Using Paypal and my checking account, I earned a 22% return!
If you keep careful watch over your money, that should get your attention. Of course, there’s a catch. Here’s the story:
I accumulated a (positive) balance of $112 in my Paypal account, the result of someone sending me some money owed to me and some refunds from a merchant. No reason to let that sit in my Paypal account just doing nothing, I thought. I logged into my account and clicked the buttons to send it to my checking account. At least there it will earn me a bit of interest and maybe prevent me from overdrawing my account if I should make a mistake.
In doing this, I had a choice. Should I opt to transfer the money immediately, at the cost of a 25¢ fee … or should I transfer it for free at the cost of not having my money for a day or two?
Of course, knowing that 25¢ saved is 25¢ earned, I thought it was a good idea to use the free service. Mathematically it makes very good sense. Getting two bits by not having access to $100-some dollars made me think of how similar that is to earning interest by putting money on deposit. Of course, that’s not really what’s happening here, but what kind of return is it to get 25¢ on $112 for a couple days? In fact, it’s a very good return!
Earning 25¢ by not having access to my $112 for a couple days is the same as earning a 22% return (on an annual basis). Unless Paypal and my credit union go out of business, it’s as good as guaranteed.
That’s a heck of a lot more than my money can earn in any bank account!
Of course, I can’t really “earn” money this way. In fact, if I did this with larger amounts, my rate of return would actually decrease (assuming the 25¢ stays constant). And it’s not as if I would be adding to my net worth by moving money back and forth between Paypal and my checking account. But the moral of the story is this: it makes sense (and cents) to think carefully about every fee, every cost, every expense and seek ways to eliminate or at least minimize them.
