The
Banks
Loyalty
Tax
Don’t let human inertia or just plain laziness allowing your basic savings earning sub atomic low rates when higher and just as safe returns are possible!
Dodging the loyalty tax. For banks, deposits are the primary source of funding. Higher deposit rates raise the cost of funds for banks, and so they’re loathe to raise interest rates they pay on deposits, and they will raise only the minimum necessary to retain deposits, and they will offer higher rates to get new deposits. They love customers who don’t compare or who don’t pay attention or who feel stuck earning nearly nothing on their savings accounts and checking accounts. It’s free money for banks.
And there are still trillions of dollars in bank deposits that are earning nearly nothing. Some is inevitable, such as with transaction accounts. But other deposits should be moved somewhere else if the bank fails to offer competitive interest rates. There are lots of options today to dodge this loyalty tax. And the 5% interest rates are much-needed compensation for the loss of purchasing power due to inflation.
DYI: Finally short term interest rates
are no longer in the sub atomic low level as they have moved up closer to their
historical mean. The main point of Wolf
Street article if your bank remains offering sub atomic low rates then shop
around in many cases for CD rates much higher reducing the effects of ongoing
inflation.
No comments:
Post a Comment