Yesterday's interest rate cut is already impacting me! Just a week or so ago, I recommended the E*Trade High Yield Savings account as a better alternative to those offered by HSBC, Emigrant Direct, and ING Direct. I logged on this morning to check my balance and overnight they've dropped their rate from 5.05% to 4.40%. With another interest rate cut expected when the Fed mets next week, I suspect the rates on online savings accounts will continue to fall.So...what to do? Well, first of all, let me recommend the Rate Chaser Calculator from My Money Blog. This is a neat tool that will help you figure out whether or not it's worth your time to move your money around based on rates offered by different banks. According to the calculator, it'd take me 255 days to make up the lost interest if I were to move the funds from E*Trade back to Emigrant Direct - so it looks like I'll sit tight for a little while.
I am, however, considering looking into locking down a fixed rate by putting my emergency fund money into a short term CD. From the looks of things, there are still some banks out there offering over 5% on 6 and 7 month CDs. That takes away some of my liquidity and I'd have to forfeit the interest gains if I actually needed to touch the money before the CD matures I'm not entirely sold on that idea. Nonetheless - be aware that these rate cuts we're hearing about in the news will trigger a lot of activity by the banks so watch your accounts to make sure you know how you're being impacted!
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