Savers: Shop around, you may make some money

The Beaufort Gazette (Sunday) - - News - BY SARAH SKID­MORE SELL

EX­PERTS SAY MORE BANKS ARE GET­TING INTO THE RATE RACE AND CON­SUMERS SHOULD TAKE NOTE.

Savers re­joice – you can fi­nally earn a lit­tle more on the money you’ve been set­ting aside.

To draw in cus­tomers, banks – par­tic­u­larly on­line in­sti­tu­tions – have been get­ting more com­pet­i­tive with the rates they are of­fer­ing on sav­ings, CDs and even check­ing ac­counts. That means a savvy con­sumer may be able to earn far be­yond the norm if they are will­ing to shop around.

Take the hum­ble sav­ings ac­count: The aver­age in­ter­est rate in the U.S. is 0.09 per­cent, ac­cord­ing to the FDIC. And that is just an aver­age – some banks are of­fer­ing rates as low as 0.01 per­cent while many oth­ers are at or above 2 per­cent.

To some­one with $5,000 sit­ting in an ac­count, that means the dif­fer­ence be­tween earn­ing 50 cents a year in in­ter­est ver­sus $100.

In the low-in­ter­est rate en­vi­ron­ment that fol­lowed the Great Re­ces­sion, banks rou­tinely paid lit­tle to noth­ing on many per­sonal ac­counts. The Fed­eral Re­serve be­gan to raise its rates in 2015 but tra­di­tional banks were slow to do the same for cus­tomers.

They had lit­tle in­cen­tive – cus­tomers had grown com­pla­cent af­ter years of low in­ter­est rates. And tra­di­tional banks were large enough that they had huge de­posits and other busi­ness lines that served them well.

A num­ber of on­line banks spot­ted an op­por­tu­nity and be­gan of­fer­ing much higher rates to at- tract more cus­tomers. They could af­ford to be­cause they didn’t have the cost of main­tain­ing a store­front on every cor­ner.

But also, not hav­ing the ben­e­fit of size, they needed to of­fer more at­trac­tive rates to sur­vive. Some big­ger banks took no­tice and, want­ing to bet­ter serve a more on­line-fo­cused cus­tomer base, be­gan to re­spond with higher rates them­selves.

While in­ter­est rates are still low his­tor­i­cally speak­ing, they are on the up­swing. Ex­perts say more banks are get­ting into the rate race and con­sumers should take note.

So while lesser-known play­ers, like Bank5 Con­nect, of­fer a 2.05 per­cent an­nual per­cent­age yield, or APY, on a sav­ings ac­count, big­ger banks have some nice of­fer­ings as well. Mar­cus, the on­line bank of Gold­man Sachs, has a 2.05 per­cent rate on its sav­ings ac­count and HSBC Di­rect of­fers a 2.01 per­cent rate.

“The out­look for savers is very pos­i­tive and the op­por­tu­nity cost of not mov­ing your money is only go­ing to grow,” said Greg McBride, chief fi­nan­cial an­a­lyst at Bankrate.com. That’s be­cause money earn­ing lit­tle to no in­ter­est is los­ing its pur­chas­ing power over time if the rate earned on it does not keep pace with in­fla­tion.

SHOP AROUND

Com­pla­cency isn’t go­ing to earn you any­thing and ex­perts say many con­sumers are miss­ing out sim­ply be­cause it takes ef­fort.

“One of the big­gest mis­takes we make is get­ting into a prod­uct that is not right for us,” said Paul Golden, spokesman for the Na­tional En­dow­ment on Fi­nan­cial Ed­u­ca­tion. “I think con­sumers should shop around.”

It won’t take long: Take a look at your ex­ist­ing ac­counts and find out what you are get­ting paid. Then do a quick search on­line to get a sense of com­pa­ra­ble rates (many web­sites com­pile and sort the data for you).

On­line banks are lead­ing the way on rates. Com­mu­nity banks and credit unions may of­fer com­pet­i­tive rates as well. And many big banks are rolling out op­tions with highly com­pet­i­tive rates.

“Bet­ter is out there and it’s not hard to find,” said Di­ane Mo­rais, pres­i­dent of con­sumer and com­mer­cial bank­ing prod­ucts at Ally Bank, which of­fers a 1.9 per­cent APY on its sav­ings ac­count. The bank es­ti­mates that there is as much as $3 tril­lion parked in bank ac­counts earn­ings 0.25 per­cent or less.

Want to stick with your tra­di­tional big bank? Even switch­ing to a dif­fer­ent type of prod­uct may earn you more.

Or if you’re an es­tab­lished cus­tomer of a bank, try to ne­go­ti­ate a bet­ter rate.

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