bank rates

I’ve Grown Weary Of Interest Rate Chasing

Green dollar sign in a vice.When I retired several years back, I didn’t realize the “active adult” lifestyle I was embarking on would feature constant chasing of interest rates.

Last week was typical.

I had CDs maturing at Salem Five, Discover Bank and AIG Bank.

On Tuesday, I’d read a post here about a 5-year, 2% CD being offered nationally by Mountain America, a credit union I’d never heard of.

I wasn’t interested.

You see, I was tired of chasing rates from one institution to the next.

I wanted to avoid the hassle of opening an account at, and familiarizing myself with the peculiarities of, yet another bank or credit union.

I decided I’d take the best I could get among the 30 or so I already had in my unwieldy portfolio.

My plan was to park my maturing CD money in my guaranteed-rate (until Dec. 31) savings account at Pacific Trust Bank. From there, I might put a portion into CDs at known quantities — Nationwide Bank, Melrose Credit Union and, perhaps, Discover.

Then the rate-cutting set in.

Nationwide slashed most CD rates by 0.10%.

Melrose dropped CD rates by the same amount, across the board.

And Discover trimmed its rates by 0.05%.

The next day, I joined Mountain America and began funding 5-year CDs with money from those three maturing CDs.

This has become an all-too-familiar pattern.

First, I swear to myself that I’m done chasing rates.

Next, I see rates dropping all about me and I panic.

Finally, I decide to move every available penny into an unfamiliar institution with the best rates, hoping to get it there before it drops them too.

In 2011, I went through this exercise at Alliant Credit Union, MainStreet Bank (Airbanking.com) and Velocity Credit Union.

Last year and early this year, I repeated the process at Pentagon Federal.

It’s my response to the so-called “wealth effect” behind Fed monetary policy.

The wealth effect doctrine holds that if a central bank drives interest rates low enough, people will invest money in things like stocks, gold and real estate, and the value of these assets will rise.

As asset values appreciate, people feel better about themselves and start borrowing and spending money, spurring economic growth.

Frankly, I used to have more success feeling better about myself by taking a few stiff slugs of vodka.

But I always got a hangover afterward.

Imbibing large drafts of current Fed policy doesn’t make me feel better about myself at all.

It only produces the hangover.

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