Why is the interest on your savings account not going up despite the rising interest rates?
According to the Wall Street Journal, the average rate on a savings account right now at large U.S. banks is 0.06%. That’s after years of government interest rates being low.
But now those rates are going back up. In the past, that would have meant more bang for your bucks stashed away in a savings account. But that is not happening this time around.
So why not?
Turns out the banks have a lot of our cash. Deposits at U.S. commercial banks skyrocketed during the pandemic. Total deposits at banks now add up to 18 trillion dollars, up from 13 trillion at the start of 2020.
And savers aren’t moving their money around. They are keeping those savings in the big banks despite the fact that some online startups now offer much higher interest rates.
In the past, banks used to offer better rates to attract customers. Now they are finding they don’t have to.
The Wall Street Journal says part of that is human nature. After years of the government keeping interest rates incredibly low, we have gotten used to getting little in return from our savings account.
One group that is seeing a big return on their investment: the banks. They generated some of the biggest reported record profits in 2021.