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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

#121

Post by kevin_thibedeau »

leetrout wrote: post #30
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…

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…

That's nice but doesn't explain 30% hikes the day after a global supply disruption. They still have cheap gas in their tanks.

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

#122

Post by rjkennedy98 »

stagger87 wrote: post #37
rjkennedy98 wrote: post #9

Earlier quoted context omitted.

There are a lot more people than you think that simply don't invest their money, instead they keep it in savings accounts. My aunt is one of those people. She got a large inheritance and basically kept it in a savings account for 20 years. My mom got the same inheritance and bought investment properties with it and now its worth 10x. I think it comes down to the fact that a lot of people are risk averse or feel that…

10x? I'm not familiar with real estate. How does one earn 10x in that time frame. Even with a price to rent ratio of 1 to 15 and assuming housing prices double over that period, you still aren't at 10x, and that doesn't include maintenance, taxes, closing fees, etc.

Not too hard if you buy California real estate with 10% down in the 80s.

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

#123

Post by ac29 »

ArtWomb wrote: post #14

Am curious how Compound, dX/dY, Nexo services are able to advertise such high interest rates on digital assets. Some as high as 10% APR accrued on a daily basis.

For one, because the underlying asset they are paying interest in can lose value, or even go to zero. Compound, for example, has lost 50% of its value in just a month.

The crypto space is also, to say the least, extremely risky, and full of every variety of untrustworthy, unscrupulous character.

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

#124

Post by catblast »

thaumasiotes wrote: post #110
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 fe…

> you're doing it wrong.

What else do you suggest that is liquid and essentially risk free? There is a purpose for this type of product. If not a high yield savings account, what is it?

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

#125

Post by leetrout »

kevin_thibedeau wrote: post #121
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…

That's nice but doesn't explain 30% hikes the day after a global supply disruption. They still have cheap gas in their tanks.

I understood it that everyone in the chain raises their prices to cover how high it’s predicted to be.

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

#126

Post by frereubu »

OJFord wrote: post #55
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…

But it's also not a problem for savings accounts in the first place? Other than if you have a standing order(s) paying in I suppose, but that's probably only one, and unlike direct debits etc. all in your control and less hassle to move.

It's certainly less of a problem. But people are notoriously lazy, and a service where you could switch savings accounts in the same way as a current account would make it more likely. It's the cost / benefit trade-off, so if differences in interest rates are very small you need to make it even easier for people to switch.

For example, I'm being paid 0.3% on a current-acount-linked savings account. If I could switch that to NS&I (1%) more simply than I can currently, I would. But given the relatively low amount in the account, and how much I feel my time is worth, it just doesn't feel worth it to me. Yeah, I'm lazy. But so are lots of other people, and it would change the dynamics of the savings account market if it was easy enough to make me want to switch.

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

#127

Post by matthewdgreen »

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…

There are services (google Max my Interest, this is not a product plug) that will allow you to automatically shuffle money between many high-yield online savings accounts. They'll make sure that your money stays in the highest-yielding account, but remains under the FDIC insurance limits.

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

#128

Post by IncRnd »

jennyyang wrote: post #88

This is the same with gasoline prices too. CA gas prices are still well over $3/gallon despite low crude prices.

For gasoline there are federal, state, and local taxes. Also, each jurisdiction needs gasoline to be made differently than in other areas. Gasoline is a processed product, and it differs from crude.

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

#129

Post by latch »

sjg007 wrote: post #119
jliptzin wrote: post #77

Earlier quoted context omitted.

Suppliers for lots of things charge whatever people will pay regardless of current market conditions. From time to time I read about lobster surpluses, where prices for distributors plummet and they just can't get rid of them. But when I go to the supermarket the price hasn't budged even $1. The supermarket knows the average consumer isn't aware of the fluctuations in the wholesale lobster market and even if they are…

Lobsters can be frozen.. gasoline is more elastic b/c it does eventually expire.

I don't think it's reasonable to imply that fuel is more perishable than meat. Crude oil doesn't go bad.

Besides, the [non]-perishability of either doesn't see to really be a factor in either, does it?

Maybe the closest factor for oil is storage, as we saw recently when prices went negative.

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

#130

Post by mschuster91 »

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%.

> Only real friction is I can only move $10k at a time every N (4?) days.

The amount of bullshit that you Americans put up with in banking on a daily basis is mindboggling for me as an European. A bank that couldn't give me all my funds in one day would never see my business again and yield themselves a complaint at the regulatory agency.

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