Maximize Interest and Automate Monthly Bills

I thought of yet another way to bring in an additional smidgen of passive income on a monthly basis, using money dedicated to recurring monthly expenses. This tip will also ensure your recurring bills are automatically paid for, so that you don't have to do so manually.

1. Set up recurring monthly bills to be paid for automatically with a high cash back credit card.

I have previously written about this here. Read and implement this first. The rewards mentioned below don't even include the rewards mentioned there.

2. Set up automated transfers from your main bank (where your paychecks are sent) to your HISA (High Interest Savings Account)

If your paychecks are already sent directly to your HISA, you can skip this step, since it is assumed your HISA will contain more than just amounts to cover your monthly bills. What I mean by this is, it is assumed your HISA will contain your emergency fund as well (at least 6 months worth of ALL expenses). 

It is also to note that your HISA will have to allow bill payments for this to work. I'm using EQ Bank for this. 

Log into your HISA online banking site, and for each recurring bill you want to automate, set up an automated transfer on the first day of every month from your main bank to your HISA. I prefer to set up individual transfers for each bill, rather than tallying them up into one larger transfer, so that I can easily see and recall how much money is being transferred for what, in the future. 

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3. Set up automated payments from your HISA account, to your cash back credit card

Next, on the 29th of every month, set up an automated bill payment from your HISA, to your cash back credit card, for each bill. I chose to set it up on the 29th since the payment is said to take place on the "next business day", and since many months are 30 days rather than 31, I wanted to cover my bases. 

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Nice to know that once you set up a second automated payment to the same biller, there is a warning message telling you there is already a recurring payment set up for this biller.

Since we're separating our various bill payments as individual payments, we can ignore this warning.

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In the "Pending Transactions" section of my online HISA account, I can see the 3 separate transfers I've configured to transfer from my main bank to my HISA, on the first day of every month.

I also see my payments to occur from my HISA to my Visa on the 29th, monthly. 

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4. Calculate the Total sum of all the Recurring Bills, and Ensure Your Main Bank Account has This Amount on the First of Every Month

Again, if your paychecks are already sent directly to your HISA, you can skip this step as well.

If your paychecks are sent to a different bank than your HISA, this is the only bit of manual work you will need to do.

Add up the price of all the bills you've configured to determine the total amount. Whatever that amount is, all you have to do is ensure your main bank account balance isn't less than that amount on the first day of every month, so that there are no issues with the automated transfer, or to ensure that you don't automate yourself into overdraft.

In my case, my 3 example bills come up to $411.71, so I'll always ensure my main bank account always has at least $500 in it on the first of every month. This keeps the math simple with an even number, and has an additional buffer of funds in there on top.

5. Reap the time savings, and free money rewards.

Once this is all set up, funds will be transferred to your HISA on the 1st of every month, and will be withdrawn from your HISA (to pay your bills) on the 29th of the month.

(If you're worried about late payments, you can always switch some of your automatic money moves to occur on different days.)

Every bill you set up with this method is one less bill you ever have to spend any time and effort paying for manually.

As for the free money, in my example, assuming it takes a full 3 days to transfer my funds from my main bank to my HISA on the first of the month (the banks always claim 1 to 3 days for the transfer), my bill money will reside in my HISA for at least 26 days before it is withdrawn on the 29th of the month.

26 days per month x 12 (months) = 312 days of potential interest per year
2% (current) HISA yearly interest rate / 365 = 0.005% interest per day
0.005% x 312 days = 1.7% interest per year

1.7% / 12 months = 0.141% interest per month (26 days)

0.141% of $411.71 (total of 3 bills) = $0.58 per month in interest

$0.58 per month x 12 = $6.96 per year in interest

So a free $6.96 per year in interest, just for (automatically) paying a few of my bills.

I'll take it. Will you?

Gears photo by Bill Oxford on Unsplash