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Old 07-01-2019, 10:50 PM
 
830 posts, read 295,336 times
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Quote:
Originally Posted by Quietude View Post
It's more than that - choosing a bank or account because it pays some trivial level of interest almost certainly means you are making poor money-management choices (keeping a lot of money in a demand account instead of any tier of savings or investment), or have researched your bank and account options so poorly you think you are getting something worthwhile with this option.

The trivial return is completely secondary to the suspicious terms under which it's offered.
Why is it suspicious? That is what the main money banks in this area (SW PA) are offering. Eventually I hope to switch into a better account, yes perhaps a T-bill account once I figure it out, how it works, and how I'm going to pay my bills through a brokerage firm if I can.
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Old 07-02-2019, 08:07 AM
 
Location: HoCo, MD
4,339 posts, read 7,982,576 times
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Quote:
Originally Posted by Cindi Waters View Post
OK, and I'm reading this again, because I guess (?) I forgot. So, yes, it is confusing for me because as you say, it's percentage with a decimal value. And when I went to school 2% was written as .02. Not, I suppose, as .02%. Still can't figure it. So 2% means 2% of something. So is 2% written as .02, but not .02%??? Or is it more precisely written as 0.02% in that case where it is not really 2%? I guess that is where my confusion is. If someone else has already answered the question, please excuse but maybe you can help out by answering it or pointing to the answer. Thanks.
It may already be answered. Buy by percent, it's already being divided by 100. So 2 percent is really 2/100. Or .02.

You can certainly have a fraction of a %. So .02 percent (or .02%) - is .02/100. Which is .0002.

Of course, this may have been a typo. The lending manager or COO says we want to change the percentage rate to .02. He meant 2%, but the way it was worded, the person reading it thought .02 percent. The easiest way to confirm is to contact the FI.

And this is why most FIs will use basis points instead of percent internally. One basis point is one hundredth of a percent - or .01%. Thus, 100 basis points is 1%. You want to raise the rate from 2.5% to 3%, you say you are increasing the rate by 50 basis points.
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Old 07-02-2019, 09:30 AM
 
Location: Aurora Denveralis
8,556 posts, read 3,001,676 times
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Quote:
Originally Posted by Cindi Waters View Post
Why is it suspicious? That is what the main money banks in this area (SW PA) are offering.
The rate is not suspicious. Why they offer it at all is. It's a come-on for the financially clueless.

Now that you've come to grips with the math, reread above about its use, here.
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Old 07-02-2019, 01:57 PM
 
830 posts, read 295,336 times
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Quote:
Originally Posted by macroy View Post
It may already be answered. Buy by percent, it's already being divided by 100. So 2 percent is really 2/100. Or .02.

You can certainly have a fraction of a %. So .02 percent (or .02%) - is .02/100. Which is .0002.

Of course, this may have been a typo. The lending manager or COO says we want to change the percentage rate to .02. He meant 2%, but the way it was worded, the person reading it thought .02 percent. The easiest way to confirm is to contact the FI.

And this is why most FIs will use basis points instead of percent internally. One basis point is one hundredth of a percent - or .01%. Thus, 100 basis points is 1%. You want to raise the rate from 2.5% to 3%, you say you are increasing the rate by 50 basis points.
OK, that's way above my level. I just couldn't understand what 0.02% interest means. So allow me to tell you what I glean from this. 2% is .02. But it's not 0.02%. (Is that right?) So one would write .02 meaning 2%, but would not write 0.02% meaning 2%. (right?) because .02% really is .0002. Without the percent sign after it. ?
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Old 07-02-2019, 02:00 PM
 
830 posts, read 295,336 times
Reputation: 341
Quote:
Originally Posted by Quietude View Post
The rate is not suspicious. Why they offer it at all is. It's a come-on for the financially clueless.

Now that you've come to grips with the math, reread above about its use, here.
I honestly can't figure out why they offer such a ridiculous rate and I won't ask, but I'll be getting out of that asap. thanks! When we were needing to put our money in a bank, as far as financially clueless goes, they have so many vehicles at the bank that for me it's impossible to figure out. We do have a CD which is a little less than 2%, but I intend to figure the T-bill accounts asap.
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Old 07-02-2019, 02:08 PM
 
Location: Aurora Denveralis
8,556 posts, read 3,001,676 times
Reputation: 12760
Quote:
Originally Posted by Cindi Waters View Post
I honestly can't figure out why they offer such a ridiculous rate and I won't ask, but I'll be getting out of that asap.
It's outlined above. It's a rate of absolutely negligible value that appeals only to a fairly ignorant banking consumer, those who are fleeing teen/young adult accounts with high monthly fees. (And older customers who lose sleep at night because they could be making the bank pay to hold their money.)

Virtually any adult with a paycheck or a modest pile of savings can get completely free bank services - demand account, savings account, most basic services like check cashing and cashier's checks. You just have to meet some very minimum requirements and choose the right bank.

But those who had "starter" accounts with BigNationalBank and slowly found themselves paying $5-10 a month and fees for every extra service tend to go on a high dudgeon attack, and go across the street to a bank who will Pay! Interest! on their measly paycheck account. And then put limits on it, and still charge for other services, etc. The free account at the right bank that don't pay nothin' is by far the better deal, but that pennies-per-month interest clouds novice judgment.

No one with a lick of financial sense, from 20-somethings getting their first real check to eldsters who pinch every penny, should ever have money in an interest checking or demand MM account. They are come-ons, bait and switch tactics and there are always better choices - either free accounts that give good service or higher-paying savings/investment options for static money.

And that's why they offer that ridiculous tier of rates... because some people are dumb enough to think it means they win.
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Old 07-02-2019, 03:39 PM
 
39,438 posts, read 40,743,367 times
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Quote:
Originally Posted by Cindi Waters View Post
OK, that's way above my level. I just couldn't understand what 0.02% interest means. So allow me to tell you what I glean from this. 2% is .02. But it's not 0.02%. (Is that right?) So one would write .02 meaning 2%, but would not write 0.02% meaning 2%. (right?) because .02% really is .0002. Without the percent sign after it. ?

Correct.
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