Two Must Do Saving Tips!

You may not want to clip coupons, or you may not go to discount stores. But at least, you should follow these two effortless saving tips that will save you big money in the long run:

  1. Earning interest from idle cash: Open an Emigrant Direct Saving account at 5.15%, or HSBC or Capital One accounts that consistently pays a higher interest rate.
  2. Earning cash while you spend: Get a Citi Dividend Platinum Select Card to get 5% cashback on your gas/drug/grocery purchases, and 1% cashback on all other purchases.

There may be other better banks or better cashback credit cards, but if you do the above, at least you have a very good start. How much money you can save in the long term? With #1, assuming that you have just an average balance of $1000 in the account, and let’s use the comparison of 5% in Emigrant Direct and 1% in Bank of America savings account (it’s probably lower), the difference in yield is 4%. I’m going to use 3% for the yield difference to be more conservative, since the money market account won’t always yield as high as 5%. Because of a consistent 3% higher interest rate, in one year, you can save $30 extra in interest money. For the next 40 years or so, you can get $1200 interest money. I’m using simple compounding because most likely you will spend those $30 right away every year. And that’s just for an average balance of $1000. If your average balance is higher, your extra savings will be higher. Now, tell me how much time does it take to open an online bank account? Yes, in about 30 minutes of one-time effort, you can probably earn $1200 in additional interest for every $1000 average balance. You just get paid at an hourly rate of $2400/hr. That’s a huge return on your time spent (using just $1000 average bank balance).

Now on the credit card, it’s an even better return (well, for people who spend more but save less). Monthly, let’s assume that your family needs to spend some $250 on gas, and $500 in grocery store, and another $750 in other expenses that you can charge on credit card. Using the Citibank card, you can get ($250 + $500) * 5% + $750 * 1% = $45 per month or $540 per year (by the way, Citibank card has an anual limit of $300 rebate, so you will need to apply for two cards to split this $540.) Now, multiply $540 by the next 40 years, and you will get $21600 in cash rebate in total, TAX-FREE by the way. Again, how much time does it take for you to apply credit cards? Half an hour or so, and you would have paid yourself at the rate of $43200/hr. Now, if that is not good use of your time, then I don’t really know where else you can earn $43200 per hour, tax-free. (Unfortunately, if you have some debt on your credit card, you may need to shop differently for a lower APY instead of getting cashback. Now you know why credit card debts are not good.)

Of course, the above scenarios assume that both the bank and the credit card continues their end of deal. As far as I can see, and from my personal experiences too, there seems to be no reason that they will change their way of doing business.

Please do yourself a favor. When you have time, go to the links and open those accounts. I’d rather see you get richer than big corporations getting filthy rich from scalping average people.

For more information, you can read the following posts on credit cards and banking:

  1. Why I would choose EmigrantDirect over others
  2. How I Bank
  3. Comparison of Cashback Credit Cards for other good deals on credit cards.
Mr. M-Man
 

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