Recently, United States banks have experienced an increase in interest rates. With the Federal Reserve raising the rates, interest rates increased to stretch within 2.25% and 2.5%.
However, The Washington Post reveals that big institutions are not paying their clients enough. In fact, Bankrate.com reports that the largest bank in America, JPMorgan Chase is only giving their customers 0.01% for basic savings, whilst Bank of America is paying 0.03% and Wells Fargo, 0.01%.
Clearing Up Misunderstandings
Clients think that the rate called the Federal funds rate, set by the Fed applies to them. However, The Washington Post clarifies that this is actually the percentage which banks charge one another. What applies to savers are those set by the banks themselves and not by the Fed. According to experts, these institutions boost their rates to attract customers and depositors. Nevertheless, large banks have enough deposits, which is why they do not pay bank savers more.
CBS News further explains that these institutions are not incentivized to increase lending percentages, which could have resulted in a rise in deposit rates. Moreover, the Great Recession also contributed to the minimised spending of small companies.
What Other Institutions Pay
Meanwhile, reports show that online banks are paying their savers more as compared to the standard industry rates. This is due to the lower costs needed to operate these institutions, especially without branches and automatic teller machines to maintain. They also need to rake in more new customers.
It is easy to observe that smaller ones pay higher. According to Bankrate.com’s data, banks such as Tab Bank (with 2.4% annual percentage yield), MySavingsDirect (with 2.4% APY) and Vio Bank (with 2.39 APY) offer some of the most competitive percentages when it comes to savings.
When looking for institutions to deposit their money in, experts encourage customers to be selective.