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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

#141

Post by BurningFrog »

aleksandrm wrote: post #114
BurningFrog wrote: post #102

Earlier quoted context omitted.

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%.

Is it a Citibank limit that you only move 10k every N days? I changed banks to Ally last year and had no such issue.

It's been a while since I dealt with it, but I think $10k is the biggest amount I can transfer without any fee.

I can always wire any amount of money.

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

#142

Post by jbay808 »

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…

> 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.

Note that this wasn't always the case, though. Until not too long ago, keeping your money in a savings account, not making too many "risky" investments, and benefiting from compound interest in the long term while saving for retirement was considered basic financial literacy.

However, by now interest rates have been near zero and well below inflation for the entire adult lives of anyone under ~35, so the common wisdom has shifted to investing your money in the market being basic financial literacy.

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

#144

Post by thaumasiotes »

jbay808 wrote: post #142
thaumasiotes wrote: post #110

Earlier quoted context omitted.

> 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…

> 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. Note that this wasn't always the case, though. Until not too long ago, keeping your money in a savings account, not making too many "risky" investments, and benefiting from compound interest in the long term while saving for retirement was considered…

> However, by now interest rates have been near zero and well below inflation for the entire adult lives of anyone under ~35

When were interest rates on bank accounts not below inflation? Bank interest failing to even keep up with inflation is not a recent phenomenon; as far as I'm aware, our low rates now are better, inflation-adjusted, than the old high rates were.

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

#145

Post by hansvm »

danieldisu wrote: post #78
repsilat wrote: post #74

Earlier quoted context omitted.

> or if that is too risky invest in a government bond. You can get 1% in a savings account in the US. TBill rates are all less than 0.25%. The latter has tax benefits, but not enough. One good way to "get a higher return" (for some at least) is to pay down debt. If your mortgage is at 3%, whatever you pay off is "earning" 2ish% after tax. If your margin loan is at 1.5%, anything you pay off earns 1.5% (because the in…

interests are not linear, also most credits and mortgages will have a commission when you pay down a percentage of it, at least in Europe

Mortgages might be a poor example because of prepayment penalties, the ability for a lender to choose to apply an excess payment to future interest payments instead of the current principal, and all sorts of things (each situation is different, you just need to do the math).

Something like a credit card or student loan in places where those are common might be better targets. They usually have ordinary compounding interest, and the delta in your net worth (assuming no other effects like taxes) between investing P dollars at an interest rate R for time T is identical to paying off P dollars of a debt at an interest rate R and waiting till time T has elapsed.

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

#147

Post by PaulDavisThe1st »

qzw wrote: post #108
BurningFrog wrote: post #102

Earlier quoted context omitted.

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…

I left Capital One Savings (formerly Ing) because their 2FA required me to own a mobile phone registered in my name. I even sent them serious articles on the relative risk of 2FA using SMS vs email. Completely ridiculous. I had the accounts for about 15 years, and pulled out everything and pushed it to Marcus.

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

#148

Post by PaulDavisThe1st »

mschuster91 wrote: post #130
BurningFrog wrote: post #102

Earlier quoted context omitted.

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.

Your first sentence is 110% correct (as an Anglo-American). It is embarrassing for me to see the ease (and speed) with which my brother & stepfather (UK banking) move money around.

The second sentence is not 100% correct, though. The limit is not on accessing your funds in general, but specifically on using the ACH to move funds to a different institution. In practice, of course, in an era of online banking, it's almost the same thing - I mean, what else were you going to do with all your funds anyway?

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

#149

Post by PaulDavisThe1st »

horsawlarway wrote: post #79
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.

This is my route too. I have accounts at 4 institutions with various levels of service. 2 of them provide good rates on savings 1 is local and has ATMs and branches in my area 1 provides a fantastic online experience Once you've verified accounts between banks, it's fairly painless to transfer between them (and usually free if you initiate the transfer from the bank that will receive the funds) Works very well and gi…

I'd also note that I've been happy to see ACH transfer times decrease dramatically in the last 5-6 years. Used to be consistently 3 days, 2 if you were lucky. I now regularly see same day transfers. PayPal -> bank is getting close to european speed: if I schedule an ACH transfer with them around midnight, it will be in my bank during the following 12 hours.

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

#150

Post by singhrac »

As an aside, if someone is fairly risk averse (i.e. doesn't want to lose more then 10-15% in a crisis like what just happened) and wants to park ~200k, is the best option a high-yield savings account? A CD? I would have normally thought treasuries but obviously interest rates are low.
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