I often speak to bank executives who are pursuing capital with the goal of bringing in large deposit volumes and who are setting their rate strategies. These folks will tell me that they are trying to avoid “fast cash”. In other words, they do not want depositors that will come only for the rate and leave as soon as they find a higher rate. My advice to these bankers is always that if they want their asset base to be more permanent, they should offer competitive CD rates as well as savings rates, and they should keep their savings rate competitive and not launch a huge campaign to advertise a great rate, only to later quietly lower it to a rate that is not competitive.

My advice to depositors is likewise pretty simple. If you have an online savings account or a local savings account that is not competitive or no longer competitive, you should consider moving your assets to one that is. By regularly checking online rates and local rates at BestCashCow.com, you can ensure that your money is compounding at the highest rate available over time.

In any environment, depositors need to consider the opportunity costs of moving cash from one savings account to another. You will always loose a day or two of interest getting your money out of an account through an ACH transfer, and may lose more if ACH is not available. Then your money may sit at a hub account paying only nominal interest that you hold (like Morgan Stanley or Merrill or Bank of America or Wells Fargo) for a day or two before you can get it transferred again. And, then by the time your money is earning the higher rate, it may no longer be the higher rate.

In a declining rate environment – like the current one – the opportunity costs of moving cash from one account to another may be lower, but you run the risk that the bank that you are moving your money to will shortly be lowering its rates too.

This, in fact, is what happened to me. I held a maturing one-year CD at a major online bank at 2.85% APY. Rather than allow the CD to renew at 2.00% or to keep the principal at that bank earning 1.70%, I decided to move it to a local bank near me that was still paying 2.00% APY on savings. However, by the time I finally got the money deposited in that bank, it had actually lowered its rate below 1.70%, causing me to have to move the money back to the bank where I had held the CD. In the end, I had lost almost a week’s worth of interest.

This strategy, of course, makes sense if you are chasing a higher CD rate and have locked in a rate by beginning the application process before you begin to transfer your money, but it just does not make sense for money that you have allocated to savings only. Read my recent article discussing whether to lock money in short-term CDs here.

The moral of the story here is that you cannot fight falling savings rates, but you sure can lose interest trying.

Think very carefully about your opportunity costs and about the direction of rates generally before you chase a few more basis points at another bank. You are often better off leaving your money where it is.

Editor's Note: This article was originally written in December 2019 when Bask Bank had a soft launch of its new American AAdvantage product. In January 2020 after Bask Bank released the full details of the product, the author realized that the Bask product is extremely compelling and updated this article to reflect that.

Several years ago, when interest rates were below 1%, many people opted to earn American Airlines AAdvantage miles instead of interest through a savings account program offered by BankDirect, a subsidiary of Texas Capital Bank. I had recommended that people close their American Advantage miles – earning savings accounts at BankDirect when BankDirect substantially reduced the value of the program in 2013.

In November 2019, several readers wrote to BestCashCow, perhaps aware that we had recommended the BankDirect program in 2013 and years prior. These readers were upset by a letter that they received from BankDirect informing them that their American Airlines mileage accounts would be sending 1099-INT forms from 2020 onwards to the IRS to report on imputed value of the miles awarded to them. I honestly believed that these readers were being silly to think that they could expect to get anything of value without a 1099-INT. I learned that BankDirect and Texas Capital Bank will be reporting AAdvantage miles at a 42 basis point value or 42/100s of a cent.

While investigating the 1099 matter, I also learned that Texas Capital Bank, BankDirect’s parent bank, was intending to offer a new AAdvantage program at Bask Bank, a new subsidiary, which would be akin to the pre-2013 program offered by BankDirect that we had once recommended.

The new Bask Bank savings account is instantly recognizable as being similar to the earlier BankDirect savings offer. Bask’s offer is geared to deliver 1 AAdvantage mile for every dollar held on deposit over the course of a year. If your account has an average balance of $100,000, you will earn 100,000 AAdvantage miles over the course of the year in the form of 8,333 miles a month. Unlike the earlier BankDirect program, Bask Bank has no account service fees.

When the details of the new Bask Bank offer were finally revealed in January 2020, it became clear that bonuses offered by Bask make it substantially more attractive. In addition to offering 1,000 AAdvantage miles for funding an account, Bask is offering an additional 5,000 miles for maintaining a $1,000 balance for one month. But, it is the additional offers that allow things to really add up. $25,000 held on deposit for one year earns a 10,000 mile bonus, $50,000 earns a 20,000 mile bonus and $100,000 earns a 40,000 mile bonus. As a result of the bonuses, the same $100,000 maintained at Bask Bank will earn 146,000 AAdvantage miles over the course of a year ($50,000 will earn 76,000 miles). You will need to maintain your balance above these levels.

BestCashCow shows that one-year online CDs are still available at 2.25% and many 1-year CDs offers by local banks and local credit unions in some markets are above that level. Savings rates are now much lower than 2%.

For purposes of this example, let’s take a look at the value of the 146,000 AAdvantage miles that $100,000 will earn. In BestCashCow's travel rewards credit card section, we routinely see that it is easy to find redemption values for American Airlines miles that have a value well over 1.80 cents per mile. Therefore, as a base case, we believe that you are getting at least $2,628 in value in the 146,000 miles. That is above the value you will get from depositing the same $100,000 in a savings or CD account over the next year. (And, by the way, the reported tax liability of these 146,000 miles will only be $613.20).

There are circumstances where these AAdvantage miles will have much more value. For example, I have redeemed American Airlines miles for expensive long haul business class tickets on American to Hawaii or to Europe on British Airways, Iberia or Finnair where I see values well over 4 cents per mile. (Qantas, Qatar, Cathay Pacific are also American Airlines partners where valuable redemptions can be found). Even if you don’t choose to redeem American Airlines miles for lavish trips abroad, the miles make sense to hold as an “alternative” currency as they can also be redeemed last-minute (and otherwise very expensive) tickets for work or family needs.

There are some risks to the Bask Bank account. The first one is that interest rates go to zero and Bask Bank cannot maintain the current payout rate, but you will bear the risk of falling rates in a savings account. The second risk is that AAdvantage miles become devalued, and I believe that is a risk worth taking as American Airlines has a track record of decades of protecting the value of their loyalty program since it has real value to them as a going concern.

Ordinarily, I’ll always recommend taking interest in the form of cash over some other instrument. But, in this case, I think it is silliness to be dismissive of the Bask Bank offer without looking at it carefully and how it might work for you. In fact, I already opened an account, even though I already have over 1 million American AAdvantage miles.

As I turn 50, I feel it is appropriate to look back and give some advice to a 30-year old me who was encountering a crazy bullish stock market like the current one in 1999.

Twenty years ago, I had just turned 30. I was a newly-minted MBA working in a dead-end job with GE in Connecticut. As the Century was drawing to a close, the internet bubble was raging (in spite of Bill Clinton’s impeachment). Having already moved most of my assets into high-flying technology and internet companies like Qualcomm and Akamai, I left my job to join a technology and telecom venture capital firm in Europe.

Everyone knows that the internet bubble popped in March of 2000 before finally hitting bottom in mid-2002. Those years hurt many. Fortunes were wiped clean.

But, technology is resilient and today some twenty years later it has lead the US stock market to new levels (and valuations that, in many cases, would be absurd even by 1999-levels). And, life refreshes such that our economy is now run by 30 year-olds who sit in positions like the one I held 20 years ago. For me, it is sometimes startling to speak with these 30-year olds who have no knowledge or understanding of what I and those like me went through some 20 years ago (they also have no knowledge of the 2008 – 2009 financial crisis).

So here, I write my advice to a younger me in the hope that maybe it will help other folks.

First, do not be afraid to take serious risks. Quit your cushy job with some stodgy old company to work for an innovative start up or to create your own company. You only live once.

Second, quantify the risk you are taking. Working in a job that can deliver tens of millions of dollars in options or stock appreciation and is exciting is a bet worth taking. But, if you are going to do that, then do what you can to pay down your mortgages, any outstanding loans you might have, and keep some cash on hand in case things go bad, because they inevitably do. Many smart young people went from wealthy to broke in the 2000 to 2002 timeframe. Committing to keeping 40% or more of your assets in cash will protect your lifestyle and save you years of anguish.

See the best online savings rates today.

Third, if you feel the need to stay heavily in the market all the time, then diversify, diversify and then diversify some more. If you just made a fortune on your company’s public listing, you may not want to sell but don’t become so wedded to the story that you start buying more at crazy prices and tons of shares in other companies in the same industry. Semiconductor investments really worked well in 2019, but if you work in the industry and have all of your exposure there, you might want to put new money to work in a biotech fund or even an oil and gas fund in 2020 (even though a market crash will sink all boats).

Fourth, stocks do not all go to infinity no matter what Jim Cramer and the other talking heads on CNBC may say. They are all pushing their own books and they are not experts. In fact, one fellow on CNBC’s Fast Money has spent 2019 shorting Tesla and buying cannabis. A monkey can throw darts better than most of these people. Do you own research, find your own experts, and never invest in what some talking head says – even if they promise that next year JDSU or AOL is a “lock to go up 30%”.

Fifth, no matter how rosy things get, financial markets can change on a dime. Commit to a portfolio and an asset allocation that reflects your risk tolerance levels and that you won’t need to adjust dramatically if things go seriously badly. Ultimately, you want to be able to sit on your hands for long periods when things go south without jeopardizing your happiness and your lifestyle.

Full disclosure: The author is ending 2019 with 50% of his assets in savings and short-term CDs and 50% in equities. He is long Qualcomm, Akamai and Tesla.