Even with small rate increase savers will still earn peanuts
By Dian Vujovich
On Wednesday of this week, comments from two billionaires caught my attention.
The first was from Palm Beach billionaire Jeff Greene and the feeble excuse he gave while being interviewed on CNBC’s “Closing Bell”. During it he explained that his comments at Davos— regarding how American’s basically need to learn to live on less— was a total misquote and likely happened because the interview was conducted in a noisy and busy room. The other, Invesco’s Bill Gross saying that interest rates will increase by one-quarter of 1 percent by June. The reason he considers this a good thing is because he said it’s time for savers to make some money.
A blog I posted on January 23, 2015 titled, “Oh those billionaires”, hits all the cords I need to about Jeff Greene so make sure to read or re-read it.
As for Bill Gross, Invesco’s current fixed-income maven and former chief investment officer of Pacific Investment Management Company (PIMCO), if interest rates were to rise by 25 basis points, how in the world is that going to make much of a difference to a saver? A saver identified as someone who has his or her money stashed in a money market account at a bank.
Nerdwallet.com provided me with this information: Have only a few bucks and want to open a new account, ableBank offered the most generous APY at 1 percent. Next in line, Sallie Mae Bank at 0.90 percent.
Have $25,000 and Doral Bank provides their money market account owners with an APY of even less: 0.60 percent.
BB&T will give those with $1000 half of that, 0.03 percent. The rate is the same at Wells Fargo but you’ll need to pony up more to open the account, $2500. Oh, and then there’s Region’s Bank with its 0.01 percent APY on a $10,000 deposit.
We are talking more peanuts here, folks. So pea-nutty that suffice it to say, yields that are about as close as nothin’ honey as one can get in return for letting a bank use your money and make investments for them with it.
Even if the amount deposited is jumbo-sized, as in $100,000 to $1 million, the highest APY’s is still 1 percent. Worse yet, those rates are likely to remain the same if there is an interest rate increase given that Bankrate.com reports the average return for jumbo deposits on the banks they cover is 0.48 percent.
So let me see, if Gross is correct and the interest rates go up one-quarter of one percent this summer, and doing so means that’s going to be a big bonanza for savers, don’t believe it: Depending upon the bank you use, and no matter how much money is put into a money market account, there’s a good chance you could still earn a APY of 1 percent.
Mr. Gross, please, tell me how that is supposed to help savers and make any positive difference in their financial life?
Back to those peanuts mentioned earlier. Tie a big bow around a peanut and it’s still a peanut—-even if a billionaire ties the bow.
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