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U.S. interest rates have soared everywhere but savings accounts

bloomberg.com

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Re: U.S. interest rates have soared everywhere but savings accounts

#21

Post by jeffbee »

incomingpain wrote: post #5

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%.…

How does this track? Are you saying that boomers aren't benefiting from mortgage interest rates? Boomers were still the dominant generation of mortgage purchasers as recently as 10 years ago.

Re: U.S. interest rates have soared everywhere but savings accounts

#22

Post by Rastonbury »

gotaquestion wrote: post #17
Rastonbury wrote: post #10

Clickbait title, the fed rate went from 0.25% to 0.5% hardly soaring. Savings accounts previously paid like 0.04% according to article, that's because they need margin and they can keep them low cuz people won't swap banks for half a percent (not that it'll get there anytime soon)

Doubling equals soaring in anything related to economics or finance.

Nah man 0.001% to 0.002% really? Would anyone describe the yield of t-bonds as astronomical at 1.44%? Nobody would even care if banks passed on fed rate to consumers, imagine getting the joy of getting 0.5% up from 0.25%

Re: U.S. interest rates have soared everywhere but savings accounts

#23

Post by CameronNemo »

incomingpain wrote: post #5

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%.…

Lots of retirees are leveraged.

Re: U.S. interest rates have soared everywhere but savings accounts

#24

Post by PopAlongKid »

Rastonbury wrote: post #10

Clickbait title, the fed rate went from 0.25% to 0.5% hardly soaring. Savings accounts previously paid like 0.04% according to article, that's because they need margin and they can keep them low cuz people won't swap banks for half a percent (not that it'll get there anytime soon)

For most of the last decade, IRS statutory rate for underpayment/overpayment of tax was 3%, an historically low number. It briefly spiked up to 6% in 2019, then fell back to 3% for a while, but last quarter went back up to 4%, with more increases expected.[0]

This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardless of their credit status.

[0]https://www.dol.gov/agencies/ebsa/employers-and-advisers/pla...

Re: U.S. interest rates have soared everywhere but savings accounts

#25

Post by JumpCrisscross »

ra7 wrote: post #13
hsnewman wrote: post #6

Just go for I-Bonds instead.

The $10k limit makes I-Bonds mostly suitable for parking emergency funds. If you’re saving up more money (for buying a house etc), a savings account is still the best bet. I’m in this position and the interest rates are frustrating, but everything else is very risky IMO.

> If you’re saving up more money (for buying a house etc), a savings account is still the best bet

Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2].

[1] https://www.treasurydirect.gov/instit/annceresult/annceresul...

[2] https://www.bankrate.com/banking/savings/best-high-yield-int...

Re: U.S. interest rates have soared everywhere but savings accounts

#26

Post by gruez »

PopAlongKid wrote: post #24
Rastonbury wrote: post #10

Clickbait title, the fed rate went from 0.25% to 0.5% hardly soaring. Savings accounts previously paid like 0.04% according to article, that's because they need margin and they can keep them low cuz people won't swap banks for half a percent (not that it'll get there anytime soon)

For most of the last decade, IRS statutory rate for underpayment/overpayment of tax was 3%, an historically low number. It briefly spiked up to 6% in 2019, then fell back to 3% for a while, but last quarter went back up to 4%, with more increases expected.[0] This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardle…

>This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardless of their credit status.

Yeah but you're severely limited in how much money you can "save" in this account. Similarly, it's like arguing that rates are super high because you can get I-bonds at 7.12%, but neglecting to mention the most you can buy per year is 10k.

Re: U.S. interest rates have soared everywhere but savings accounts

#27

Post by ragingrobot »

Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that.

It never recovered. I never saw that rate go above 1% ever since.

Re: U.S. interest rates have soared everywhere but savings accounts

#28

Post by [deleted] »

votepaunchy wrote: post #19
PopAlongKid wrote: post #8

Earlier quoted context omitted.

Yes, these are becoming more popular. Unfortunately, there is an annual purchase limit that is pretty low ($10K per person plus maybe an extra $5K if you can use a large income tax refund). There was a time not that many years ago (15?) where I was actually earning higher interest in a bank CD than I was paying on my mortgage. I was also able to get short term cash advance at low introductory rate on a credit card, l…

Interest is taxed as income. Debt does not cancel out income unless paid on a mortgage when itemizing deductions.

[deleted]

Re: U.S. interest rates have soared everywhere but savings accounts

#29

Post by mgh2 »

ragingrobot wrote: post #27

Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that. It never recovered. I never saw that rate go above 1% ever since.

It is a well known sales tactic to hook customers in then lower interest rates. Whomever does not fall into this trend will gain consumers' trust

Re: U.S. interest rates have soared everywhere but savings accounts

#30

Post by kube-system »

CameronNemo wrote: post #20
JumpCrisscross wrote: post #14

Earlier quoted context omitted.

> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresul...

Actually Series I bonds are negative real yield because the interest is taxed federally.

Which is still better than the savings accounts that the comment above was comparing them to, which are taxed federally and often locally.
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