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Originally Posted by financialnut
I've read through most of this thread (yes, nearly all 59 pages of it!), and I couldn't mange to see WHY all of the rates are dropping. Does anybody have a fairly concise answer to that? Doesn't it have to do with the prime rate that the banks work directly with the Federal Reserve with?
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Yes, the Fed rate influences savings account interest rates alot. When the rate goes down like it has over the last year and change, banks can get money cheaper from the government and other banks, so why keep paying depositors high rates? So banks lower interest rates. To keep business coming (for their other products... checking, CC's, CD's, loans, etc.), customer loyalty, and the "cash-in-hand" factor, they will still offer at least some sort of return (even if they can get loans for almost nothing from the gov't)... But as evidenced by the spectacularly LOW average nat'l interest rate right now (somewhere near .5% I think?), they aren't paying much.......