The mainstream media is finally wising up to the thin gruel banks are offering up to loyal customers via low deposit rates.
In this morning’s The Wall Street Journal, Eleanor Laise writes about low bank rates under the headline "The Price of Safety Just Went Up."
The word “just” is highly debatable, as bank interest rates have been basically heading south since 2008, but the article makes many of the points we’ve been hammering here at BankingMyWay. Namely, that it’s a big, bad, bear market for bank interest rates these days.
Writes Laise: “The price of portfolio safety is soaring. Low interest rates and high market volatility make it more expensive to construct products offering income guarantees, downside protection and other sleep-at-night features. On top of that, Wall Street firms, still skittish from the financial crisis, are reluctant to offer generous guarantees.”
Laise uses that platform to point out that bank deposit rates are anemic. According to the BankingMyWay Weekly Interest Rate Tracker, rates are scraping the bottom of the barrel, with most categories returning less than a 1% return — and have been for months. Here’s a snapshot:
Category Interest Rate
12-Month CDs 0.859%
Money Market 0.362%
Bank Savings 0.233%
Interest Checking 0.136%
The problem is that investors are so skittish about protecting their wealth (or what remains of it) they’ll accept less than a 1% return on their investments just to insure that they won’t lose any money from their investment portfolio. The mindset out there on Main Street right now is this: it’s better to accept a 0.86% return on a one-year certificate of deposit than to chance blowing out 20% or so of your retirement fund in the stock market. Let’s face it — 2008 (when the Dow Jones Industrial Average fell 33.8%) isn’t that far behind us in the rear-view mirror.