Straight Talk from Al Jacobs

INTEREST IS RISING

 

Though it’s been rumored interest on savings accounts will remain in the cellar indefinitely, it appears certain select banks are offering more attractive rates than we’ve seen for many years. The increases are not dramatic, by any means, and the terms being tied to the higher rates are fraught with conditions, but the signs are unmistakable: At long last firms are willing to compete – at least to a limited extent – for depositors’ money.

 

The particular newspaper ad I spotted, with the heading “GREAT CD RATES,” was placed by HAB Bank, with local offices in Artesia California. With a minimum deposit of $1,500, a depositor can obtain an annual percentage rate (APR) of 2.48% for a 24-month CD or 2.68% for one of 36 months. You might note, HAB is not a California bank. It’s headquartered in New York and is listed as the 38th largest bank in the state of New York as well as the 521st largest in the nation. So, as you see, this is no major banking institution competing for funds … but perhaps it’s a straw in the wind. Why my attention was specifically drawn to this ad is because, in following these CD offerings as I’ve been doing, this is the highest APR I’ve yet seen, with the previous high about three months ago being 2.25%. I’m anxious to see where we go from here.

 

There was a time, not many years ago, when money could be deposited with a bank at a rate of five percent per annum, or perhaps a bit greater. Thanks to the federal government’s FDIC guarantee, it was thoroughly safe, so that many a retiree came to rely upon this as the bonus they needed to augment their Social Security and pension payments, together with any other dribs and drabs which kept them financially afloat. During the past ten years or so we Americans have been deprived of this option. It’s been tough slogging for many oldsters and I’m convinced that if the major banks have their way nothing will change.

 

With that said, let me offer a prediction. With the recent relaxation of the Dodd Frank 2010 legislation, together with the desire by the many remaining community banks to resume full banking capability, there’ll be a demand for depositors’ funds once again. And with this demand will come a willingness to offer a fair interest rate to those depositors … and although reluctantly, by the major banks as well. Within a reasonable period we’ll quite likely see the five percent interest rate return.

 

 

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

You may view them on http://www.roadwaytoprosperity.com