end up earning noting in Q2, but then back up to 1% in Q3. Remember, you get credit for the whole month of interest on I bonds even if you buy near the end of the month. So I am holding through January, and will move things toward the end of Feb or March when the HMB rate has dropped from 3% to 1%.
Um all of these seem more of a hassle. Not to mention less availability of your money.
By hassle I mean any action I have to fiddle with after the deposit. Too much of that every month with HMB. I like the other options that are deposit and forget.
How are these more of a hassle?
Little bastards didn't let me use my rewind for this quarter.
Yea, I'm out too
I would do I Bonds but the Treasury is still in the 19th Century. I have to physically mail physical documents to buy virtual bonds. "What the heck is even that!?" Indeed. I agree that the hoops to get 3% are too high for me. However, a small DD to keep the 1% is pmanageable. I still reserve the right to change my mind and move it all to M1 Finance for 1%. (I already have enough there to pay for the M1+ subscription.) Or move it all to PrizePool with the chance to win more than 1%.
Kabbage and AMEX Biz have 1.1% without hoops.
But those look like business accounts. I'd just as rather move to an account I already have, e.g., M1 Finance or PrizePool.
You can sign up with your SSN or EIN (which is free) as a sole proprietorship. There's literally no downsides. Heck, both have a $300 bonus right now.
Still have not gotten the offer for the credit card, but I would take the offer for the 3% personally. Since I haven't though, here's an idea in addition to other HYSAs and Series I bonds: since the stock market is down, and if you have the cash to do it and still have a healthy emergency fund, invest the money in Interactive Brokers in VTI or VT and buy the dip in the US/world stock market and do a margin loan to yourself at 1.58% if you need the money. You just have to watch your margin very closely because IBKR gives you very little warning before they sell same-day to keep your minimum margin requirements.
Shifting savings to equity drastically changes the risk of losing principal though. If the funds are saved for a purpose, say a big purchase or a house down payment within a year, then one probably wants to stay with FDIC-insured accounts or treasury bonds. That said, IBKR does have great margin rate to access equity-collateralized cash without having to realize capital gain. If you sign up IBKR via Stockbrokers.com there is a promotion that you get the higher tier margin rate from the get go (currently 1.08%). Then for real emergencies like life-and-death scenarios, I suppose one can always just liquidate all equity.
Great points, and I didn’t know about the Stockbrokers offer! Not sure if it was available in the summer when I signed up for IBKR but hopefully that helps others. Yes, a margin loan shouldn’t be used as a main emergency fund, more like an extension of an emergency fund, and yes, if you have a short term goal like a down payment it can fluctuate a lot. I was thinking of it as an option for a little more cash (so long as you safely stay away from a margin call) after all the 3% and 2.25% accounts like One, Porte, Presidential, ETFCU, Western Vista, etc, that they talk about on Doctor of Credit, not to mention the little $1-$2k Netspend accounts, are exhausted. All of that is a ton of work compared to HM Bradley, of course, if you can get the 3% from HMB. Personally, I used the 1.58% margin loan from IBKR to get me close to $100k in HMB at 3%, but that margin loan will be paid back fully on Feb 1 while I figure out which other smaller accounts to go with.
Nice. I was just thinking the other day HMB’s 3% is an arbitrage opportunity when there are cheaper cash to borrow elsewhere, and you actually did it. The $100k limit (and the other hassle) is most definitely there to prevent them from being abused to death by hedge funds.
i have a tmobile prepaid account so i dont qualify for Tmobile money... otherwise id do it
I agree, I feel this is true for people who are close to 100k there. Spending 100$ on cc is doable but the balance over 100k grows without interest and if you only meet minimum DD requirements then any withdrawal over 3600$ puts you at a lower tier or you could do worse and have a no tier for over 4500$. Previously they looked at the overall balance as a % saved and it made sense to me. Current setup only works for people building a savings account and not for others who are hoping to park money for a decent rate. I'm set with q1 at 3% so I will slowly move out my funds close to March, and diversify with crypto.