The best money market rate I've found online depends on timing. If you want to get better rates and higher services from banks, you need to develop a relationship and concentrate your assets.
Weeks before Lehman Brothers went bust on September 15, 2008, I decided to spread my savings out to various banks to hedge against risk. As you may recall, Bear Sterns was taken under that Spring and Washington Mutual was also in deep trouble and eventually gobbled up by Chase.
Now that my 5-year CDs have expired with First Republic Bank, I've begun consolidating my assets with Citibank to make things easier to manage. I've been with Citibank for the past 14 years. There is now risk I will lose some of my money given the amount is above the FDIC insurance coverage of $250K/$500k for singles and married couples, but I also don't think there's any chance in hell Citibank goes under now, especially since tier 1 capital ratios are now much higher as mandated by law. Besides, the economy is much stronger than it was five years ago.
Another reason why I'm not worried is because concentrating this amount of savings with one bank is only temporary. I know I'll be putting a hefty downpayment on a property this year. Furthermore, I'll be spending a good chunk of change on remodeling, which will bring my liquid savings down to a minimal amount again.
I think it's a good idea for everybody to shoot to have $250,000 in assets with one bank. $250,000 in assets includes savings, CDs, or investments. Based on my experience, once you're at the $250,000 asset mark or higher, I've noticed banks start treating you much better. If you have significantly more assets than $250,000, then I suggest having at least one other bank for convenience and safety. For example, I hate paying $3 ATM fees, so by having money spread across two major banks, the chances of me paying ATM fees goes down significantly.
Five Benefits Of Consolidating Your Assets With One Bank
1) No more bank fees. Bank fees are irksome because they can hit you without you even knowing. One bank stuck me with a checking account fee of $25, which wiped my checking out to negative $16.75 because I only had $8.25 when the fee was charged. It was an orphan account that I opened up five years ago when I opened up my CDs. Thankfully, I got the fee removed due to my CD assets. I don't pay checking fees, overdraft fees, wire fees or credit card late fees anymore thanks to building up my loyalty and assets with one bank. I don't have to pay mutual fund fees anymore given I'm buying a different class of shares. I do need to hold the mutual funds for over one year though.
2) Friendlier bankers. I'm not sure if it's because I smile a lot, so other people are just forced to smile back at me, but as soon as the bank teller opens my account to deposit my check I can see her face light up a little. One teller slipped me her phone number and e-mail to get drinks after work. Another woman started asking me about summer travel plans and then proceeded to tell me her whole life story growing up in Florianopolis, Brazil and whether I'd like to meet up with her in Rio one summer. Then the bank manager swung by to see if I'd like to join a sushi making class with sake and dinner at one of their events. And then another banker asked whether I'd like to go to a SF Giants game after I was speaking with my wealth manager. People seem much more friendly when you've got a decent chunk of change with them. That feels good.
3) Higher savings rates. Although money market rates are pathetically low nowadays, I was offered a 3X bonus rate for the next three months because I had more than $25,000 on deposit. Based on the amount I had specifically, I would have made an extra ~$700. Not bad. For CDs, there's the normal rate, the jumbo rate, and the super jumbo rate based on amounts of around $50,000, $100,000, and $200,000 (varies by bank). But the rate spread between a super jumbo rate and a normal rate is often 0.25% or more.
4) Lower mortgage rates. Plenty of banks will lower your rate, usually in 0.125 increments if you have a certain amount of assets. For example, I was able to lock in a 2.5% jumbo 5/1 ARM with a 0.375% CREDIT because I crossed Citibank's $250,000 asset threshold. If I didn't, I would have got 2.625% or 2.75%, which still is pretty cheap. First Republic also has the same program, and I'm sure other big banks such as Bank Of America, Chase, and Wells Fargo.
You should still shop around for mortgage rates online with places like Credible because it's free and you can get five competing offers in minutes. It's a no-brainer to leverage the internet to make banks compete for your business.
5) Much better service. I'm really into good service because things come up all the time. I can e-mail my personal banker to handle requests such as opening or closing accounts, finding out if there are any specials, putting me in touch with an expert in a particular type of investment, getting me research reports, getting a mortgage going and so on. Given we've spent time together at a Giants game, we've developed a good relationship based on trust.
When she asked if I'd like to open up a $50,000 unsecured line I didn't need, I did because I knew it would help her. There's no 1-800 number I've got to weave my way through to get to a live person. If you like people returning your e-mails and phone calls, then focusing your assets will get you there.
MOTIVATION TO SAVE MONEY
One trick to really supercharging your savings is to identify what it is you are exactly saving for. For some, they are saving money to then throw it out the window by buying a car they can't afford. For more prudent people, they are saving for a first home or a child's college education fund. Now you can add the above five banking related benefits on your list of motivations to save.
Attractive people get treated better – we all know that. But besides working out, buying nice clothes, and performing painful cosmetic surgery, there's not much one can do to change one's appearance to get treated better. But when it comes to accumulating more money, many more people can decide to save more, get another job, invest, take risks, and do all sorts of things. And once you get to the ~$250,000 asset threshold, the folks who handle your money will treat you better. Who knows? You just might get invited to the next sushi rolling dinner party.
Wealth Building Recommendations
* Shop Around For A Mortgage: Credible offers some of the lowest refinance rates today because they have a huge network of lenders to pull from. If you're looking to buy a new home, get a HELOC, or refinance your existing mortgage, consider using Credible to get multiple offer comparisons in a matter of minutes. When banks compete, you win.
* Manage Your Finances In One Place: One of the best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize your money. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances on an Excel spreadsheet. Now, I can just log into Personal Capital to see how all my accounts are doing, including my net worth. I can also see how much I’m spending and saving every month through their cash flow tool.
Finally, they recently launched their amazing Retirement Planning Calculator that pulls in your real data and runs a Monte Carlo simulation to give you deep insights into your financial future. Personal Capital is free, and less than one minute to sign up. Ever since I started using the tools in 2012, I've been able to maximize my own net worth and see it grow tremendously.