Ever wonder how to boost your interest earnings, especially with rates that banks pay you being so low? Granted, you may earn about 0.10% on any balances left in your account. Why not earn it another way by saving some money on interest expenses? There is still a way to do this.
When your milk check comes twice per month, why not pay down your revolving lines of credit for a couple days, while you are deciding specifically what invoices you will be paying? While these earnings are not huge, they are far greater than anyone can earn on any funds sitting in a checking or savings account today. If your lines are at a rate of 4.25%, you can save over 40 times what the bank will pay you on any unused balances. Sounds like a good trade to me…
When your milk check arrives, assuming you have a revolving line of credit, you simply pay down the line, especially if it comes on a Friday or before a three day weekend, and then save the loan interest until you send out checks to your vendors. Just be certain that you have the funds back in your checking account before your checks written start to clear the bank. Otherwise, the overdraft fees will wipe out any savings you have had on your line interest.
You may also want to check with your bank to see if they have an automatic “Sweep Account.” A sweep account will do the same thing for you every banking day, ensuring that you minimize your interest expenses, while ensuring that your checks are always covered. This sweep process is done completely via a computer program, designed to save you money, just like the manual process I described above.
That, my friends, is good for your bottom line. It is a great example of Next Level Thinking!