HomeBankingWhy Squeezing Every Last Penny Out of Savings Accounts Isn't Worth It

Why Squeezing Every Last Penny Out of Savings Accounts Isn’t Worth It

I love my savings account. I love knowing that I’m earning money on my money. I especially love it because I know that I’m earning more than anyone else is.
Still, there comes a point where it’s just not worth it to micro-manage your finances and throw every last dollar in the account with the hopes of making a little bit of extra interest.
out of order
There are four reasons why it’s just not worth it:

  • The Stress Factor
  • The Low Reward Factor
  • The High Risk Factor
  • The Time Factor

Let me explain:

I usually leave about $200-$300 in each of my checking accounts (Bank of America and ING) and put everything else on my credit card. I don’t use cash all that often so I rarely have to worry about running low.

Well, rarely isn’t always, and last week I ran into a problem. After transferring a large majority of my paycheck into savings, my roommate reminded him that I owed him for groceries (we switch off, and it adds up for about a $150 transfer each time). No problem, right? Well…as it turns out, I also had a $100 automatic transfer coming out of that same account to pay off my student loan. To make it worse, this all happened on a Friday and two business days to transfer more money in from my other checking account wouldn’t happen until Tuesday so I was stuck.

I had a few choices: I could just suck up a $35 overdraft fee, then try and get it reversed. When I get within $50-$100 every month, I’m probably cutting it too close. This is a case of The High Risk Factor.

I could withdraw money from the ING ATM and deposit in my Bank of America ATM, which would post immediately an save me. Sounds like an obvious choice, even if it is a little time consuming. This is a perfect example of The Stress Factor.

Anyway, I headed to the CVS which has the ING ATM, and it was out of service. No problem, they must have another one somewhere. I whipped out my free iPhone, plugged in my location and up popped another ATM about 15 minutes away. I got there but that one was ALSO out of service. What gives ING? Ah, the frustration. Plus, I had just spent 25 minutes to find out that two ATMs weren’t working. This is clearly The Time Factor.

The next closest one was REALLY out of the way, so I headed home a bit disappointed. I stopped by the Bank of America ATM, deposited the $20 I had in my wallet but I was $6 in the red. Don’t forget that I did all of this because I wanted to keep an extra $100 in my savings account! That $100 would make me only $2 per year, or less than 20 cents per month! That’s not exactly going to get me rich any time soon. It actually isn’t even enough money for me to spend even a minute thinking about! Yes readers, this is The Low Reward Factor.

When I got home, my roommate was waiting for me and had some unimportant news for me: “Oh, by the way, you transferred me too much, I’m sending you $12 back right now.”

So in the end, I didn’t go over and I wasn’t charged, but I did waste about 40 minutes walking around D.C. searching for an ING ATM and aged about 15 years while worrying about a $35 fee. I wanted to save a very little bit of money so I risked a whole lot more. I think it’s time to take a step back and relax a little bit.
Readers, have you ever been so intent on saving money that you forgot to take a look at the big picture?



  1. Great post! A perfect example of overmanaging money accounts to maximize interest when it’s really not worth all the hassle. I would also consider the context: the historically low current interest rates. Right now rates are so low that we can just act as if relatively small amounts of money (in the hundreds) don’t earn any interest. But, as interest rates rise in the coming years, we may need to re-adjust. To put it in perspective: my current mortgage rate is only 4.4% but when I bought my first house (30 years ago) the rate was between 12-14%!


    • @ira, Definitely not worth the hassle, my gosh! At what point is the interest worth it? Is it a set dollar amount that you’ll be earning extra per month or is it a few points? Basically, does it depend on the person or is there a rule we should all follow?

  2. I’m at the other end of the spectrum trying to put a cork in my wife’s and my shopping binge this month.

  3. I love real world examples :-) I don’t worry about a little bit of money here or there in missed interest. Interest doesn’t matter much to a broke person.

    The system I use works great for me and provides a cushion for cases just like this. I keep my $1,000 EF in my ING checking account. I use it to cash flow my daily/weekly purchases and provide a means to cover unforeseen issues like you illustrated. The $1,000 will go down as I make purchases but is built back up after I transfer budgeted money back from a savings account. Example: $40 in gas is drafted, ING balance goes down to $960. At a later date I will move money from my “gas” savings (sinking fund) account back into the checking account to bring the balance back to $1,000. I never worry about the interest because a few dollars over the course of the year doesn’t make sence. The time, stress, worry, etc just isn’t worth it.

    GREAT POST my friend!!!


  4. Sounds like you were really stressed out about going in the negative as well! I think I agree with you, you need to look at the big picture sometimes first, then the details. Terrific topic!

  5. That fee would’ve killed your interest earned and then some! You’re right, it’s not worth fretting over every little penny like that because the $2 in interest doesn’t make up for the stress and time that’s involved from an overdraft!

    • @Jason @ Redeeming Riches, I know and the worst part is that it wasn’t even close! Forget about the money, just the 40 minutes isn’t worth the $2 PER YEAR extra I would have earned! Live and learn!

  6. Ha ha, funny in hindsight… How are you wearing those new wrinkles, do they suit you?

    I went through a stage when I was trying to manage cash on 4 credit cards and was drawing money between them in the hope of saving interest fees and basically getting free money…. I screwed up a few times and lost money in the process. Often the easiest route is worthwhile to keep stress at a minimum and allow you to concentrate on more important things in life.

  7. i think we have all had those moments where you feel you have everything under control and the wham you realize that something has come up and you get that pit in your stomach that you have to do something fast.

    glad to hear you came out of the situation without the fees you were worried about.

  8. Daniel, when I first took sailing lessons years ago, my instructor, Captain Bligh, told me to look at my wake periodically, and if it looked like a mile long snake, then I was over-steering the rudder!

    The more margins and redundancy you build into every system decreases the chance of a breakdown, and decreases stress!

    A pretty good lesson learned for less than an hours time-you got a bargain-just like your free iPhone!!!

    • @Dr Dean, I think it is a matter of micro-managing, trying to get every last detail perfect, and then looking back and realizing that you’re doing too much. What a great lesson, thanks!

  9. We put almost everything on our Discover card and pay that off at the end of the billing period from ING Checking, but we also keep $1000 padding in our brick and mortar bank as well as ING for any emergencies. Our actual emergency fund is in Smarty Pig and I rather not touch it if we just need $100 for something.

    It also allows us to be spontaneous…like a weekend trip with friends without waiting 3 days to withdraw money from our vacation account in ING. All we do is make sure we have the vacation money already and start the transfer to whatever account we need it…then we withdraw the money we need from our brick and mortar bank or ING ATM and head out.

    • @Budgeting in the Fun Stuff, That’s a great point that it allows you to make decisions without basing them on what day of the month it is and when your next automatic withdrawal is coming. I learned a very important lesson and extra padding will help me worry less!

  10. Balance my man, balance. One of the greatest rewards of effective personal finance management is control over the cushion. A $35 fee is the least of the worries in my book. The time and energy spent on dealing with the problem means leaving an extra few hundred in an account is worth the value lost by far.

    Keep up the great work!

  11. Daniel,
    As they say, “Been there done that”. We learned the same lesson in much the same way and now leave at least a $500 buffer in our checking account. The only difference is that you learned it at a much younger age. Congrats!

    Thanks for the real life story. It brings life to your post!

  12. Definitely. When I was paying back my student loans and credit cards, I sometimes became overly optimistic about how much I could afford to pay in a month and found myself struggling in the end. Overdraft is the absolute worst mistake possible. I find that I’m more comfortable these days just leaving a float in my checking account to avoid stupid errors–especially since my husband and I now share an account here in France and there’s could be a lack of communication between us when we spend/write checks.

    • @Simple in France, Having another person withdrawing does make it more difficult! You have to either be really on top of everything (which can only end badly) or leave a nice padding there to eliminate the worry!

  13. This reminds me of the client who drove 25 miles to get a CD last year that paid 6% for 6 months. Of course, she ignored me when I pointed out that the CD was limit to $2,000 and she is spending more gas than what she will make.

    She is still keeping that CD there even though it’s paying .5% now because it costs her so much to go and collect it.

    • @Kim | Money and Risk, Lol that’s a good one. The things people do to “make” a few dollars. My girlfriend teaches swimming lessons over the summer. One thing she knows is that it’s not worth driving 20 minutes each way for one lesson. If she groups them together, a trip may be worth it, though.

  14. Hi Daniel, Just like in life, there is a happy medium. I have chosen not to try and squeeze the last nickel of interest out of my savings as the time and monitoring it would take aren’t worth the extra few bucks. That said, even the best intentions sometimes fall short and we end up screwing up and getting hit with a penalty. Mistakes happen!

  15. Daniel, I think there are some occasions where it is worth micromanaging your finances (i.e. during an emergency, you have to give a great deal of attention to detail). However, in general, it is way more hassle than it is worth. I keep a $500 buffer too. That way, I don’t have to deal with all of the stress you described in this post.

  16. Yep, I’ve done something along these lines as well. I have a B of A card that lets you pay off other credit cards. I thought this would buy me another 30 days before I have to pay, letting my money accumulate a puny amount of interest.

    The B of A card only accepts payment from the linked B of A checking account. Needless to say, several times I was close to hitting the due date without transferring money to my B of A checking account. This led to a bit of panic and worry over both possibly being hit with an insufficient funds fee in my checking account, and a late payment fee for the card. Again, all this for the sake of earning probably a few pennies.

    I’m glad I stopped this recently though!

  17. This is exactly why I stopped using ING. The two-day transfer time because too much of a nuisance when trying to juggle accounts and keep track of checks that haven’t been cashed yet. Now, I transfer money to my savings and within seconds it’s there. Technology!

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