It's October, time to shuffle around your high-interest accounts

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As I wrote last month, my favorite high-interest checking account, the Free Rewards Checking account from Consumers Credit Union, has dropped the maximum balance eligible for their highest interest rate tier from $20,000 to $10,000 (while raising that rate up to 5.09%). While the account is still more than worthwhile (it also offers unlimited worldwide ATM fee reimbursement), there's no reason to hold more than $10,000 in your account anymore, which means you may suddenly have some extra underperforming cash lying around.Here are a few suggestions for what to do with it.

Kasasa Checking

I'm not going to lie and say I know exactly who or what a Kasasa is. If I had to guess, I'd say it's a way for smaller banks and credit unions to pool their deposits and earn higher interest rates on them, part of which they pass along to their depositors in the form of higher interest rates.How high? This high:

All these accounts have slightly different calendar schedules and monthly requirements for triggering their interest rates, so be sure to read through the requirements carefully to make sure you will be able to trigger the advertised rates before opening an account.

Other Rewards Checking Accounts

Two additional non-Kasasa options are:

What to do with the rest of your cash

I love cash for its two great virtues: it doesn't go down in price (although of course it may go down in value due to inflation), and it can be exchanged for goods and services. Those are virtues I'm willing to pay something for, but I'm not willing to pay an unlimited amount for. That's why I would think twice before deciding to hold onto cash that was earning less than the 3.33% APY offered by Heritage Bank.So, what are your other options?

  • Certificates of Deposit. I'm not generally a huge fan of CD's, simply because most people willing to apply a little elbow grease can get higher interest rates from rewards checking accounts. But if you've already exhausted the rewards checking accounts you're eligible for, there are a few places you can get decent rates on CD's. People's Community Bank, United States Senate Federal Credit Union, and KS StateBank all offer medium-term CD's paying between 3.37% and 3.63% APY.
  • Pay down debt. If you financed a car or house at the depths of the Great Recession, you may well be paying less in interest than you can earn on the high-interest-rate accounts. But once your savings exceed the eligible balances on those accounts, you can convert your additional cash savings into savings on interest by aggressively paying down those loan balances.
  • Low-cost bond funds. While I've been focusing on investments of cash that are federally guaranteed to maintain their value and liquidity, interest rates have gradually crept up enough that there are finally opportunities worth considering in the bond market. Vanguard's Short-Term Corporate Bond Index Fund (VSCSX) currently has an SEC yield of 3.41%, their Intermediate-Term Investment-Grade Fund (VFIDX) yields 3.64%, and Intermediate-Term Corporate Bond Index Fund (VICSX) yields 4.08%. The essential thing to keep in mind when investing in bond index funds is the relationship between duration and return: an intermediate-term bond fund is more volatile than a short-term bond fund over the short term, which means its higher yield can be more than outweighed by its sensitivity to interest rates if you need to sell your shares within a year or two. If you need a short-term investment, you should buy a short-term bond fund!

Conclusion

No one of these options, or any one combination of these options, will be right for everybody. But it's equally true that most Americans are not earning as much as they could be on their savings, and I'd like to help them get started.Politicians often cast the failure of Americans to save as the fault of individuals for not making sufficient contributions to their workplace retirement accounts, or not saving enough in IRA's, or HSA's, or 529 plans. My Councilmember has an insane plan to encourage people to save by deferring their tax refunds and earning a "bonus match" or some such nonsense.But it's all ridiculous. What you need to do to make your savings grow is earn as much interest as possible on your savings. High interest rates encourage people to save, low interest rates discourage people from saving, and that's the whole ballgame. If you save more money than everybody else, at higher interest rates than everybody else, you'll end up with more money than everybody else.So why not get started today?