Finance
Is ‘rate chasing’ worth it? How to decide if you should switch banks.
After years of raising interest rates to combat high inflation, the Federal Reserve recently began lowering the federal funds rate.
While this is good news for borrowers, eager savers may not be as appreciative. With savings account interest rates falling in response to a lower federal funds rate, those who’ve been enjoying high returns on their savings may be tempted to switch banks to secure the best rates they can find.
While “rate chasing” may seem like a good strategy to get the most bang for your buck, it has some disadvantages you should be aware of. Read more to find out when it’s worth switching banks.
Read more: Federal funds rate: What it is and how it affects you
Savings interest rates vary by bank and can change at any time, often in response to the federal funds rate. Rate chasing involves constantly searching for the best savings account rates, opening a new account when you find a better rate, and transferring your savings to your new account.
Often, this pattern of opening and closing bank accounts to eke out a few more basis points isn’t worth it. While there’s a chance it’ll help you earn a few extra bucks, it takes a lot of time and effort that may be better spent elsewhere. However, there are certain situations where switching banks to chase a higher rate may be worth it.
Switching banks to earn a much higher interest rate — for example, switching from a large brick-and-mortar bank to an online bank offering a high-yield savings account — is often worth the effort.
Some major banks — like Chase, for example — tend to offer rock-bottom savings account interest rates, often around 0.01% APY. Meanwhile, it’s possible to find high-yield savings accounts offering rates of at least 4.00% APY.
If you aren’t currently using a high-yield bank account, making the switch from a national bank to a financial institution with more competitive rates can make a major difference in terms of your interest earnings.
The following table illustrates how much interest you’d earn with a $10,000 balance in a savings account earning 0.01% APY, 4.00% APY, and 4.20% APY (with interest compounding daily).
In this case, switching banks to earn 4.00% APY would amount to a difference of more than $400 over the course of a year. But as you can see, jumping from a rate of 4.00% APY to 4.20% APY would only result in an extra $20.
In other words, if you’re already using a high-yield savings account that generally offers a competitive rate, it’s likely not worth switching banks to find a marginally better interest rate.
Plus, savings account interest rates change all the time. A bank that has historically offered a competitive rate will likely continue to do so in the future, even if it doesn’t currently offer the best rate on the market.
Finally, the administrative hassle of moving your money from bank to bank may have financial costs too. Some banks charge account closure fees of up to $50 for closing a bank account within a certain period of time, such as three or six months of account opening. Such a fee could easily eat up any gains in interest earnings.
Read more: Does closing a bank account hurt your credit score?
Ultimately, it’s up to you to decide whether or not it’s worth switching bank accounts, but the following tips can help.
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Do the math: Calculate how much money you’d earn with a new account compared to your current account. If it’s a minor difference, you may decide the administrative effort isn’t worth it.
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Consider any sign-up bonuses: Sometimes, banks offer cash sign-up bonuses when you open a new account. While not necessarily a reason to open a new account, a sign-up bonus can sweeten the deal if you decide to switch for other reasons. (See a list of the best new bank account sign-up bonuses here.)
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Consider fees: Some savings accounts have monthly maintenance fees and some charge early account closure fees. Consider whether an account switch would mean paying these fees, and if so, calculate how much they’d take away from earned interest. On the other hand, switching from an account with a monthly fee to a fee-free account can further boost your earnings.
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Weigh account features: Sometimes, it’s worth switching accounts to get the benefits you want and need. For example, if the ability to split up savings between multiple goals is important to you, switching to an account with this perk may be worth it, even if the difference in interest rate is negligible.
Read more: How to switch banks: An easy step-by-step guide
Continued Strong Net Income and Loan Credit Quality
ST. PAUL, Minn., Nov. 7, 2024 /PRNewswire/ — Today, St. Paul-based AgriBank announced financial results for the third quarter of 2024, with strong profitability, credit quality, and liquidity and capital.
Highlights:
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Profitability: Net income remained strong at $685.0 million for the nine months ended September 30, 2024. AgriBank’s year-to-date return on assets (ROA) ratio of 51 basis points was above the target of 50 basis points.
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Credit quality: Total loan portfolio credit quality remained strong, with 99.4 percent of loans classified as acceptable at September 30, 2024.
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Liquidity and capital: End-of-the-quarter liquidity was 155 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.
“Amid a continued volatile interest rate environment, AgriBank is able to report another successful quarter with consistent profitability, credit quality, and liquidity and capital,” said AgriBank CEO Jeffrey Swanhorst. “We look forward to continuing to collaborate with the Farm Credit Associations we support to bolster their financial performance as, together, we meet the credit needs of farmers, ranchers and other rural borrowers.”
2024 Results of Operations
Net interest income was $768.5 million for the nine months ended September 30, 2024, an increase of $46.6 million, or 6.5 percent, compared to the same period of the prior year. The increase was primarily driven by higher spread income on retail loans in AgriBank’s asset pool portfolio, when compared to the prior year, due to the purchase of a significant number of loan participations during the second half of 2023. Additionally, the benefit of equity financing from higher interest rates compared to the same period of the prior year has also contributed to the increase in net interest income. Equity financing represents the benefit of non-interest bearing funding. AgriBank typically experiences slight net interest margin compression as fixed-rate assets age, usually offset by the margin from new volume. However, with the current inverted yield curve, new volume margins are not providing the typical offset. Additionally, spread income on investment securities has declined compared to the same period of the prior year due to the mix of investment securities and reduced spreads on money market instruments.
Non-interest income was $85.9 million for the nine months ended September 30, 2024, an increase of $12.7 million, or 17.3 percent, compared to the same period of the prior year, primarily related to an Allocated Insurance Reserve Accounts (AIRAs) distribution received from the Farm Credit System Insurance Corporation (FCSIC) during the second quarter of 2024. Additionally, mineral income increased for the nine months ended September 30, 2024, compared to the same period of the prior year, related to a rise in oil production, a result of an increase in new well activity during the first quarter of 2024.
About half the Minnesota districts that asked voters for more money on Election Day got it.
In Northfield, the school district’s $121 million three-question funding request saw full approval, meaning school leaders will be able to move forward with building a new gymnasium, classroom addition and geothermal heating and cooling system.
Minneapolis voters OK’d a $20 million technology spending levy for the financially strapped public school district.
Voters across the state were willing to renew existing levies for building maintenance and upgrades, and for technology. It was a different story, though, when they were asked to pay more for day-to-day operating costs.
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Thirty districts this year asked voters to approve levies for daily costs, including 28 that put questions on ballots this week. Only 40 percent of those requests were OK’d — one of the lowest approval rates since 1980.
“One of the things that really stuck out to us is people were willing to vote to maintain. They weren’t interested in increasing their local property taxes,” said Kirk Schneidawind, executive director of the Minnesota School Boards Association.
Schneidawind said he believes that’s a reflection of how Minnesotans feel about the economy.
“The general default for many voters is, ‘I’m going to vote no if I don’t understand it or don’t know about it,’” Schneidawind said. “People, in their mind, the economy, prices of things and costs of things have gone up. And inflation, even though it’s been coming down, it’s still impacting their pocketbook. And I think perhaps folks saw that or felt that and weren’t supportive of new increases for our public schools.”
Statewide, 45 districts put some sort of financial question on their local ballots this year with 51 percent approved.
School boards
More than 300 Minnesota school districts sought to fill open school board seats this election. In places where incumbents were on the ballot, voters elected to keep them at a rate of nearly 87 percent.
While this year’s competition wasn’t as intense as in recent years, many districts had multiple candidates on their ballots. Behind those candidates were organizations spending time and money on training and endorsements.
The Minnesota Parents Alliance, a conservative organization launched in 2022, endorsed nearly 130 candidates in 56 Minnesota districts in its voter guide. Teacher unions backed nearly 100 candidates in 33 districts. The School Board Integrity Project, a progressive organization launched last year, endorsed 45 candidates in 27 districts.
In the 29 districts where there were candidates from both the Minnesota Parents Alliance and the teachers union or School Board Integrity Project facing off, 31 Minnesota Parents Alliance-endorsed candidates won and 50 union or School Board Integrity Project-endorsed candidates won.
Education Minnesota president Denise Specht claimed victory in an emailed statement, saying union-backed candidates won nearly 75 percent of their races.
Leaders of the Minnesota Parents Alliance also focused on wins, pointing to wins in 56 percent of races with endorsed candidates and seats gained in 47 school boards and majorities gained on boards in Elk River, Lakeville, Forest Lake and Prior Lake, MPA leader Cristine Trooien said in a statement.
Here are the results in a few districts MPR News tracked on Tuesday.
Prior Lake-Savage
In 2022, the open seats on this suburban district’s school board were hotly contested by opposing slates of candidates who staked out sides in a tug of war that involved organized parent groups, teacher unions, networks of political donors and families worried school equity efforts were in jeopardy.
This year there were six candidates running for three open seats. The candidates — just one of whom was seeking reelection — were divided into those backed by the local teacher union versus those who received endorsements from the Minnesota Parents Alliance.
Two of the Minnesota Parents Alliance candidates won, backed by a local parents group that sank at least $1,800 in the election. Just one union-endorsed candidate won, meaning this school board, come January, will be led by a majority of MPA-endorsed candidates.
Voters in this district also rejected the school system’s request for a levy to help pay for daily operations.
Brainerd
In Brainerd, there were seven candidates running for three seats. Only one didn’t secure endorsements from either the Minnesota Parents Alliance or the local teacher union. All union-endorsed candidates were incumbents. Of those, two won reelection. The third open seat was filled by a Minnesota Parents Alliance-backed candidate.
In the 2022 election cycle, Brainerd saw a frenzy of school board campaign spending with candidates racking up nearly $80,000 in disbursements on advertising, mailers and signs. This year, the spending has come way down and is now closer to $11,000.
The three election winners will oversee a district serving at least 6,000 students in north-central Minnesota.
Fergus Falls
Nine candidates were running to fill three seats in this west-central Minnesota district where nearly 3,000 students attend school. Three union-endorsed candidates, supported by about $2500 in union campaign spending, beat out three Minnesota Parents Alliance-endorsed candidates.
Lakeville
In Lakeville, nine candidates vied to fill three seats on a board overseeing district-level decisions for more than 12,000 students in this Twin Cities outer ring suburb.
Campaign finance reports from August and September show close to $20,000 spent on the board elections, mostly from the teachers union. The six endorsed candidates were backed by either the local teachers’ union or the Minnesota Parents Alliance, none of whom are incumbents.
One union candidate and two Minnesota Parents Alliance candidates won, meaning alliance-backed members will hold a board majority come January.
Osseo
In the Twin Cities suburban district of Osseo, there were six candidates running to fill three open board seats. None of the candidates were incumbents. They raised at least $9,000 between them for websites, business cards, flyers, T-shirts, signs and other campaign spending.
This district’s current board has been the site of clashes over policies regarding gender inclusion, instruction and LGBTQ+ pride flags.
On Tuesday voters backed two union and School Board Integrity Project candidates and one Minnesota Parents Alliance candidate.
St. Francis
In St. Francis, in the northern Twin Cities exurbs, there were 10 candidates running for four open school board seats. The Minnesota Parents Alliance and local teachers union each endorsed four candidates, none of whom was an incumbent.
The winners were evenly split — two union-endorsed candidates and two Parents Alliance-endorsed candidates won.
Rosemount-Apple Valley-Eagan
This metro-area district saw two candidates competing in a special election to fill a single school board seat. The local teachers union spent more than $90,000 to support their endorsed candidate, who won the seat.
STORY: :: November 6, 2024
:: Berlin, Germany
:: Germany’s Scholz sacks finance minister
Christian Lindner, seeks confidence vote
:: He says Lindner broke his trust
‘too many times’ and blocked lawmaking
:: Olaf Scholz, German Chancellor
“Ladies and gentlemen, I have just asked the President for the dismissal of the Finance Minister. I feel forced to take this step in order to avert damage from our country. We need a government that is able to act, that has the strength to make the necessary decisions for our country. That’s what was important to me in the past three years. That’s what’s important to me now. I have made another comprehensive offer to the Free Democrats coalition partner at noon today how we can close the gap in the federal budget without throwing our country into chaos.”
“Too many times did Finance Minister Lindner block laws irrelevantly. Too many times did he act to serve his clientele and party. Too many times did he break my trust. Even the agreement on the budget was withdrawn by him after we had agreed on it in long negotiations. There is no basis of trust for further cooperation. This way, serious government work is impossible.”
“In the very first week of the parliamentary session in the new year, I will call for the confidence vote so that the Bundestag can then vote on it on January 15. That way, parliamentarians can decide if they want to pave the way for a snap election. That election could then take place at the latest by the end of March while respecting the rules of the constitution.”
After firing Finance Minister Christian Lindner of the Free Democrats (FDP) party, Scholz is expected to head a minority government with his Social Democrats and the Greens, the second-largest party.
He would have to rely on cobbled-together parliamentary majorities to pass legislation and he plans to hold a parliamentary confidence vote in his government on Jan. 15.
The collapse of Scholz’s three-way alliance caps months of wrangling over budget policy and Germany’s economic direction, with the government’s popularity sinking and far-right and far-left forces surging.
“We need a government that is able to act, that has the strength to make the necessary decisions for our country,” Scholz told reporters.
Scholz said he fired Lindner for his obstructive behaviour on budget disputes, accusing the minister of putting party before country and blocking legislation on spurious grounds.
The move comes a day after the election of Republican Donald Trump as U.S. president, with Europe scrambling to form a united response on issues from possible new U.S. tariffs to Russia’s war in Ukraine and the future of the NATO alliance.
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