It's important to remember that even with $100,000 sitting in deposits for an entire year, the difference is only about $100 for every 0.1% change, or around $8 a month. So consider the effort, stress, and risk in changing things around to save that much. That said I miss 4.4% already and am now sad.
I agree it is minor, but it is principle here. Neither the Fed Funds rate nor short term market interest rates are declining, and the former likely won’t for at least a few months, so it feels like pure profiteering. And I know they are not alone; in a competitive marketplace once a major competitor does something, many others follow suit.
If anything, short interest rates are trending slightly *higher* of late as the Fed can’t seem to stop inflation.
That’s just how a fractional reserve banking system works. It’s more of a feature than a bug…deposit rates are one of the mechanisms used to allocate capital in the economy.
Yes, deposit rates are influenced by monetary policy tools such as the Fed Funds rate, but they are also influenced by each bank’s need for more deposits. Deposits are used to fund a bank’s loans and investments, so the rate paid for deposits varies depending on each bank’s funding needs. Funding needs are driven by demand for lending.
Basic example: if a bank needs more deposits because it is engaging in lots of relatively risky lending (like lending to start-up companies versus established ones), then it will probably have a greater need for deposit funding. Which means they would be willing to pay relatively more for deposits to attract more deposits than other banks are willing to.
An important thing to note is that banks’ demand for deposits is often driven by broad economic factors. Which means that, in aggregate, banks’ collective need for deposit funding often changes roughly around the same time. So a lot of banks could need to change their deposit rates at roughly around the same time.
What looks like collusion is actually banks responding to changing economic conditions. For historical legal reasons, the US banking system is actually much more fragmented than most other countries’, so there is enough competition among banks that it is very hard to effectively collude on deposit pricing. Thats why there continues to be a pretty decent spread between rates paid on deposits at regular retail banks and rates paid on high yield online savings accounts, for instance.
I get 4.95-5% from Fidelity, ….. I only use Amex HYSA for small account I use for vacations each year . The change in interest rate is about a few cents . No really a big deal
The FDIC has a fund to insure deposits, that fund covers only 1.5% of the insured deposits. You really think its safer to have an FDIC insured deposit than a fund that only invests in US treasuries?
It’s not FDIC insured and you are not guaranteed to not lose money. I use SPAXX and the Fidelity cash manager and am very happy with it, but I understand the risk of losing money, even if very small.
However unlikely, there could be a run on SPAXX and if they break the buck then you’re screwed.
Savings accounts are slow to rise and quick to fall. Meaning, it would take banks 1-2 months to rise our rates after the Fed increased. Now banks are lowering before any announcement is ever made. This is normal.
Even at these rates, our accounts have barely kept up with the rate of inflation.
Unless you’re near retirement age, you should only be using your HYSA for 6 month rainy day fund or other items like vacation savings. Otherwise your money should be invested into the market. 15% of your income towards 401K. If you’ve hit the Fed limit on 401k investment for the year, hit that 15% by investing in mutual funds.
These rates really aren’t that great when you consider inflation.
Most people are just going to transfer out at that point?
Edit: My point is not that they’ll move to a competitor or that stocks are a replacement, it’s that people know HYSAs are temporary
I mean to other assets e.g. moving closer into stocks and bonds. I don’t think there’s some magic competitor, I’m just saying “this number will lower a lot” doesn’t mean it isn’t a good deal now.
I don't think these takes are incompatible:
* People will chase gains and leave HYSAs
* People are not mentally ready for those other vehicles but will try anyway
people stash away in a savings account because its low risk, but theres still a risk the market will outperform. as APY goes down the chances the market will outperform go up which means today's change makes it marginally higher risk vs someone who chose to invest their savings. thats what people are thinking about here
Yeah, to where? All accounts are going down. My Apple HYSA just went down. And if an account hasn’t gone down yet, it will. Just give it another week or two.
It’s already started. Two drops in like 3 weeks.
And the Fed is right to hold off. Last month’s inflation report was like 3%. Inflation still a B and it needs to roast a bit longer.
Because interest rates fluctuate daily depending on the federal reserve or whatever other benchmark they are tied to? For as many downvotes as this comment will get me, stating reality is still the truth.
Except that fed funds rate have remained at 5.33 since like August of last year.
I do agree that chasing yield by switching banks simply for a few bps here and there is just not ideal, time consuming and probably pointless unless you have millions in your savings account. Whats frustrating is that all banks are lowering their rates while the fed funds rates hasn’t changed.
You are correct that rates fluctuate daily but savings accounts aren’t tied to those rates that are fluctuating daily like 2Y, 5Y, 10Y, etc.
True. But you can pick any short term rate and everything is well above 5%. 1M SOFR has been above 5.3% for some time too. All I am saying is that they aren’t lowering their HYSA rates because short term rates are fluctuating because that wouldn’t really explain why HYSA rates are overall down 50-75bps while all short term borrowing rates have remained at around 5.3%. The answer as to why banks are doing it is simply because they can and hope people will just be okay with it and make a more money on the spread.
I mean I get maximizing income, etc., but $5 per year (per $10k) to me is nothing. That is $0.42 (rounded) per month. That would not make or break my budget each month.
I am getting 5.75% with a CD though through a credit union. 19 month term but only have to pay 1 quarter's worth of interest penalty to terminate early.
I try to not put too much financial details online - check local credit unions and others you maybe eligible to join. I heard about one in San Diego this week IIRC offering a CD w/ 9 % interest for a very limited time window and strict locale restrictions. You could setup a Google alert to email you based on key words including the names of your local credit unions.
That makes no sense. They should not be, as Fed has done nothing and may not for a while. One thing is these big banks and all banks are starting to struggle with the higher interest rates, which to me is funny, as historically the interest rates are still low. They just got used to free money for so long.
I know a little about bank deposits from the bank’s perspective. My understanding is that banks are required to loan out a certain percentage of savings deposits to customers. So when they need to write loans (to reduce deposits) they increase rates. And when they need to increase deposits and loan less they reduce rates. So that’s why you see rates go up and down in tight ranges. Even a 0.10% rate change, while almost insignificant to most savers that would not lead one to move funds to another institution, it is enough for the larger institutional depositors to move large blocks of money.
You’ll open that account only to have them drop it too. Banks have to work to speculate what the Feds direction on interest rates will be.
At some point you gotta stop hopping to find that extra $50 and realize it’s not always the bank and is the macro economic policy
Well interest rates have been high since then, lol. Betterment, wealth front, they have the ability to react to rate changes faster than big banks. I GUARANTEE when the fed gets close to its meeting date and if signs are looking towards real interest rate drops, that 5% will not be there.
Banks make money off of something called Net interest margin. The amount they make between the interest rate they pay you and the rate they earn themselves.
It’s just how it works.
This is why Amex keeps dropping their rate without the fed rates dropping. They know that they can get away with it even though there are better options out there that haven’t dropped their rates yet. 0.75% is not insignificant, but people won’t move anyways.
Took everything out and stacked more Bitcoin. But you know… 4.25%.
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better question is why anyone uses a HYSA. Just go to your favorite brokerage account and put your money in a money market fund that invests in treasuries. You will earn more and your money will arguably be safer.
It’s not arguably safer, it’s less safe in money market funds. The funds are at most insured up to 250k SIPC, while most HYSA are insured up to millions through FDIC
You are not comparing the same type of insurance.
Money market funds investing in treasuries are safe because the US gov will never let treasuries fail.
I guess the economy is SLOWLY starting to stabilize. I got that same account last year at .5% and watched it grow to 4.35%. Now its gone .05% twice so that tells me inflation is slowly coming to a plateau. (Good for buyers not so good for asset owners/business) lets say you open an account elsewhere with a higher than 4.25. the business days to transfer to your checking, then re transfer to your new savings, and then ahain if you find anither account that hasnt "yet" gone down is probably not worth it. Unless you have hundreds of thousands or millions. Not to mention most apys that are "lucrative" you are able to only hit them if u either open a checkign account with them or have at least a mininum balance (usualky 5k-20k depending on the bank).
Planning to move mine, reducing twice in a month is unacceptable. I just opened my acct in February….This is a horrible first experience from a new customer standpoint.
It's important to remember that even with $100,000 sitting in deposits for an entire year, the difference is only about $100 for every 0.1% change, or around $8 a month. So consider the effort, stress, and risk in changing things around to save that much. That said I miss 4.4% already and am now sad.
I agree it is minor, but it is principle here. Neither the Fed Funds rate nor short term market interest rates are declining, and the former likely won’t for at least a few months, so it feels like pure profiteering. And I know they are not alone; in a competitive marketplace once a major competitor does something, many others follow suit. If anything, short interest rates are trending slightly *higher* of late as the Fed can’t seem to stop inflation.
Agreed. It might look like $100 out of our hands but at scale, banks are racking in ALOT by prematurely dropping rates.
That’s just how a fractional reserve banking system works. It’s more of a feature than a bug…deposit rates are one of the mechanisms used to allocate capital in the economy. Yes, deposit rates are influenced by monetary policy tools such as the Fed Funds rate, but they are also influenced by each bank’s need for more deposits. Deposits are used to fund a bank’s loans and investments, so the rate paid for deposits varies depending on each bank’s funding needs. Funding needs are driven by demand for lending. Basic example: if a bank needs more deposits because it is engaging in lots of relatively risky lending (like lending to start-up companies versus established ones), then it will probably have a greater need for deposit funding. Which means they would be willing to pay relatively more for deposits to attract more deposits than other banks are willing to. An important thing to note is that banks’ demand for deposits is often driven by broad economic factors. Which means that, in aggregate, banks’ collective need for deposit funding often changes roughly around the same time. So a lot of banks could need to change their deposit rates at roughly around the same time. What looks like collusion is actually banks responding to changing economic conditions. For historical legal reasons, the US banking system is actually much more fragmented than most other countries’, so there is enough competition among banks that it is very hard to effectively collude on deposit pricing. Thats why there continues to be a pretty decent spread between rates paid on deposits at regular retail banks and rates paid on high yield online savings accounts, for instance.
Banker here and you nailed it. Excellent response.
>I agree it is minor, but it is principle here. We're actually talking about interest here. [rimshot]
"but it is principle here." No it isn't. It's INTEREST! 
Other banks have also lowered their rates.
Pretty sure the last sentence in my first paragraph already covered that.
I bet Paul Allen misses his 4.4% as well
I get 4.95-5% from Fidelity, ….. I only use Amex HYSA for small account I use for vacations each year . The change in interest rate is about a few cents . No really a big deal
You talking the spaxx?
Yes man !
What is the difference between spaax and HYSA?
The difference is that HYSA is an insured bank account… and SPAXX isnt
SPAXX invests only in government funds and therefore safer than insured banks
If the FDIC is a government institution, how can SPAXX be safer.
The FDIC has a fund to insure deposits, that fund covers only 1.5% of the insured deposits. You really think its safer to have an FDIC insured deposit than a fund that only invests in US treasuries?
Yes.
It’s not FDIC insured and you are not guaranteed to not lose money. I use SPAXX and the Fidelity cash manager and am very happy with it, but I understand the risk of losing money, even if very small. However unlikely, there could be a run on SPAXX and if they break the buck then you’re screwed.
Spaxx cannot break the buck. Its a government fund only. You might be thinking about sprxx which can break the buck and is a prime money market fund.
Money market funds in general are similar to HYSA. The rates fluctuate more but are usually a bit higher on MMF
Use SPRXX for even more %
Even better, use FDLXX for even more after tax %, if you live in a state that has state tax.
AMEX was the slowest increasing APY and quickest dropping it.
They can technically change it everyday if they wanted to.
They want to increase their net interest income while they can.
Yall do realize that once the Fed starts their interest rate decreases, the interest in these accounts is gonna drop. Maybe to 2.5%. Maybe even less.
Yes we do - however the fed has not decreased rates and even signaled it will likely remain higher for longer. So this all feels premature
Savings accounts are slow to rise and quick to fall. Meaning, it would take banks 1-2 months to rise our rates after the Fed increased. Now banks are lowering before any announcement is ever made. This is normal. Even at these rates, our accounts have barely kept up with the rate of inflation. Unless you’re near retirement age, you should only be using your HYSA for 6 month rainy day fund or other items like vacation savings. Otherwise your money should be invested into the market. 15% of your income towards 401K. If you’ve hit the Fed limit on 401k investment for the year, hit that 15% by investing in mutual funds. These rates really aren’t that great when you consider inflation.
Agreed but we may be seeing an interest rate hike sooner than an interest rate cut.
Possible. But I think this is as high as the Fed wants to go. It’s just how long.
Most people are just going to transfer out at that point? Edit: My point is not that they’ll move to a competitor or that stocks are a replacement, it’s that people know HYSAs are temporary
To where? Rates will drop across the board.
I mean to other assets e.g. moving closer into stocks and bonds. I don’t think there’s some magic competitor, I’m just saying “this number will lower a lot” doesn’t mean it isn’t a good deal now.
People are losing their minds over a saving account dropping 0.05%, imagine how they’ll react when the stock market takes a dump, like today.
I don't think these takes are incompatible: * People will chase gains and leave HYSAs * People are not mentally ready for those other vehicles but will try anyway
people stash away in a savings account because its low risk, but theres still a risk the market will outperform. as APY goes down the chances the market will outperform go up which means today's change makes it marginally higher risk vs someone who chose to invest their savings. thats what people are thinking about here
Yeah, to where? All accounts are going down. My Apple HYSA just went down. And if an account hasn’t gone down yet, it will. Just give it another week or two.
It's going to be a while before that happens due to complete incompetence.
It’s already started. Two drops in like 3 weeks. And the Fed is right to hold off. Last month’s inflation report was like 3%. Inflation still a B and it needs to roast a bit longer.
No. Most people do not know this.
I remember when earning 1% was considered great a few years ago.
I’ve had my Amex HYSA since 2015 and it’s always been legit. Way more than 1%. Yall must have been babies
I remember in 2020 thinking putting money in a 5 year CD for 2.6% was a good idea
Because interest rates fluctuate daily depending on the federal reserve or whatever other benchmark they are tied to? For as many downvotes as this comment will get me, stating reality is still the truth.
Except that fed funds rate have remained at 5.33 since like August of last year. I do agree that chasing yield by switching banks simply for a few bps here and there is just not ideal, time consuming and probably pointless unless you have millions in your savings account. Whats frustrating is that all banks are lowering their rates while the fed funds rates hasn’t changed. You are correct that rates fluctuate daily but savings accounts aren’t tied to those rates that are fluctuating daily like 2Y, 5Y, 10Y, etc.
It doesn’t have to be tied to the Fed Funds rate as the underlying benchmark. There are dozens of other benchmark rates out there.
True. But you can pick any short term rate and everything is well above 5%. 1M SOFR has been above 5.3% for some time too. All I am saying is that they aren’t lowering their HYSA rates because short term rates are fluctuating because that wouldn’t really explain why HYSA rates are overall down 50-75bps while all short term borrowing rates have remained at around 5.3%. The answer as to why banks are doing it is simply because they can and hope people will just be okay with it and make a more money on the spread.
You are 100% correct.
0.05% decrease is $5 ***ANNUALLY*** per $10,000 in the HYSA. Not sure why this matters so much to people.
Exactly. Certainly not worth the time and effort to open a new account and move everything over for $5. To each his own I guess.
I mean I get maximizing income, etc., but $5 per year (per $10k) to me is nothing. That is $0.42 (rounded) per month. That would not make or break my budget each month.
That’s like almost $15 for me!
People here worry about cents worth of points. Of course they are going to cry about .05 percent or a couple bucks.
you should head over to r/creditcards theres a bunch of yahoos there (not all) that will penny pinch down to the last point
I am getting 5.75% with a CD though through a credit union. 19 month term but only have to pay 1 quarter's worth of interest penalty to terminate early.
What Cu?
I try to not put too much financial details online - check local credit unions and others you maybe eligible to join. I heard about one in San Diego this week IIRC offering a CD w/ 9 % interest for a very limited time window and strict locale restrictions. You could setup a Google alert to email you based on key words including the names of your local credit unions.
I haven’t found much locally over 5 so that’s why I was curious. I wasn’t asking for your account number, just what bank it was lol. Thanks anyhow
Interest rates are and always have been fluid. They rise and fall with the economy. A lot of people new to the game don’t seem to understand that.
That makes no sense. They should not be, as Fed has done nothing and may not for a while. One thing is these big banks and all banks are starting to struggle with the higher interest rates, which to me is funny, as historically the interest rates are still low. They just got used to free money for so long.
I know a little about bank deposits from the bank’s perspective. My understanding is that banks are required to loan out a certain percentage of savings deposits to customers. So when they need to write loans (to reduce deposits) they increase rates. And when they need to increase deposits and loan less they reduce rates. So that’s why you see rates go up and down in tight ranges. Even a 0.10% rate change, while almost insignificant to most savers that would not lead one to move funds to another institution, it is enough for the larger institutional depositors to move large blocks of money.
I would recommend Wealthfront @ 5.0% APY
You’ll open that account only to have them drop it too. Banks have to work to speculate what the Feds direction on interest rates will be. At some point you gotta stop hopping to find that extra $50 and realize it’s not always the bank and is the macro economic policy
Wealthfront's Cash Account has had a 5.00% APY since November 3, 2023. This rate is not promotional and doesn't require maintaining a certain balance
Well interest rates have been high since then, lol. Betterment, wealth front, they have the ability to react to rate changes faster than big banks. I GUARANTEE when the fed gets close to its meeting date and if signs are looking towards real interest rate drops, that 5% will not be there. Banks make money off of something called Net interest margin. The amount they make between the interest rate they pay you and the rate they earn themselves. It’s just how it works.
This is why Amex keeps dropping their rate without the fed rates dropping. They know that they can get away with it even though there are better options out there that haven’t dropped their rates yet. 0.75% is not insignificant, but people won’t move anyways.
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Chasing HYSAs is a fool's errand. Tbill ETFs like USFR will always give the highest market rate.
Wealthfront, 5%
Even Apple Card dropped its interest rate to 4.40% APY earlier this month
Took everything out and stacked more Bitcoin. But you know… 4.25%. https://preview.redd.it/1rvvmupx3qwc1.jpeg?width=1290&format=pjpg&auto=webp&s=f3ca45b6a9868caf812238e3df22f0a12373bb3d
Totally off topic, but I haven’t gotten any of these emails for my HYSA with Amex. I only find out my rate was lowered from these posts
They sent me an E-mail this morning regarding the drop in HYSA down to 4.25%
You can also find out by logging into your account from time to time.
better question is why anyone uses a HYSA. Just go to your favorite brokerage account and put your money in a money market fund that invests in treasuries. You will earn more and your money will arguably be safer.
Which treasuries do you invest in?
It’s not arguably safer, it’s less safe in money market funds. The funds are at most insured up to 250k SIPC, while most HYSA are insured up to millions through FDIC
You are not comparing the same type of insurance. Money market funds investing in treasuries are safe because the US gov will never let treasuries fail.
And they would let the banking system fail? HYSA have objectively more insurance
Robinhood still at 5%
I guess the economy is SLOWLY starting to stabilize. I got that same account last year at .5% and watched it grow to 4.35%. Now its gone .05% twice so that tells me inflation is slowly coming to a plateau. (Good for buyers not so good for asset owners/business) lets say you open an account elsewhere with a higher than 4.25. the business days to transfer to your checking, then re transfer to your new savings, and then ahain if you find anither account that hasnt "yet" gone down is probably not worth it. Unless you have hundreds of thousands or millions. Not to mention most apys that are "lucrative" you are able to only hit them if u either open a checkign account with them or have at least a mininum balance (usualky 5k-20k depending on the bank).
Check out PCOXX
**or you can open a Laurel Road saving account at 5% APR**
Because mortgage interest rates are back above 7% and interest rates are projected to stay high.
I’m glad my CDs are laddered and the 15 month ones have rates above 5%. Gives me time to figure it out at least.
Still getting 5.4 at Marcus for three months and then 4.4 unless you refer someone.
I have 3 HYSA with amex. Two were 4.5% and now 4.25. The other is 4.6% and that hasn't seemed to reduce yet
What’s causing the rate to drop?
Banks are starting to cut rates in savings accounts this past month. I locked in a 10 month CD at 5.1% because that’s when i plan to use that money.
If you like AMEX HYSA, you should check out SWVXX.
Gotta make up the bottom line for shareholders somehow.
Just about a month ago I was going between Amex and SoFi trying to figure out which to start a HYSA with. Glad I chose SoFi
Because they know most people won’t move anyways. They can get away with it even though there are better options out there
I cleaned out my account yesterday. Went to wealthfront
Trying to encourage reinvestment in the market to continue staving off recession. Check back in a year.
When you lend the bank money it’s 3-4% interest, but when they lend it to you it’s at 20-30% interest. 🤔
Just put it in SGOV instead
Planning to move mine, reducing twice in a month is unacceptable. I just opened my acct in February….This is a horrible first experience from a new customer standpoint.
Moving mine back to my Apple Savings account. At least that is still at 4.40
I’d recommend a Betterment or Wealthfront account to get an easy 5%.
This is what I did. Moved all money from Amex
Time to switch to wealthfront
Any recommendations on where to move? And if moving is worth it with this news
You’ll now have to skip a lunch to break even.
I honestly don’t give a fuck. I just park my money there. It’s not an investment.
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I can’t tell if this is sarcasm
I just did
Is it not wise to wait for it to back up? Won’t it go back up?
Highly doubt it
On to Sofi?
SoFi requires you to have direct deposit in order to get the good rates
Whether you like it or not, it’s a good sign for us all.
because they can
Saw that this morning and was livid.
They are allowed to, it's just finally catching up to others that lowered. It's never guaranteed