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Do people chose banks for interests rates in saving accounts? Like do people make the financial decision to use saving account rather than stock/bonds/hedge fu
by afiori 4y ago
Do people chose banks for interests rates in saving accounts?
Like do people make the financial decision to use saving account rather than stock/bonds/hedge funds as investments?
As far as I understand no reasonable bank anywhere offers interest higher than inflation.
- nine_zeros 4y agoYes, people do make such decisions. Why? Because they expect stocks to fall and bonds to expose them to interest rate risk. They'd rather keep the money liquid and ready to sweep in to buy assets. People also use savings accounts for impending expenses. Human stuff such as pregnancy, kids, car repairs. Parking money in liquid savings with 3.5% interest is a very viable hedging strategy for humans. Perhaps not for institutions.
- ghaff 4y agoAt least Bank of America is still effectively 0 interest (excuse me 0.01%) on savings accounts. I'm not sure why anyone would bother to maintain a separate account beyond a checking account buffer. My brokerage sweep account is over 4% right now and transfers can be done online and just take a few days. I assume the only reason for the savings accounts is to convince some people that they can save at their bank without bothering with another account somewhere else. (And, of course, until recently money market sweep accounts paid very little as well.)
- afiori 4y agoIs that 3.5% an actual figure or just an example? I admit that it is much higher than I would have expected (which was on the order of 0.1% ~ 0.01%), did SVB offer that kind of interests?
- nine_zeros 4y agohttps://www.nerdwallet.com/best/banking/savings-accounts https://www.nerdwallet.com/best/banking/savings-accounts
- ghaff 4y agoI assume all of those are money market accounts like a brokerage sweep account as opposed to a regular bank savings account which, at my bank at least, are still paying 0.01%. Which may be a reasonable risk/reward tradeoff as 4% on, say, $100K isn't nothing.
- nine_zeros 4y agoThose are really savings accounts. I myself created accounts in them to take the benefit.
- ghaff 4y agoInteresting. Marcus for example is explicitly covered by FDIC. I guess a lot of regular banks have decided that they'll just continue to pay the "dumb money" basically nothing rather than trying to compete with the banks and brokerages paying reasonable interest rates.
- nine_zeros 4y agoThere is a market for it. Not every human sits everyday watching interest rates, stock prices or other financial signals. I, for one, am glad that banks are competing for money with any interest rate.
- ghaff 4y agoDefinitely. For so long, $100K or whatever sitting as a cash or near-cash reserve, it really didn't matter much whether that was in a checking account, a savings account, or a brokerage sweep account. But getting 4-5% on that kind of money at very low risk is getting to be real money at current interest rates and it's worth actively managing how much you have in a checking account.