Bank Transfer Day won't help savers
Live Poll
Are you leaving your bank to protest higher fees?
By John W. Schoen, Senior Producer
Saving money is never easy. But it's getting harder than ever to try to sock away a few bucks.
Depositors joining the Bank Transfer Day protest Saturday?are hoping to send a message to the nation's biggest banks that they're tired of annoying fees and government bailouts. Many of them are moving to smaller community banks and credit unions.
But they're not likely to get a higher return on their cash.
Since the financial panic that followed mortgage lending bust, interest rates have crashed to levels not seen in decades. And there appears to be no sign that trend will reverse anytime soon.
The average rate paid on typical savings account rate fell again last month - from 0.286 percent in October to 0.275 percent in November, according to a survey by DepositAccounts.com of more than 275,000 rates at 8,000 banks and credit unions. That means the payments savers are collecting fell by more than 4 percent. The same held true for the top 10 percent of the most competitive banks, which paid as much as 0.811 percent interest. (Alabama has the best average rate, at 0.440 percent, while Arizona has the worst, at 0.160 percent.)
Checking accounts are paying even less - a puny 0.171 percent on average. You won't do much better with certificate of deposit. The average rate on a one-year CD fell to 0.638 percent in November. The average five-year CD rate fell to 1.755 percent.
With consumer inflation?running at just under 4 percent year-over-year, savers are getting a negative real return on their money. Why not just spend it now?
That's what many savers seem to have concluded. The latest data showed that consumers boosted spending by six-tenths of a percent in September - three times the gains in August - but only by dipping heavily into those savings accounts. They didn't pay for that spending with income, which fell largely because interest on their savings accounts keeps falling.
The good news, if there is any, is that interest on debt is falling too. For those with good credit who can?refinance a mortgage, rates are at record lows. You can get a four-year new car loan for less than 6 percent, according to the latest data from the Federal Reserve. And the average rate on credit card debt has fallen to 12.28 percent - about a point and a half less than the 2010 peak. ?
Lower rates, of course, are part of the Fed's plan to try to spur lending and get the economy back on track. For now, the central bank is on hold with that strategy. But if the financial crisis in Europe goes global, expect the Fed to try story to push rates even lower.
If this keeps up, banks may soon start charging you just to hold onto your cash.
Related:
A 7-step plan to break up with your bank
Fed-up consumers ready to leave their banks
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Source: http://lifeinc.today.msnbc.msn.com/_news/2011/11/04/8638081-bank-transfer-day-wont-help-savers
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