Dear Fed, October 9, 2008

Couldn’t you have done this a week ago?

We all know that the economy is crumbling in front of our eyes.  And after that bailout bill and all these other attempts to fix the economy, the Fed and other countries are trying the old interest rate reduction trick again.  You are probably sick of me talking about this every time it happens.  As you may have noticed, we’ve got ING savings interest rates down to 2.75%, and checking interest rates down to 1.5%.  They’ve gotten on that pretty quickly!

But really, my issue with it being this week instead of last week (if it had to happen at all) is that my variable student loan interest rates are readjusted every quarter.  So, October 1st was the first day of the fourth quarter…which means I’m stuck with the same rate for my loans, but lower rates for my savings.  Yes, I complain about these things every time.  And I know that there are a lot of people worse off.  I’m just laying things out there.

That’s really all I’ve got for now.  I’ve been trying to follow a lot of what’s been going on in the financial world, but to be honest, it’s a bit depressing.  Though it’s odd when you think about how so many people are now finally thinking about living within their means and avoiding going into further debt.  Hooray living within your means!

Looking at the positive of the recession April 11, 2008

The Feds keep lowering rates, which is unfortunate for my savings account, but great for my student loans.  As I’ve mentioned in the past, ING, as well as most other banks that offer “high yield” savings accounts are staying close to the Federal Fund Rates, which is currently 2.25%.  And so my account has suffered a little, but I haven’t taken any money out of my “emergency fund”, except to fully fund my Roth IRA for 2007.  Since I had started the Roth IRA halfway through the year, I didn’t put enough in to cover the $4,000 max for last year.

Anyway, I just wanted to remind you to check your rates that depend on the Federal rate.  Some rates are fixed (for me that means my consolidated student loans stay at 4.5%), but other rates depend on the Federal rate.  While I don’t worry about credit card rates (I pay off my balance every month), some credit card rates are based on the Fed rate plus some constant extra percent above that.  The one rate that I’m excited about is my student loan rates.  I owe a large chunk of money for student loans that follows the Fed Rates…and every quarter, they readjust their interest rates accordingly (I’ve heard many companies do this).  So while ING and other banks follow the Fed rate very closely, these rates go at a slower pace.  So, currently, those loans are only at 6%!  Which still is a lot, but it’s a lot better than the 8.5% it was a year ago.

Oh, and Trent at The Simple Dollar wrote an article about the recession and what’s going on…it’s pretty good, you should check it out!

ING Lowers their rates…again! January 23, 2008

I can’t say that I wasn’t surprised. After the Fed lowered the interest rates 3/4 of a point, I knew my rates would shrink. Their checking account is down to 2.50% APY for up to for accounts with less than $5,000, and their savings account is down to 3.65% APY. This makes me all the more interested in paying off my student loans. I mentioned before that the interest rate for the bulk of my student loans had dropped, thanks to the Fed lowering rates last year. Sadly, I’ll be waiting a few more months before my loan rates are lowered (if the Fed rates don’t rise). In the meantime, paying off loans that are more than my yearly gross income (Darn you MIT!), most of which have an interest rate of 7.5% is going to net me more money than saving money at about half that rate. I already have a decent emergency fund, so I feel that I can draw some money from that and put a decent chunk towards the student loans. I do know that there are tax factors relating to the two options…I think that I’ll have to still pay taxes on the money I earn on interest through ING, but I also get some sort of tax benefit for the interest I pay on my student loans. I think for the whole “pay yourself first” idea, I’ll continue to put some money away every month, but I’ll draw some money from the “emergency fund” to pay a large amount towards my loans.

Though ING has lowered their rates, I’d still urge you to join up with them…for the referral bonus (that both you and I would get!). A guaranteed 10% return ($25 for $250) isn’t half bad, right? If you need a referral for either the electric orange checking account or the savings account, let me know (leave a comment; there’s a place to enter your email address, and only I can see it), or email me! Wow, this seems a bit forward and brazen to just tell you to do this (since I get a nice $10 referral bonus when you sign up and put at least $250 in). I’ve never really been a rate chaser when it comes to savings accounts…if you are, I don’t know if ING is right for you. The rates could change again!

Something I read about the Fed interest rate decrease is that they hope that by lowering the rates, consumers will be more willing to spend (rather than save). I guess that’s happening in a way for me…I’m spending the money on student loan payments instead of saving it in a savings account. But that made me wonder: are all these people you read about in personal finance blogs (me included, I suppose) partially to blame? Everyone is urged to have an emergency fund, be more frugal, spend less…but the economy “needs” us to spend to keep it going. I know that there’s also all the people NOT saving, because they’re part of the whole “subprime market meltdown” that is being blamed. Who knows…That was just something I was thinking about…

(some interesting articles that I’ve found on Slate.com (an online news magazine) relating to the Fed rate decreases…the one listed above: Bernanke’s Surprise, as well as How will the latests interest-rate cut affect me?, and How do you inject money into the economy?.)