There's Big Money in Shopping for Bank Rates
April 21, 2010
During the past week, MoneyRates.com released research estimating that American bank depositors have lost $140 billion in purchasing power to inflation over the course of the last twelve months. The reason is that bank rates have been persistently below the level of inflation during that time.
The low level of bank rates remains striking. According to the FDIC, as of this past Monday average U.S. savings account rates stood at 0.20%, money market rates stood at 0.31%, and 1-year CD rates stood at 0.78%.
These numbers are low on an absolute basis, and low relative to the rate of inflation. However, perhaps what is most striking about these national averages is how much better people could do with some simple shopping around.
Right now, MoneyRates.com features a number of savings account rates of 2% or more. That's 1.8% above the national average. There are also money market rates of 2% or more, which is 1.69% higher than the national average. The best 1-year CD rates on MoneyRates.com are around 1.80%, or 1.02% higher than the national average.
Averaging those three figures -- the amounts you could gain on savings account rates, money market rates, and CD rates by shopping on MoneyRates.com -- gives you a potential boost in bank rates of 1.5%.
Now let's play what if. What if Americans hadn't settled for the average rates of the past year, but instead had flocked to the highest-yielding bank products. The average rate might have been some 1.5% higher. On the $7.56 trillion in U.S. deposits, this would have meant over $113 billion in additional interest. Instead of $140 billion in lost purchasing power over the past year, the figure would have been more like $27 billion.
So, don't let anyone ever tell you that shopping for bank rates is a waste of time. The numbers really do add up.
Compare ISAs
30 April 2010 at 3:19 am
I have my system, and it has served me well, I do not go out of state on this stuff, a few points do not matter to me that much, I stay local, where I can see my money and I can move it when I need to. Only card in my deck that is still holding is the CD I opned with Wachovia now Wells Fargo.
Olivia
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No Stocks 4me Kramer
24 April 2010 at 11:19 am
Well my friend, I DO "shop" for rates, as best I can, but when ALL 3 banks and my local CU are on the same level, its a bit silly to keep "checking" every few min, So far I see nothing changing, and even if it does, and give it away free Ben decides to change, you can bet the banks will take their sweet time raising anything but the CC rates. I have my system, and it has served me well, I do not go out of state on this stuff, a few points do not matter to me that much, I stay local, where I can see my money and I can move it when I need to. Only card in my deck that is still holding is the CD I opned with Wachovia now Wells Fargo, that is still getting 6.18% till Oct 2011 :). I had 3 there but when IndyMc went south I started to become more involved with FDIC limits and moved 2 CD's out to other banks, However,the way things turned out, had I left them there (over FDIC or not) I'd still be getting that 6.18 on them too. But sometimes you have to make a decision, take the risk and keep the % rate, or diversify and be safe at a lower one, shrugs, I went with safe.
Bottom line in my book, is this is ALL BS, it was a way for them to come up with a way to do the NO COLA thing, and the banks to go nuts on interest rates for savings. I'm sure you as I don't see anything you need on a daily basis gone to 0, instead its gone UP. So this NO inflation is BS, unless you buy 10 tons of scrap iron a day. What people need somehow seems to be left out of the CORE.
Richard Barrington
23 April 2010 at 3:54 am
I understand your frustration -- just check out our recent article which estimates that depositors have lost $140 billion in purchasing power over the past year, due in large part to artificially low interest rates. Still, the question is whether you want to simply accept a bad situation, or make the best of it. Whether rates overall are low or high, active shopping for the best rates can put more money in your account.
No Stocks 4me Kramer
21 April 2010 at 5:20 pm
Nothing to see here, keep moving, nothing to see.
When damned uncle ben quits giving free money to them (banks) and makes them compete for public money, maybe than things will change in favor for savers again. Until than its the SOS.