{"id":9558,"date":"2024-04-24T04:00:00","date_gmt":"2024-04-24T10:00:00","guid":{"rendered":"https:\/\/milesearnandburn.com\/?p=9558"},"modified":"2024-04-23T21:33:54","modified_gmt":"2024-04-24T03:33:54","slug":"wednesday-wisdom-the-velocity-of-money-part-one","status":"publish","type":"post","link":"https:\/\/milesearnandburn.com\/index.php\/2024\/04\/24\/wednesday-wisdom-the-velocity-of-money-part-one\/","title":{"rendered":"Wednesday Wisdom: The Velocity of Money, Part One"},"content":{"rendered":"\n<h4 class=\"wp-block-heading\">Introduction<\/h4>\n\n\n\n<p>At MEAB, we encourage churners to think about bank bonuses in terms of simple APR: for example, a $300 bonus on $30,000 deposited for 60 days is effectively an APR of roughly 6% (about $300\/$30,000 * 365\/60 * 100%). When savings accounts <a href=\"https:\/\/www.doctorofcredit.com\/high-interest-savings-to-get\/#Best_Basic_Savings_Rates\">already earn 5.5% or above<\/a>, this bonus almost certainly isn\u2019t worth your time.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">The Velocity of Money as an APR<\/h4>\n\n\n\n<p>The same rule applies for the velocity of money, even though no one really talks about it. What do I mean? Let\u2019s assume you\u2019ve got a simple rewards debit or credit card that earns a net profit of 0.65% for sending money through a FinTech (yes, this exists in myriad places in the real world). Assuming you can scale this, we\u2019ve got a near perfect APR analogy for the velocity of money:<\/p>\n\n\n\n<p style=\"--ek-indent:20px\" class=\"has-ek-indent\"><em>APR = spread * velocity<\/em><\/p>\n\n\n\n<p>In this equation, velocity means bill pay cycles per year, or put more directly:<\/p>\n\n\n\n<p style=\"--ek-indent:20px\" class=\"has-ek-indent\"><em>APR = spread * banking_days \/ settlement_time<\/em><\/p>\n\n\n\n<p>Let&#8217;s take a concrete example: Assuming spread = 0.65%, <a href=\"https:\/\/www.investopedia.com\/terms\/b\/business-day.asp\" class=\"ek-link\">banking days = 252<\/a>, and settlement time = 3 (<a href=\"https:\/\/milesearnandburn.com\/index.php\/2023\/12\/26\/lets-go-fly-ach-kite\/\" class=\"ek-link\">avoid kiting<\/a>), we get:<\/p>\n\n\n\n<p style=\"--ek-indent:20px\" class=\"has-ek-indent\"><em>APR = 0.65% * 252 \/ 3 = 54.6%<\/em><\/p>\n\n\n\n<p>54.6% effective simple APR!<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Conclusion<\/h4>\n\n\n\n<p>Moving money repeatedly with even a small spread has a huge effective APR, which you should keep in mind when deciding whether to park money in a high yield savings account, work on a bank bonus, or to scale your existing operations. Money in motion for a churner is often better than money at rest.<\/p>\n\n\n\n<p>Happy Wednesday!<\/p>\n\n\n<div class=\"wp-block-image is-style-editorskit-rounded\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"894\" height=\"810\" src=\"https:\/\/milesearnandburn.com\/wp-content\/uploads\/2024\/04\/image-20.png\" alt=\"\" class=\"wp-image-9564\" style=\"width:420px\" srcset=\"https:\/\/milesearnandburn.com\/wp-content\/uploads\/2024\/04\/image-20.png 894w, https:\/\/milesearnandburn.com\/wp-content\/uploads\/2024\/04\/image-20-300x272.png 300w, https:\/\/milesearnandburn.com\/wp-content\/uploads\/2024\/04\/image-20-768x696.png 768w\" sizes=\"auto, (max-width: 894px) 100vw, 894px\" \/><\/figure>\n<\/div>\n\n\n<p class=\"has-text-align-center\" style=\"font-size:14px\">Next time on Wednesday Wisdom: Did you know that John Travolta = Nicolas Cage? This mug proves it.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction At MEAB, we encourage churners to think about bank bonuses in terms of simple APR: for example, a $300 bonus on $30,000 deposited for<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","footnotes":""},"categories":[56],"tags":[],"class_list":["post-9558","post","type-post","status-publish","format-standard","hentry","category-wisdom"],"_links":{"self":[{"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/posts\/9558","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/comments?post=9558"}],"version-history":[{"count":6,"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/posts\/9558\/revisions"}],"predecessor-version":[{"id":9577,"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/posts\/9558\/revisions\/9577"}],"wp:attachment":[{"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/media?parent=9558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/categories?post=9558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/milesearnandburn.com\/index.php\/wp-json\/wp\/v2\/tags?post=9558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}