If you’re interested in leveraging your credit in a safer environment, credit card arbitrage is one of the best ways. In order to succeed, you need to make more interest than your low interest balance transfer offer and for that you need to invest your money in a high interest bearing account. However, there are many different high interest banks out there and it can be difficult to know which one is right for you. Here are some guidelines to help make your choice easier and help you get the best deal for your investment.
1. Are there any fees?
Numerous high interest banks charge account fees that can gradually chip away at your funds. If possible, look for a bank that does not charge these fees so that you won’t be out anything. If you can’t find one that you like, look for the banks that charge minimal fees and guarantee that they won’t go up. There are numerous scams out there that involve getting you in a low fee rate and then suddenly raising the costs.
2. How reliable are they?
Just because a bank sounds good on paper doesn’t mean that they are. You’re going to need to do some due diligence to protect your investment. If you’re dealing with a pretty well known bank than this isn’t such a large concern. Keep in mind however, that even big banks can fold suddenly, as evidenced by the fallout in the current housing markets. While US banks are insured up to $100K, getting access to your money in such an event is a potential issue in the short term and more than likely the high interest paid will convert to a substantially lower amount paid after the closure.
3. What is the minimum amount required to open an account?
If you are only placing a limited amount of funds in a high interest bank you need to be aware that some of them have limits as to how little you’ll be able to put in. For some larger banks, like ING, the minimum is only a dollar. For others, the minimums may be higher than $10,000. This can really help narrow the field, especially if your investment is very limited.
4. How good are the rates?
Although most high interest banks offer similar rates, keep in mind that even a tiny little point or percentage can make a big difference when it comes to the amount of your return. Make sure that you do your homework to find the right bank that not only meets the criteria above but also offers you the best interest rate.
5. Will the rate fluctuate?
It goes without saying that it is much smarter to put your money into a fixed account. Sure, if the rates go up suddenly you may be out a few bucks, or even a lot of bucks. But it’s a lot better than facing the music when the rates plummet down.
It is also a good idea to consider opening more than one high interest bearing account with different banks. Diversity is always key when it comes to smart investments. It’s never a good idea to put all of your eggs into one basket. As we mentioned earlier, even the best banks can fail. You won’t be hit quite as hard if you’ve got your money spread around with different banks.
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