American depositors are at a loss – rates on deposits and savings programs are constantly decreasing, and no one knows what to do. According to the Washington EBRI (Employee Benefit Research Institute), at the beginning of 2013, over 70% of the working population of the country has savings in 50 million US banks in savings accounts. On average, the balance on savings accounts is $78,000, although a quarter of depositors have less than $25,000 in savings. Almost every American has small deposits (from $1,000 to $10,000).
Moreover, many US residents have not one, but several savings accounts in different banks like centerpoint account. After all, a slight drop or increase in interest rates on deposits in America has always been the norm. If rates in bank “A” fell, depositors simply transferred the entire amount of the deposit with interest up to the minimum balance to bank “B”, where the rates were higher. And then back.
Thus, their money always “worked” to the maximum. In order to manage your deposit so competently, you must always be in touch and know exactly what annual interest income different banks offer. Now, when rates on deposits have gone down sharply in almost all banks, American depositors are really in a difficult situation. Even experienced financial advisers sometimes fail to give their clients 100% correct advice on how to manage their savings.
What happened to the terms of savings programs (pay online) in American banks, what interest rates do they offer?
Interest rates on deposits in US banks
Let’s take a closer look at what deposit rates are offered by top American banks. After that, the reasons for the US investors’troubles will become much clearer.
So, Everbank, which is part of the American deposit insurance system FDIC (federal deposit insurance fund), opens deposits at 1.01% per annum (the amount of the initial payment is $1). Annual interest income in the largest American bank Alley Bank, also a member of the FDIC – 0.90% per annum, the minimum deposit amount is not limited. Another top American bank, Discover Bank offers to open a deposit at 0.80% per annum, with a minimum deposit amount of $ 500. If it seems to you that these deposit rates are very low, let us assure you that these are the best offers to date.
For comparison: you can open a savings program at Citibank at an annual interest rate of 0.20% with a minimum deposit amount of $25,000. Depositors who deposit from $10,000 to $25,000 to a savings account get an even lower percentage – 0.15%. Approximately, the same annual rates are offered by another leading US bank – Bank of America. In general, the average annual interest on bank deposits in US commercial banks has fallen from 0.22% to 0.11% over the past few months. Considering that at the beginning of 2008 the average annual rate for funded programs ranged from 0. 63 to 0.92 % per annum, the difference in incomes of Americans is indeed very significant.
Terms for pension and student deposits look a little more attractive. In Washington Savings Bank, you can open a student deposit at 1.50%, and in Ultima Bank – pension and student savings programs even at 2%. But here we should not forget that we are talking about long-term savings deposits for a period of 10 years or more, which do not provide for the possibility of early closure without loss of interest. As for pension programs, it is possible to receive the entire amount of the main deposit and interest on them only after retirement.
Interest rates on deposits online
Perhaps the situation is more favorable in the US online deposits market? No, it is not. Keep in mind that the annual interest income on online deposits also decreased significantly. For example, in 2012 alone, leading US banks such as Citizens National Bank, Flagstar Bancorp, Salem Five, AbleBanking have lowered their annual rates on long-term online deposits several times (on average, from 1.25 to 0.89%). As for express deposits, the interest rate on short-term programs in Citizens National Bank is 0.3% today, and in Flagstar Bank – 0.6% per annum. In addition, if the amount on the deposit falls below the minimum level, banks charge the depositor a monthly commission of $10. If the amount on the deposit is less than $1000, the commission in the overwhelming majority of banks is already 30% monthly.
So, according to Market Rates Insight data for January 2013, the average annual interest income on long-term and short-term online deposits in the United States is 0.46%. For comparison, five years ago the arithmetic average rate was 1.32% per annum.
However, Americans quite steadfastly endure such terms, moreover, the overwhelming majority of US citizens (including those who get social benefits, child support, scholarships and retirement benefits) reported that they will continue to transfer at least 5-10% to savings accounts from your annual income.