Current interest rates for savings accounts are at the lowest in history, at a paltry average of 1-2% This means for every $100 you give the bank to hold for you, you get back $1 or $2 PER YEAR. Meanwhile, the bank is lending out your money to others at 4% for prime mortgages, up to 12% for subprime, or risky, mortgages, and up to 30% for credit cards! The banks, even after all their expenses, are making huge profits off of your money, and rewarding you with only 1 or 2% PER YEAR. And some banks even have the nerve to CHARGE their customers for having an account with them.
JP Morgan Chase, for example, posted a $17.37 billion profit in 2010. $17 BILLION in profit, off of their customers' money. And how much of that profit is going back to the customers? That's right, none. Some of it will go to the shareholders, the majority of which are Wall St. and the Board of Directors. They thank you.
Lets look also at how long term savers get the short end of the deal, especially when interest rates are this low. The reason is inflation, which destroys any real growth savers might hope to see. If interest rates are between 1-2%, and core inflation is also at 2%, savers aren't realizing any real growth, and may even be losing real purchasing power in their savings. If interest rates for savings lag behind inflation rates, over the course of decades savers who thought they were doing the right thing are surprised to find out they don't have enough for retirement or making that big purchase.
So what can you do? One thing you can do is to deny the banks their easy source of capital. By closing our savings accounts, we let the banks know they need to offer more to get OUR money. Demanding higher rates and no fees puts you back in control as the consumer. If you don't like the idea of closing your account, you can at least do some research and find out which bank will offer you the highest return. Remember, its your money, not the bank's.
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