Rates have soared for mortgages, credit cards, auto loans, and a range of other debt products, but not for savings accounts at big banks used by millions.
Yields on savings accounts at megabanks such as Bank of America and Chase remain near zero. Savers, many of whom might lack financial discipline after years of living in a low-rate environment, have trillions in accounts that are yielding nothing and getting eroded by inflation.
“I really implore people to look outside their relationship with their current megabank,” said Amy Hamasaki, the owner of Mountain Wealth Planning. “These banks are making so much money off of these individuals having so much money earning nothing.”
Chase, for example, offers just a 0.01% rate on its checking and savings accounts. JPMorgan Chase has $1.4 trillion in interest-bearing accounts, according to data provided by the Federal Deposit Insurance Corporation.
Bank of America offers similar rates on its accounts, and it has nearly $1.3 trillion in interest-bearing deposits. Other megabanks, such as Wells Fargo and Citi, and large regional banks, such as US Bank and PNC, similarly offer near-zero rates on basic savings accounts.
Customers can get higher rates by moving funds into money market accounts or certificates of deposit.
Or, they can look to competitors. Many banks, especially online banks, have raised rates to tempt depositors over the past few years. Some banks are now advertising savings rates of around 5%.
To take advantage of the higher rates, customers have to be aware of the options and willing to move their funds. But for various reasons, they have not been.
Charles Thomas, the founder of Intrepid Eagle Finance, said customers are generally slow to switch banks. And the past few decades of low interest rates made many people complacent and unprepared to seek out higher-yielding accounts from competitors. “There’s bank customers in their 30s who have just now begun to experience the concept of earning interest in any type of bank account,” he said in an email to the Washington Examiner.
A retiree with $100,000 in savings in an account that does not pay out interest is losing out on $5,000 a year, noted Greg McBride, the chief financial analyst for Bankrate.com.
McBride said that at this stage of the economic cycle, it is not likely that consumer patterns will change and demand higher yields from big banks. “If the sharpest increase in interest rates in 40 years didn’t do it, I’m not sure what will,” he said.
CLICK HERE FOR MORE FROM THE WASHINGTON EXAMINER
Hamasaki said she recently had a meeting with a customer who had $200,000 in an account at a megabank yielding 0.01%. The customer had been too busy running a business and living life to move the money and was also uncomfortable with the thought of investing in stocks, given that she was hearing negative news about the economy.
Still, Hamasaki said she was encouraging clients to act now to lock in higher rates by buying bonds or other instruments that guarantee higher yields before the Federal Reserve moves to cut rates. The Fed is expected to begin cutting its target rate by May. In that scenario, the savings account rates near 5% currently being offered by some banks will no longer be available, Hamasaki said.
