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Banks are slow to increase rates on savings accounts, but quick to reduce them

jpkoning.blogspot.com

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Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#81

Post by amiga_500 »

salawat wrote: post #64
amiga_500 wrote: post #53

Earlier quoted context omitted.

We should each have our own account number that is ours. This could be registered with the state, when born. It would contain a pointer to a private bank account. Banks would have to implement a one day transfer to flip the pointer.

Who is maintaining the ledger exactly? On what terms? Who has access to that account? What controls are they entitled to place on it? Is it maintained by the government? If yes, then you have a whole new set of problems. Now you have all your funds in one basket. (Remember, you've implemented the indirection mechanism, so it doesn't matter which bank you do business with, it's this weird government one all the time).…

Sorry I'm not American so I'm not obsessed with the idea that the state cannot maintain something. Your banking sector sucks compared to Europe.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#82

Post by detaro »

luckylion wrote: post #75
frereubu wrote: post #29

Earlier quoted context omitted.

In the UK this has got a lot better with banks being forced to offer an "account switching service", which makes it trivial to change your current (checking) account. Things like salaries, standing orders and direct debits (for utility bills etc.) are automatically transferred across. It doesn't work with savings accounts though as far as I know, so it doesn't help much with managing interest rates other than interes…

Does that work reliably in the UK? Germany has similar a similar mandatory service, but the few people I know that switched banks using that service all ran into major trouble, like rent payments, insurance premiums etc not going through and the two banks pointing at each other "we don't know, it's those guys". In the end, I believe the best course of actions would to simply make account numbers transferable. There's…

I feel like account numbers being transferrable would be worse for potential for fuckups.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#83

Post by mindslight »

mabbo wrote: post #24

The problem is that most people don't want to change banks. If changing your bank to get a better savings rate took 15 minutes and had no other consequences, banks would be updating their rates by the second to beat one another. But it doesn't. If your mortgage, credit cards, car loan, etc, are all with the same bank then switching your bank account only just to get 0.1% higher interest is a huge hassle for little be…

I think most people are worried about changing banks because their current bank hits them with annoying fees, and they don't want to double the problem by having two banks. But online banks (along with small local banks and credit unions) do not charge monthly fees. You can open a new account with a small deposit, receive a new debitcard/checkbook, and then slowly transition. The only squeeze you'll feel is the minimum balance requirement at your legacy bank as you split your balance to cover transactions at both places.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#84

Post by save_ferris »

learnstats2 wrote: post #62
save_ferris wrote: post #2

This seems like pretty typical market behavior to me. Are we really surprised that banks are taking the opportunity to increase their profits by choosing not to pass down all savings to customers? The same exact thing happens with gas stations. The price of gas never falls quite as fast or far for the consumer as it does for the retailer, but gas stations will instantly respond to price increases. I’m sure there are…

Doesn't this just prove that there is not a competitive market in these industries? If I - and everyone else - could quickly identify which bank/gas station was acting in my interest without colluding, I would immediately switch. The fact that prices are quick to rise but slow to fall is dependent on consumer apathy and monopolistic behaviour/collusion. It might be typical market behaviour, but it's not the perfect m…

> If I - and everyone else - could quickly identify which bank/gas station was acting in my interest without colluding, I would immediately switch.

I doubt this would be the case for most people for a couple of reasons.

First, gas stations are pretty transactional businesses that don’t rely on recurring customer relationships to stay afloat, it’s really all about the location. When was the last time you researched all the gas stations in your area and looked for the one that you felt served your interests above all the others? Nobody shops for gas this way.

Second, when gas stations maintain prices as their upstream costs come down to pad their margins, they’re doing so in cents per gallon, not dollars. A customer may save a dollar or two depending on the size of their tank, which isn’t enough of an incentive to stick it to the greedy gas station because you gotta be sure that the next gas station you’re headed to isn’t doing the same thing or costs even more. The gas station, OTOH, probably sees hundreds if not thousands of dollars in extra revenue per day depending on their volume for doing this.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#85

Post by fennecfoxen »

Spooky23 wrote: post #49
leetrout wrote: post #30

Earlier quoted context omitted.

I heard this story / explanation before: You own a gas station and you want to fill up your tanks so you call the distributor and pay $1 / gallon. You then sell that for $1.10 / gallon making a 10% profit. Now prices of crude doubles and you have 1000 gallons left to sell. It’s going to cost you $2 / gal to refill so you immediately raise your price to prevent a loss and cover the next fill. I don’t know how accurate…

The gas station is an agent of the oil company and gets paid commissions. The gas is on consignment, owned by the upstream oil company. The big oil company uses futures and options to manage risk. All aspects of that industry have slowly reconsolidated, so the market forces that push prices down are generally weak.

Also, most gas stations don't make significant profits on gas. They make more profit on the attached convenience store.

There are exceptions (e.g. near airport rental car returns, or in places where drivers aren't paying for their own gas — there used to be a Shell near San Mateo City Hall that always got on the front page of newspapers)

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#86

Post by sithlord »

aronpye wrote: post #67

Why would you ever have a savings account? They’re pointless as they always earn little interest. Much better to invest in an ETF that tracks something like the S&P500 with an average year on year growth of 10%, or if that is too risky invest in a government bond.

Because it makes since to keep an emergency fund, even a small amount, say 10-15k, will earn 125-150 (obviously more or less depending on rate) in a savings account is better than roughly 0 in a checking account.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#87

Post by JackFr »

The ease with which money can be moved in and out of money market funds mean that it’s probably unlikely that anyone has a long term balance of over $2000 or so in a savings account. At those levels the difference in interest rates is dwarfed by fees etc.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#89

Post by eightysixfour »

mabbo wrote: post #24

The problem is that most people don't want to change banks. If changing your bank to get a better savings rate took 15 minutes and had no other consequences, banks would be updating their rates by the second to beat one another. But it doesn't. If your mortgage, credit cards, car loan, etc, are all with the same bank then switching your bank account only just to get 0.1% higher interest is a huge hassle for little be…

I have always believed there is room for an $xx/year service in the US that provides a virtual bank account number so you can easily switch banks in the background. The decrease in switching friction may actually make banking interesting/competitive again.

Re: Banks are slow to increase rates on savings accounts, but quick to reduce them

#90

Post by lotsofpulp »

jacquesm wrote: post #28
mabbo wrote: post #24

The problem is that most people don't want to change banks. If changing your bank to get a better savings rate took 15 minutes and had no other consequences, banks would be updating their rates by the second to beat one another. But it doesn't. If your mortgage, credit cards, car loan, etc, are all with the same bank then switching your bank account only just to get 0.1% higher interest is a huge hassle for little be…

And your typical mortgage contract will include clauses that stop you from moving your mortgage to some other provider without penalty. You can get badly locked in like that with rates from a decade ago.

This isn’t true in the US. Typically, you can refinance anytime you want, and I’ve never seen a prepayment penalty.

Closing costs aren’t a penalty, as it does take some work to get a mortgage. Although in free money times, even that is sometimes waived by lenders.

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