Back today, as promised. This time, I've got a question for you:
I've written several times about the advantages of keeping spare cash in an online savings account, such as those offered by ING Direct or HSBC Direct. Everyone should have some spare "just in case" cash around for emergencies, and the online banks give you the advantage of paying far more in interest on the money than a traditional bank savings account.
That is, they used to. These days, I'm starting to question the decision I made to keep a decent amount of cash in my ING Direct savings because the interest rate they're paying me has fallen so far. When I opened the account in March 2007, I was earning a 4.1 percent APY (interest rate) on my money. Today I checked my balance and found that my rate was lowered to 1.638 percent yesterday. That's just the latest of several rate cuts that essentially amount to ING taking cash out of my pocket. ING cut the interest it pays me on my money four times since Dec. 30.
Which brings me to my question: Should I take the cash out of my ING account and use it to knock down my last remaining credit card bill? The cash I have with ING isn't enough to fully eliminate the bill, but it would cut it substantially and cut down the number of monthly payments I'm making and the amount of interest I'm paying to the card issuer. Beyond that, I'd get a much greater rate of return by paying on the than I would at ING, since the interest rate on the card is almost nine percentage points higher.
So, what would you do?