Stashing Cash at Higher Rates

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Not all rate chasers are as obsessed as Profesda. George Cominskie, a photo agent in New York, says he spends at most two to three hours a month shopping for the best rates on CDs and money market accounts for his excess cash, while using Wachovia (WB) as a home base for his savings account. He likes to stow the money he doesn't need day-to-day at assorted locations, moving it around whenever a locked-in rate expires to the next high-yield deal he has found. "When my E*Trade CD comes up and all of sudden I have $25,000 [to invest], by putting it into my money market [account] at Wachovia, I'm guaranteeing 3.5% for four months, and it's liquid that whole time," he says.

"Pretty Close to a Free Lunch"

Cominskie says friends and neighbors will stop him on the street to ask him for advice about where to stash cash. He likes General Motors Acceptance, which now offers a CD at 3.65% if you don't withdraw money for 12 months and at 3.55% for nine months. The minimum balance required is $500.

Cominskie and Profesda come close to fitting McBride's description of online banking afficionadoes who "tend to be evangelists." As they've already learned, by doing online banking, "the additional return without additional risk is pretty close to a free lunch," McBride says.

Indeed, it's easy to find a rate at an online bank that beats the paltry 0.5% or less for savings accounts at traditional brick-and-mortar banks, which usually don't offer higher rates because it would squeeze their margins and hurt profitability. "There's a tendency for consumers to set it and forget it in matters of personal finance, and that can cost you a lot of money in the long run," says McBride. "At the very least [you should be] looking for a return that can preserve your buying power."

Bogoslaw is a reporter for BusinessWeek's Investing channel.