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Ditch banks – Go with money market funds and treasuries
- ashconnor 2y agoI might use Money Market Funds if moving money between accounts wasn't such a pain. Until then the HYSA will be the default place to stick money that might be needed with 24 hours notice. Maybe this will change when FedNow has fully rolled out. For longer term investments I hold my nose and suffer through the Treasury Direct website.
- toomuchtodo 2y agoI can wire funds from my cash management or brokerage account for free, use the debit card for anything that takes debit payment rails, etc. I do keep a Chase account around for Zelle, but am looking to switch to Navy Federal Credit Union to eliminate Chase but retain Zelle until FedNow uptake improves. Wires to my Wise account land super fast for quick cross border money movement to EUR and AUD. Wise only charges $1-$2 for domestic US wires, so also convenient for funds that need immediate availability elsewhere. (lots of detail that might be potentially unhelpful, but I hope it helps others, the plumbing is easy if you know the primitives; Chase is horrible, I do not recommend, Schwab, Vanguard, or Fidelity is the way)
- pishpash 2y agoWire can easily get held up for unknown amounts of time with no recourse. A brokerage attached to a real bank is the only liquid solution for large amounts. Everything else is on an ACH timeframe, which is usually next day with push, but that's often not good enough when you actually need large amounts of money.
- toomuchtodo 2y agoA “real” bank is not necessary. The bank charter is for their benefit, not yours, and a brokerage offers everything one should need to satisfy their financial service needs (assuming no lending products besides margin).
- pishpash 2y agoRead and learn: https://www.reddit.com/r/personalfinance/comments/lhrr49/chase_bank_lost_my_25k_wire_transfer_and_has_not/ https://www.reddit.com/r/personalfinance/comments/lhrr49/cha... https://www.reddit.com/r/fidelityinvestments/comments/1ctpz8l/outgoing_wire_transfer_to_bank_account_from/ https://www.reddit.com/r/fidelityinvestments/comments/1ctpz8...
- deleted 2y ago[deleted]
- lurking_swe 2y agohuh? I successfully sent a $60k same-day wire with Fidelity, for my mortgage downpayment. The escrow company confirmed they got it by end of day. My father in law once purchased a home with “cash” and sent an $800k same-day wire (vanguard or fidelity - i forget). Also went through successfully. First time i’ve heard of this. Can you share more details? Any reading material?
- lmz 2y agoMy guess is any kind of "suspicious" wire can be held for manual review.
- toomuchtodo 2y agoThis is true, but so can any Zelle or other real time payment if flagged by fraud or anti money laundering heuristics.
- pishpash 2y agoLots of reasons, joint accounts, name mismatch, weird names, fat finger by bank employee, missing odd info deemed necessary by the receiving bank, fraud/money laundering holds. One of my very normal wire transfers of not even a huge amount arrived next day for no reason, defeating its purpose, and neither Fidelity nor the receiving bank had any explanation, or really knew anything about it, without a formal trace. Fidelity after all is not a bank. They'd have to check with their own bank.
- greenavocado 2y agoThis doesn't happen
- dghlsakjg 2y agoAny bank can do this. It has to do with KYC, in many cases, and being a brick and mortar bank doesn't help. There are heaps of horror stories involving Chase, WF, BOA, etc freezing money up.
- lurking_swe 2y agoThis is a strange take. Many brokerages, like Fidelity (their “Cash Management Account”) let you write checks, send ACH, or send wire’s directly from the brokerage. They even have a debit card. It also has an account number that you can use to pay bills, it’s exposed by fidelity as a “checking” account type. For me, Fidelity IS my bank for daily life. I only go to a physical bank like chase / bank of america if I need to deposit cash, or i need to withdraw a lot of cash.
- pishpash 2y agoFor daily life yes, for large amounts of money, the extra layer due to not being a real bank makes a huge difference.
- wenc 2y ago> large amounts of money, the extra layer due to not being a real bank makes a huge difference. Can I ask why?
- pishpash 2y agoYou need to get the money to an actual bank, an extra hop is just extra delay and cause for problems. See links to examples of failed wire transfer below.
- ac29 2y agoYou can spend directly out of a money market fund at Fidelity. Yes, there is a bank involved in some transactions behind the scenes, but there is no delay and no extra step to take by the customer.
- wenc 2y agoIn theory correct because large sums of money wired out of an account can be subject to holds for any number of reasons. But it’s the same with banks too. The only difference is there is one fewer party in the transaction to trace (whereas Fidelity has to work with UMB which is their bank partner). But the probability of a hold is the same, which is usually very low. I’ve been with Fidelity for over a decade now and have never had large transactions held.
- drivebycomment 2y agoWhat realistic scenario do you envision that you would need / want to move a large amount of money with a 24h notice ? And what would be the reasons why that can't wait one more day if the transfer doesn't work out ?
- nl 2y agoBuying or selling a house is one. You want the money transfer to occur at the same time as the title transfer. There's plenty of ways where missing the payment date means you lose your deposit which can be tens of thousands of dollars.
- drivebycomment 2y agoNobody buys a house with a one day notice. You have multiple days and weeks to prepare.
- drivebycomment 2y ago> There's plenty of ways where missing the payment date means you lose your deposit which can be tens of thousands of dollars. Please elaborate. Which one requires 1-day turn-around ?
- jjav 2y ago> Buying or selling a house is one. Who wakes up one day and decides they're buying a house today, without any prior planning?
- throwaway22032 2y agoAn investment purchase? To be honest I want as close to instant as possible. If the FTSE100 drops 15% then I want to be there to buy it before it pops up again.
- ac29 2y agoEvery brokerage account I have lets me trade instantly when transferring funds in even though the actual bank transfer takes a day or two to settle.
- pm90 2y agoI only started parking my money at Vanguard/Fidelity in my mid 20’s. The familiarity penalty was very real: I felt like I could trust Chase since national brand, brick and mortar stable. I wish I had moved sooner.
- dkasper 2y agoYou can buy treasuries and money market funds with Chase self directed accounts.
- vasco 2y agoWhy, to pay higher fees for the same thing?
- JoshTriplett 2y agoTo make transfers faster and more convenient.
- vasco 2y agoI forgot bank transfers in the USA still use fax machines. Where I am this is roughly instant.
- ryandrake 2y agoDoes Chase charge a fee to buy US treasuries? I know Fidelity and Schwab do not. I wouldn't be willing to pay a cent in fees to buy a T-bill.
- yas_hmaheshwari 2y agoMid 20s is not bad -- I did that in my mid 30s :-\ ( "The best time to plant a tree was 20 years back. The second best time is now" is the quote that I repeat to not fall into that regret trap )
- jcims 2y ago
- ggm 2y agoComplete avoidance of FIDC insurance after one mention. So, it's predicated on being able to afford to lose all of the savings. Whats that about a fool and their money easily parted? Why yes, chasing the highest return IS a good way to come unstuck. What do you think those extra points of interest were held back for in the first place?
- solaarphunk 2y agoSIPC is also a thing…
- deleted 2y ago[deleted]
- tomcam 2y agoAnd I didn’t see a compelling reason to switch in light of your point. Weird
- toomuchtodo 2y agoMoney market funds with government paper (US Treasuries) are backed by the Federal Reserve, effectively limitless. “Full faith and credit.” FDIC is to make the unsophisticated comfy with parking their savings for pitiful rates at commercial banks making the spread. Their margin is your opportunity.
- deleted 2y ago[deleted]
- lurking_swe 2y agoif a money market fund, especially one backed by the federal reserve like a us treasury, collapses, you have MUCH bigger problems my friend. It basically falls into the category of “doesn’t keep me up at night”. I recommend you do some reading to learn more about it.
- localfirst 2y agoits funny the parent comment doesnt realize what FDIC is and how money market works if us treasury fails the last thing im worried about is my my bank okay
- fny 2y agoThe TL;DR is at the bottom. Just use VUSXX. It’s tax exempt-ish and more liquid than buying treasuries outright.
- loeg 2y agoAs far as I can tell the article doesn't specifically suggest VUSXX over the default Vanguard VMFXX (or a range of other acceptable money market funds). The author does get into it more here: https://thefinancebuff.com/best-vanguard-money-market-fund-your-tax-rates.html https://thefinancebuff.com/best-vanguard-money-market-fund-y... , but there isn't one clear best for everyone.
- aorth 2y ago> The author does get into it more here: https://thefinancebuff.com/best-vanguard-money-market-fund-your-tax-rates.html https://thefinancebuff.com/best-vanguard-money-market-fund-y... Interesting, the linked article says this: > Vanguard Federal Money Market Fund (VMFXX) is the settlement fund in a Vanguard brokerage account. You don’t have to do anything extra to buy or sell this fund. It requires no minimum investment. Any cash you transfer into your Vanguard brokerage account will automatically land in this fund. I didn't know that. It definitely has better returns than most savings accounts. Instead of parking money in a savings account you could just leave it there until you decide whether to invest it or transfer it out to do something else with it.
- loeg 2y agoYes. By the way, this is an unusually good deal for uninvested cash at a brokerage (it's not generally a reasonable thing to do outside of Vanguard). E.g. Schwab makes most of their revenue from interest on your uninvested cash.
- xhrpost 2y agoI think it's mostly tax exempt at only the state level, no? For tax advantage, I've recently found out about BOXX. You get roughly the same growth as a typical HYSA, but the value is added as actual value to the stock rather than dividends. So if you hold for at least one year, you can get HYSA interest but only pay capital gains tax.
- AlexCornila 2y agoyeah but if I get a 4.25% FDIC insured I’ll prefer that and take the 0.75% loss. https://www.crisesnotes.com/i-got-the-fed-to-release-its-2011-treasury-default-playbook-heres-what-it-says-and-why-it-matters/?ref=notes-on-the-crises-newsletter https://www.crisesnotes.com/i-got-the-fed-to-release-its-201...
- dawnerd 2y agoYou can get higher than that w/ fdic too. I use wealthfront and it's been great so far. Currently 5%
- fshbbdssbbgdd 2y agoWhat’s the FDIC going to do for you when the treasuries it uses to hold its own funds are in default?
- AlexCornila 2y agoFDIC is going to return my funds defaulted treasuries are not required to do so
- fshbbdssbbgdd 2y agoAs far as I know, the US Treasury and FDIC are both under a legal obligation but either could be unable to fulfill its obligation if it lacks the funds. Under this scenario where the Treasury defaults, tons of banks will will be broken (since they keep money in the Treasury too), how will FDIC save them when its money is also tied up in treasuries?
- sam2426679 2y agoHolding t-bills means you pay neither state nor local taxes, so the net difference is likely larger than 0.75% depending on where you live.
- ashconnor 2y agoIs it possible to buy t-bills whilst avoiding the Treasury Direct website?
- tompccs 2y agoUnless something very different in the US is available to what I can get in the UK, I think this is very dangerous advice. If I put £100 in a savings account with 4% interest, I can withdraw that £100 (plus interest) at any time. If I buy put £100 into government bonds with 4% yield and I check back in a year's time, if bond yields have increased (say, due to increased base rate) then the "balance" I can withdraw is _less_ than £100, since the underlying bond is less valuable! Putting money in bonds exposes you to market volatility, which banks shield you from (which is why they get to take a cut) Edit: a money market fund appears to absorb this volatility for you by balancing their bond portfolio, but ultimately you are still relying on the fund being well managed. The failure mode here isn't the govt not paying the coupon on the bond - it's the fund not having the liquidity to pay you if you withdraw. I don't understand enough how money markets are regulated to understand the risk, whereas banks are required to have deposit insurance in UK & US.
- esaym 2y agolol, my bank's rate is 0.3% on savings account.
- _uhtu 2y agoMoney market funds and short term t-bills are basically always liquid at face value, unlike longer term bonds. They fall below investment value maybe once per 50 years and that usually lasts a couple days.
- tompccs 2y agoSee my edit. What protects you from the fund being mismanaged?
- zbobet2012 2y agoDepends on the money market fund. There are US treasury only funds like FDLXX, basically the only situation it would become unable to meet it's cash flow obligations is if there where no buyers for US treasuries at face value. And frankly if that's the case I wouldn't be betting on FDIC or equivalent insurance actually working anyways. But even "less" secure ones are heavily regulated to be kept at 1$ of NAV and SPIC backed.
- chazeon 2y agoI want to mention that, typically, if you are a new immigrant, most US brokerages won't serve you because you are not considered a US person in tax; of course, smaller banks won't either, mostly because they won't bother to prepare a different tax form for you; you can only use a bank within that period. But after you become a US person, you have far more choices. Usually, transfer is also more difficult with a brokerage than a bank; correct me if I was wrong: a) brokerage follows a previous T+3 settlement, now T+1, some banks offer a faster settlement, especially if Zelle is directly available; and b) while doing international wire, the bank is considered a viable target, but brokerage don't, a broker has to use their account opened at a bank, it could be cheaper, but there is more hassle (e.g., some government would allow this for non-business purpose). But if you are just parking money, these brokerages offer a much better deal; many even offer to reimburse your ATM cost.
- wanderingmind 2y agoAn even better strategy is to park you savings as redraw in your debt account (like housing loan), since the interest you are likely to pay on your debt is always more than the interest you are likely to make on your assets. Further, its completely tax free.
- zbobet2012 2y agoNope, my house loan is 2.3% my liquid savings in FDLXX are about 5%. What you are saying is only true if your debt is incurred at the same time as your savings are accumulated. That's actually rather unlikely.
- wanderingmind 2y agoUS is an outlier with 30 year Fixed mortgage especially during COVID. Now for any new debt its significantly higher across the globe.
- zbobet2012 2y agoYou missed the point. Most people take on debt when it's cheap (low interest) and take on savings when they have high returns (high interest). You save when interest rates are high, you buy when interest rates are low. That interest rates change is global.
- dalmo3 2y agoDoesn't that assume you're always in debt AND the debt is greater than your savings?
- wanderingmind 2y agoYes you need to always have current debt more than current liquid assets (like cash).
- pcvetkovski 2y agoDepositors lost trillions since the last few years in purchasing power due to low interest on deposits at the banks and high inflation: https://blog.maxint.com/purchasing-power-loss/ https://blog.maxint.com/purchasing-power-loss/ Be careful with treasuries, during times when the Government is heading towards default otherwise pick the highest yield and lowest fee option, SGOV offers the highest yield right now, here are the latest rankings, based on yield and fees: https://blog.maxint.com/treasury-bill-etf/ https://blog.maxint.com/treasury-bill-etf/ unless you don't want to pay any fee and do it yourself via https://www.treasurydirect.gov/ https://www.treasurydirect.gov/ There are a lot of money market funds, make sure you read their prospectus to understand where they invest your money. VMRXX offers the highest yield right now, here are a few more: https://blog.maxint.com/best-money-market-funds/ https://blog.maxint.com/best-money-market-funds/ which are also a good alternative when the Government is heading towards default. Prioritize based on your needs and financial circumstances, starting with MMFs, treasury ETFs and lastly consider bank accounts for a small % that you need to have available on-sight. This is not financial advice.
- pxx 2y agothere's no need to worry about a non-technical default at all. if there is a substantive default on Treasurys the world is already over and it doesn't matter where you had your money.
- lyrrad 2y agoOne issue I have with this article is that it doesn't discuss the distinction between Government money market funds that invest in US Treasury debt and repurchase agreements, and Prime money market funds, that also invest in riskier assets like corporate paper. I'm comfortable with holding significant amounts in a Government MM fund, but less so with Prime MM funds.
- ryandrake 2y agoAlso, if you value the state tax exemption (for example, you live in California), you need to make sure the fund only invests in Treasuries and not in repurchase agreements. Treasuries are state tax exempt, but repos are not. If your fund holds a mix, you need to tease them apart at tax time. Or just buy the Treasuries directly. Why pay a fund to do it for you?
- delfinom 2y agoYea, buying into a MMF only makes sense if you need the money to be semi liquid since it only takes a day or so to cash out. Otherwise buying short term treasuries is quite easy on most brokers. The downsise being it may not be as quick to sell on the secondary market when you need to cash out unless you get competitive with the sell terms.
- azemetre 2y agoThank you for this comment. I was really confused on the difference between MMFs and T Bills, going by the other comments in this thread it seemed like there is a preference for MMFs without stating why.
- ryandrake 2y agoBuyer availability really isn't a concern, especially for short term bills. I've never had even the slightest problem selling a T-bill one the secondary market. It's almost always as instant as selling 100 shares of a stock.
- 2y ago
- pants2 2y agoWhat's the highest yield account that can be used to easily pay your credit card / debit card balances? Because having even just $20k sitting in a checking account ready to pay bills you're losing out on $1,000/yr.
- toast0 2y agoMy credit union pays 3.25% on checking if you jump through the hoops (online statements, 10 debit or credit card transactions a month, $300 ach credit/month or $5000 balance across checking, savings, loans at the credit union). It's the same rate they have for savings... they've previously had competitive savings rate, but they have been raising rates slowly this time. I had thought the online high yield savings accounts also had high yield checking, but I don't see much currently. I only saw one offer from a bank whose name I don't recognize. Some of the brokerages offer a checking account that sweeps into money market, or checkwriting against moneymarket holdings, you can look around a bit there.
- throwaway22032 2y agoBrit here so not exactly answering your question but I set things up so that the money is in the right place a few days before. i.e. for simplification, try to get all bills to come out on the 1st, then make sure that $20k hits the account on the 25th. For the rest of the month it can be empty.
- ac29 2y agoFidelity brokerage with SPAXX or another money market as the default cash position.
- RhysU 2y agoThis. Fidelity has a rather nice BillPay service and can accept direct deposits for paychecks. The only thing one really loses is access to a human teller to obtain beyond-ATM levels of cash.
- Dalewyn 2y agoA savings account of some description at the same bank as your checking account. Transfers between accounts owned by the same person at the same bank are instantaneous from my experience. I always keep a balance in my checking to ease my mind, but the bulk of my monies I keep in a savings account next to it and I transfer as needed prior to paying the bills.
- golemiprague 2y ago[dead]
- g96alqdm0x 2y agoBounced off that page straightaway when I saw Cloudflare trying to check if I’m human.
- aszantu 2y agoI need something like this for Germany, I'm kinda dyslexic with anything money and having a hard time reading contracts.
- bravura 2y agoYou can set up a Schwab brokerage account internationally and then use it to buy money market funds.
- skrause 2y agoFor a German investor that's not a good option for two reasons: 1. Buying US dollar money market funds will add a whole level of currency risks which you might not want. 2. Using a foreign broker is a tax nightmare in Germany. Apart from that the German broker market is highly competitive with multiple choices where you can buy European money market funds basically for free.
- pentacent_hq 2y agoThere are also European money market funds for people who live in the Eurozone. Examples of this are DBX0AN, DBX0A2, and LYX0B6. You can buy them at any German broker. If you speak German, check out this article about money market ETFs as an alternative to savings accounts: https://www.finanztip.de/investmentfonds/geldmarktfonds/ https://www.finanztip.de/investmentfonds/geldmarktfonds/
- aszantu 2y agothanks!
- ttepasse 2y agor/Finanzen is the german subreddit for money. Like any subreddit it develops into something of a cult with its own culture and lingo, but it could be helpful.