Math geniuses help please

[happygirl]

I'm considering moving my savings into a new account, but it would be linked to a checking account which I must use at least a few times a month. This means I would have to purchase checks (for some reason they don't count debit usage). The cheapest checks they offer are 13$. I'm not sure if I'll really make enough interest at the higher rate to make it worth the effort to change. So, that's why I need help. Math is not my strong point.

I have roughly 35k in my current savings at 1.5% compounded daily. The new account is 2.25 also compounded daily. I'll spend 13$ on checks and there is no guarantee how long the 2.25 will last, although the 1.5 was at 2.0 for over 6 months before dropping, so I do think they exceed the average for the most part.

My question is would it even be worth the effort to switch the money over since it would cost me 13$ right off the top? How long would I need to earn 2.25 for it to even be worth it?

Thank you in advance for your input. I appreciate the help I get on the forum so much!

[jIM_Ohio]

$13/.0225=$577

I believe if you have $577 invested at 2.25% you will earn $13 after 1 year.

[jefffou]

Ok, HappyGirl. I'll take a shot.

$35,000 @ 1.50% will earn about $1.44 in interest per day.
$35,000 @ 2.25% will earn about $2.16 in interest per day.

The difference is 72 cents per day. This doesn't include compounding (this would be minimal anyway, and should not affect your decision).

So, $13 check cost divided by the 72 cents difference in interest means that it will take about 18 days to payback the original cost of the new checks.

[happygirl]

Well it sounds like it would be a good thing to do, so I guess I'll head on down to the bank tomorrow. Thanks!

[Ima saver]

It sounds good to me. You will earn $525 a year in interest on the old account but now you will earn $787.50 on the new account paying 2.25% That is an extra $262 per year.

[Ima saver]

Where is this bank? I can't even find C.D.'s paying that much!!

[happygirl]

Where is this bank? I can't even find C.D.'s paying that much!!

It's just a small town bank started by local folks. I suppose they are trying to build up business against the bigger name banks around here. So far, I think they're doing a wonderful job!

[jpg7n16]

Looks like you got your answer, but here's the easiest math for future decisions:

$$$$$ * (Potential Interest% - Current Interest%) = Gain/Loss per year on the switch

$35,000 * (2.25%-1.5%) = $35,000 * (0.75%) = $262.50

As long as it doesn't cost more than $262.50/yr, you would gain money by switching accounts. Good luck!

[Avg. Joe]

Well now,

Girl, you may be tripping over dollars to get to pennies. I'm hoping you have fully funded 401k,IRA or Roth and you require 35k liquid for some reason.
Good luck-

[happygirl]

Girl, you may be tripping over dollars to get to pennies. I'm hoping you have fully funded 401k,IRA or Roth and you require 35k liquid for some reason.
Good luck-

Yes, we put the allowable max into 401k and IRA's. The 35k is our emergency fund. I wouldn't mind tying some (maybe most) of it up in CD's if I could find a great rate, but for now, 2.25 is the best I've seen, particularly since it does allow me to keep the funds liquid in case rates eventually go up. Beyond that, we're focused on paying off the mortgage. Thanks for the input!

[Ima saver]

It is a very good rate, stick with it! I wonder if they take out of state depositors?