Banks paying savers again after years of low rates

NEW YORK — Americans are finally reaping some benefit from keeping their money in the bank.

Banks are paying up for savers’ deposits in a much bigger way than they have in more than a decade, based on recent earnings reports from the nation’s biggest banks.

After a decade of low interest rates, the Federal Reserve has unleashed a rapid series of rate hikes to combat inflation, pushing up its benchmark rate to a range of 4.75% to 5%.

That has prompted banks to pay higher interest on traditional savings products like money market funds, certificates of deposit and regular savings accounts.

A 24-month CD, a common savings product for medium-term savers, is now carrying an average yield of 4.81%, according to the Federal Reserve Bank of St. Louis. That’s up from a 1.18% yield only a year ago. Further, non-bank names such as Apple are getting into the deposit game, giving savers even more options.

Banks were initially slow to raise their payouts as the Fed raised rates because they were awash in deposits. But those deposits have shrunk over the past year because inflation forced consumers and businesses to dip into their savings.

To bolster their deposits, banks are raising payouts to retain current customers and entice new ones. Some investors, leery of the current volatility in the stock and bond markets, could find a zero-risk investment like a savings account or CD an attractive option.

The volatility was only heightened after the failure of Silicon Valley Bank last month. A mass exodus of deposits in a short period of time doomed that bank, and led depositors at other midsize institutions to pull some of their money as well, although the withdrawals appear to have abated for now.

In a sign of how competitive it is getting for bank deposits, electronics giant Apple Inc. unveiled a savings account that will pay a 4.15% yield for Apple Card users. The savings account is in collaboration with Apple’s consumer banking partner Goldman Sachs — and actually pays out more than the 3.90% Goldman pays for deposits under its Marcus brand.

Bank of America, the second-largest bank in the country, told investors last week that it was paying on average 1.38% to customers for their deposits, up from 0.96% a year earlier. That figure is still low for BofA because the bulk of customers’ funds are in checking accounts, which typically pay the lowest yield.