Is loyalty losing you money?

Convenience costs.

Photo by Cytonn Photography on Unsplash

PayPal is one of the companies in my stock portfolio.

My investment thesis for it, like all of my early decisions, didn’t involve much nuance. I’m one of the company’s customers.

I’ve paid my rent via PayPal every month since relocating to Chicago in 2017. Before that, I still wrote checks and mailed them to pay my old mortgage. So it didn’t take much to turn me into a fan of fintech.

But PayPal lured me in as a loyal customer in December 2022. Rising interest rates that year made holding cash more attractive, and PayPal offered a 3.25% annual percentage yield at the time that I couldn’t resist. I opened a PayPal savings account and earmarked it as my freedom fund.

One week later, I began buying shares of PayPal stock.

If fintech is the wave of the future, I was preparing to bet big on PayPal.

The company’s APY climbed higher, keeping me happy as a new customer and shareholder. Gradually, it ticked up from 3.25% to its current 4.30%.

I would have stuck with PayPal for the next decade.

But I couldn’t keep ignoring my brokerage’s 5.10% APY.

And so on March 1, after collecting my interest payment for February, I transferred my freedom fund out of PayPal. It no longer serves me as well as another institution will.

In this regard, my loyalty must go to the highest bidder.

According to a recent Bankrate survey, U.S. adults on average retain the same checking account for nearly 18 years, while holding the same savings account for nearly 17 years.

The primary reason: convenience.

Think about it. When was the last time your financial institution rewarded you for your loyalty?

I’m as guilty as anyone.

I don’t like change. When stuff works and I’m comfortable, I prefer for things to remain. I get frustrated taking time to learn new systems and interfaces.

I’ve banked with Bank of America since my college days in the early 2000s. I opened my current account with the bank in 2015. Having access to ATMs nationwide became my primary reason for being a loyal customer. Whenever I travel for work and need cash, I know I can find a Bank of America and pull money free of pesky surcharges.

Twenty years ago, that was a logical reason. Now, I rarely use cash.

I own two other accounts that held funds without any real purpose before I consolidated early this month. I’d kept those accounts just because that’s what I always did.

But I’ve learned there are sensible ways to make my money work better for me. Rather than resist change, I’m embracing it and expecting it to pay.

In October, I was proud of my baby steps. I wrote that I didn’t need to chase the highest returns. Yet five months later, here I am chasing returns.

But this feels much closer to a good money move than greed. I don’t have to go back far to remember how foolish I was accepting paltry interest from various banks for so many years. I didn’t know any better.

Now I do.

What is loyalty to your financial institution getting you?

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