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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

#101

Post by ac29 »

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…

Opening a online, high-yield savings account takes much less than 15 minutes. Many of these banks dont even offer checking accounts, so you couldn't switch everything else over even if you wanted to.

Many people in the US have no problem opening and using multiple credit cards, so having multiple bank accounts shouldn't be too difficult.

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

#102

Post by BurningFrog »

latortuga wrote: post #66
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…

This is true, but there's nothing that prevents you from having a second bank for savings only. This is what I've always done, open a savings account at whatever bank has the best rates, typically an online-only bank. Savings is useful for liquidity in an emergency and I'd be crazy to not try to get a few points on it in exchange for a few clicks.

Yeah, I moved my savings from the Setting it up was as hard as making a HN account.

I can transfer money CB -> Ally with a few clicks. Only real friction is I can only move $10k at a time every N (4?) days.

Before you get too excited, the Ally rate is now down to 1.1%.

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

#103

Post by sukilot »

eightysixfour wrote: post #89
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.

There's no need. No one knows your savings account number, just your checking account number.

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

#104

Post by sukilot »

amiga_500 wrote: post #81
salawat wrote: post #64

Earlier quoted context omitted.

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.

But we avoided the Holocaust so far, so we've got that going for us.

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

#105

Post by sukilot »

mwexler wrote: post #73
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…

Airline "fuel surcharge" ticket fees come to mind. As high fuel costs plummeted, the fees did not.

That's different. It's just marketing BS to artificially suppress the advertised price, which does float competitively.

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

#106

Post by neilwilson »

Banks will pay as little as they can get away with and charge as much as they can get away with.

Only competition stops that being nothing and loads.

There is no “passing on”. There is only what the market forces on a bank to survive.

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

#107

Post by tacostakohashi »

eightysixfour wrote: post #89
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.

Once people started using any such service, they would realise that their customers are locked in / can't switch easily, so they'd raise their prices to $xx+1 each year... and then you're back to where you started from.

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

#108

Post by qzw »

BurningFrog wrote: post #102
latortuga wrote: post #66

Earlier quoted context omitted.

This is true, but there's nothing that prevents you from having a second bank for savings only. This is what I've always done, open a savings account at whatever bank has the best rates, typically an online-only bank. Savings is useful for liquidity in an emergency and I'd be crazy to not try to get a few points on it in exchange for a few clicks.

Yeah, I moved my savings from the Setting it up was as hard as making a HN account. I can transfer money CB -> Ally with a few clicks. Only real friction is I can only move $10k at a time every N (4?) days. Before you get too excited, the Ally rate is now down to 1.1%.

Try an American Express savings account. Usually the same rate as Ally, but allows much higher transfer limits. And you don’t have to have an AmEx credit card to open one. It’s my go to “middle man” account between ones that have ridiculously low transfer limits. I don’t know why these limits aren’t set as a percentage of the account balance at least. If it’s for reducing fraud, then how about implementing proper two-factor auth for logins as well as transactions over some threshold. The banking system in the US is such an embarrassment in many ways.

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

#110

Post by thaumasiotes »

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…

> So what banks are actually competing over is the people who happen to be shopping around for a new bank- something most people do only a handful of times in their life.

It's worse than that. I shopped around for a new bank based on my needs -- I picked Capital One specifically because of their advertised "no foreign transaction fees". [In fact, there's a fee around 1%, it's just not called a "foreign transaction fee". But 1% is low enough for me.] Interest on savings accounts didn't register at all.

And really, interest on savings accounts shouldn't register for anyone looking for a bank account, because savings accounts are a terrible, terrible way to invest your money. If you have money in a savings account for the purpose of earning interest, you're doing it wrong.

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