Inflation, which is at its highest level in 40 years, is a nuisance to consumers. From food to gasoline to just about everything else, inflation burns household budgets.
Realizing how reduced household spending could hamper the economy — consumption is, after all, the driver of American growth — the Federal Reserve began raising interest rates in an effort to tame rising prices for goods and services.
The federal funds rate is now between 3% and 3.25% and is expected to increase to 4.5% by the end of 2022.
Higher interest rates often prompt commercial banks to raise money lending rates. At the same time, consumers who keep their money in savings bank accounts expect banks to pay them more interest for using that money.
Marcus, LendingClub Makes Savings More Attractive
While some banks have yet to take the initiative to reward savers, others have acted quickly, offering more attractive rates on deposits when financial markets are shaken by uncertainty about the health of the economy.
This is the case of Marcus’ online retail bank, Goldman Sachs. Two days after the Fed’s latest rate hike of 0.75%, the institution sent an email to its clients on September 23 to “celebrate our higher rate!”
In an email obtained by TheStreet, Goldman Sachs (p) Marcus’ division said it raised the rate for its online high-yield savings account. The new APR is 2.15%.
“It has already been applied to your account(s). No action is required of you,” the online bank said to its customers.
She added: “Our team at Marcus, along with our colleagues at Goldman Sachs, are following market trends closely and paying close attention to the Federal Reserve and other major developments in the economy.
“When the Fed raises or lowers its rate, banks tend to increase or decrease the rates they offer on deposit accounts such as savings accounts.”
If the price offered by Marcus is interesting, it is still not among the highest in the market.
It’s LendingClub (LC) fintech offers the best rate – 2.65% – according to NerdWallet, which updated its data through September 26.
In January, the APY in a high-yield savings account was less than 1%, the company told TheStreet. APY is the money or interest you earn on a savings account, sometimes on a checking account, over the course of one year.
“We are constantly monitoring pricing to provide a market-leading rate to our members,” Alia Dodom, a company spokeswoman, said in an emailed statement. Dodom added that there is no obstacle to opening a savings account with LendingClub and taking advantage of this rate.
“There isn’t anything special that consumers need to do to take advantage of this positive price. Just apply,” Dudom added. “We will continue to monitor interest rates.”
Wells Fargo lags behind
For consumers looking for better returns on their savings, online banks and mid-sized banks seem to be the doors to knock on. In fact, they dominate the NerdWallet top 8.
Citbank division of First Citizens BancShares, (FCNCA) Raleigh, NC, offered APY by 0.5% in January. Nine months later, that rate for savings accounts was 2.4%.
The company “continually analyzes our products and services, including our savings account rates, to provide the best service to our customers,” said company spokeswoman Lexa Tutila. “We aim to provide convenience and security with our competitive rates, mobile banking and no monthly service fee.”
Citizen First Parents pay 2.35% for your money. A savings account must have a minimum of $5,000 to qualify for this rate.
SoFi financial technology (Sufi) It rewards savers at a rate of 2% and offers a bonus of up to $300 at the time of opening a direct deposit account.
Attractive payment rates are not widely available. According to NerdWallet, the national average APY for savings accounts is currently 0.17%.
Wells Fargo (WFC) They offer some of the lowest prices on the market. The interest rate is 0.01% for Basic Savings, or Way2save accounts, and up to 0.02% APY for customers with a linked Wells Fargo checking account.
It also offers a selection of certificates of deposit, or CDs, with a minimum opening balance of $2,500.
In general, the price depends on where the customer is located.
“We base our savings and CD rates based on competitive market dynamics, which may vary by market,” said Ariel Bell, a Wells Fargo spokesperson, by email.
“We review our prices regularly, but given the factors that go into the analysis and the ever-changing market, we cannot predict future price changes.”
One of the reasons the big banks are not more generous with their interest on deposits is that they feel no pressure to do so. Consumers continue to borrow heavily.
“Our retail banking segment continued to see good momentum as we grew loans at the fastest quarterly pace in nearly three years,” (buck) CEO Brian Moynihan told analysts during his second-quarter earnings call on July 18.
It is also worth noting that banks have been inundated with savers’ money after the various stimulus payments made by the government during the COVID-19 pandemic.