Why we didn’t open a Chase bank account to get a $1K bonus

IF YOU CAN EARLY VOTE:  GO DO IT!  (Don’t forget regular voting day is Tuesday, Nov 5th!)

Somehow the fact that DH and I are high income has been made known to credit card and bank companies.

Chase banking has been trying to get us to open an account for a couple/few years now.  Usually they’ve offered something like a $200 or maybe $300 bonus offer which we don’t even look at because it’s not worth the hassle to us.  But most recently, they sent a $1,000 welcome bonus offer.

  1.  Open a new Chase Sapphire bank account by mid-November
  2. Transfer $75K NEW money to checking/saving/J.P. Morgan investments (but not cds or retirement or 529 accounts) and hold it for 90 days

We’re not going to be switching our investments to J.P. Morgan when there’s Vanguard and plenty of other lower-cost brokers out there.

If the balance drops below $75,000, a $25/month fee will be assessed each month.

So, ideally we would drop $75K in and then remove it and close the account after the $1K deposit on day 100 or 101 (they say the deposit will occur after 90 days).  This sounds like a hassle, but for $1K we could probably deal with that hassle in a way that we wouldn’t for a mere $200.

But is it really $1K?  No– we have to be aware of the opportunity cost of money.  $75K is a lot of money and it has to come from somewhere.  Unless we’re saving for an unpaid leave, I don’t keep that much in cash (I try to keep a slush fund of $30K in my primary emergency fund which covers the summer even with slow reimbursements or potential DH job-loss).  Selling stocks would trigger tax implications in addition to requiring too much thinking (though I could theoretically undrip dividends– though those are generally quarterly so I may have missed my chance).  I can probably get $75K by temporarily moving our primary credit union emergency fund (we don’t really need that money until summer), moving money from our online high interest secondary emergency fund, closing out our Wells Fargo account (it’s useful for ATMs when traveling and for checks), and then using my next two paychecks, overdue reimbursements, and overdue summer salary.

Ok, let’s then assume that I have gathered all 75K and instead of putting it into the stock market, I decide to go with the risk free alternate option to put it in my Capital One online savings account that pays 1.90% APY (which we opened up because they gave a $200 bonus AND had a good interest rate AND we already had a capitol one credit card).  Holding onto that in my already existing Capitol One account for three months provides total interest of $356.81 according to this online calculator.  Of course, I would actually need to hold it a little longer to make a direct comparison (it takes time to transfer money, time to get the Chase match, time to close an account etc.), though probably not a full additional month (another month in that savings account would bring in $476.13 total), so it will be more than that, say $400 (which is about a third the difference between 4 months and 3 months added to 3 months).  If I were instead to look for the best online rate out there, there’s a 2.75 rate (that may or may not be real) on one of those bank rates websites.  Three months of that would provide $516.18.

How much does the Chase savings account that they want me to put $75K in earn?  .01% APY.  Which is practically nothing.  That’s even less than our Wells Fargo account.  Three months of that is $1.88.  Four months is $2.50.

And, of course, we have to pay taxes on that $1K, minimum 15%, so at least $150, making it really only $850 of free money (though any other method of earning interest will also be subject to tax).

So, yes, there’s a big one-time cash infusion for opening up one of these Chase bank accounts, but it has to be with the strategy of closing it as soon as possible because the interest rates are so extremely low and the minimum required balance to avoid fees is so high.  And it is not worth even $600 to gather together money from all those different sources (while hoping an actual emergency that can’t be cash-flowed doesn’t occur), open a bank account, deal with the paperwork and hassle and so on, then remember to close the account and deal with all the attendant hassle of doing that, and then figure out where to place the money after.  Heck, I might pay $600 to avoid all that potential stress.

Now, I’m not planning on actually putting all those reimbursements and incoming checks into a savings account, not even a fancy higher interest online savings account.  I probably should sit down sometime and figure out a long-term strategy for our money now that we’re doing all the obvious things, but I’m not sure it’s going to be any better than putting money into a broad-based index fund of one kind or another every couple months (is it time to look into munis?  Maybe?).  So until I actually figure out what we’re going to do, that’s what we’ll be doing– keeping our emergency funds full and shoveling any excess money into Vanguard taxable.  Doing so does have higher risk than a Chase savings account, even at .01% APY, but we can chance it.

How much would a bank have to give you as a bonus to make you willing to switch?

Big expenses coming up in the next few years

We’ve been out of graduate school for ~10 years now, which means a lot of the stuff we own is now ~10 years old.  We’re now at a point where the probability that something big is going to need to be replaced is pretty high.

Our cars are 10 and 11 years old.

Our 12-year water heaters are 10 years old.

Our roof is getting on about 12 years.

Our refrigerator is something like 15 years old.

Our w/d are 10 years old.

Our dishwasher is 9 years old.

We’re not really sure which of these things is going to break down, or even how many are going to break down.  We shouldn’t need the cost of all of these in our cash emergency fund, but the longer time goes on, the more plausible it is that we’ll need to cover two or more of these in a short time frame.

We’re pretty sure we can cash flow water heaters.  Our cash emergency fund can handle one car, but not two.  Or not one car and a new roof.  Plus I’m kind of hoping that we can do solar with the next roof replacement (we’ll see!) — even if there aren’t government incentives, DH likes new technology and I like the idea of lower a/c bills in the summer (even if we don’t actually save money), which would add considerably to a new roof expense.

I feel like if we have enough in savings to  get us through the unpaid summer should DH permanently lose his job and to handle a major expense like most of a new car, then we should also be ok for the future, even though it might mean having to take on a temporary loan or to sell stocks.  I don’t think we need to have a targeted savings account for each of these major expenses as hopefully we’ll have time to replenish the emergency fund after one comes due, but maybe I’m wrong.

How do you deal with big lumpy unexpected but still kind of expected expenses? Does everything expire around the same time for you or have you spaced things out?