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Old 01-01-2012, 01:24 PM   #21
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Today, if you have more money in a financial institution, you earn higher interest (1-1.5%) than those how have less (0-.5%). Although, I personally benefit by the status quo, I'd like to see this substantially reversed. Those with less money should earn substantially higher interest on their funds. Not sure what the clip level should be but you get the idea.
That kind of arrangement is available. My kids for instance earn 5% on their savings account (up to the first $1000 on deposit). The banks hope to attract other profitable business from the family, as these are money losing accounts for them. I could try to open (and keep track of) many of these accounts if I wanted to chase this great rate, but it's not worth the time and effort to me. I'm surprised that it's worth the time and effort to the bank, but they must have some intention to make the relationship profitable eventually. I suspect they would be less interested in offering above market rates to people with small balances if it were mandated or if it were less likely that more business would be forthcoming in the future.
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Old 01-01-2012, 01:34 PM   #22
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Originally Posted by foxfirev5 View Post
I'm not sure how all of this works. I notice that CD's are yielding higher rates than US Treasuries. The yields of Treasuries are set at auction. Right now there's a lot of $$$ going into Treasuries from around the world and various institutions. Until the economy starts rolling along and investing rather than sitting on $$$ takes place we're stuck.
I don't see what the Fed does with extremely short term rates will do for savers. Of course there's a lot I don't know. Right now I'm sitting on about 16% cash as I have for the last few years,
I personally think the Fed want us, savers to loosen our purse strings and buy distress properties as real estate investment/invest in stock market by keeping interest rate low. As saver depending on amount of cash allocation, we are actually losing money with even minor inflation. I don't understand it at all and will not try to understand. All I know is that we are screwed as Ha have said. I heard on the radio other day that US Treasuries yield was negative yet all the money is pouring into US Treasuries. Go figure.

As old saying goes, "if you try to please everyone, no one will be pleased." Or something like that. With low interest rate, I'm sure debtors are happy. If and when interest rates rise, I'm sure savers are happy. I can not control what's going on with interest rate. Only thing that I can control is how much to save and where to allocate my asset that would afford me to finally stop working.
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Old 01-01-2012, 01:38 PM   #23
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This won't be popular to some but I'd like to see progressive interest benefits.

Today, if you have more money in a financial institution, you earn higher interest (1-1.5%) than those how have less (0-.5%). Although, I personally benefit by the status quo, I'd like to see this substantially reversed. Those with less money should earn substantially higher interest on their funds. Not sure what the clip level should be but you get the idea.
I heard on the news that lots of bank were thinking about charging fees for large depositors since it cost them more to keep depositors money in the books. I don't know exactly how they work.
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Old 01-01-2012, 01:54 PM   #24
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I heard on the news that lots of bank were thinking about charging fees for large depositors since it cost them more to keep depositors money in the books. I don't know exactly how they work.
Very simply, if the banks take a large, liquid deposit they have to put up capital against it and pay deposit insurance premiums on it. However, since the money is in a liquid account, they cannot safely deploy the funds in loans or other interest earning assets to make a return on the capital they put up against the cash. This means that it costs the bank money to accept these deposits. Not surprisingly, some of the big banks have told large depositors that they will charge fees on such deposits.
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Old 01-01-2012, 01:58 PM   #25
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Very simply, if the banks take a large, liquid deposit they have to put up capital against it and pay deposit insurance premiums on it. However, since the money is in a liquid account, they cannot safely deploy the funds in loans or other interest earning assets to make a return on the capital they put up against the cash. This means that it costs the bank money to accept these deposits. Not surprisingly, some of the big banks have told large depositors that they will charge fees on such deposits.
+1 Thanks for simple explanation. I have no fear of bank charging me such fees.
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Old 01-01-2012, 04:15 PM   #26
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Originally Posted by growing_older

That kind of arrangement is available. My kids for instance earn 5% on their savings account (up to the first $1000 on deposit). The banks hope to attract other profitable business from the family, as these are money losing accounts for them. I could try to open (and keep track of) many of these accounts if I wanted to chase this great rate, but it's not worth the time and effort to me. I'm surprised that it's worth the time and effort to the bank, but they must have some intention to make the relationship profitable eventually. I suspect they would be less interested in offering above market rates to people with small balances if it were mandated or if it were less likely that more business would be forthcoming in the future.
Pretty cool. This would be an incentive to save, I think. I agree that many will open a few of these accounts if they were available. I open (and close) accounts regularly to get rewards and short-term teaser rates. It is my new 'job' and it is fun.

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Originally Posted by Sandhog
I heard on the news that lots of bank were thinking about charging fees for large depositors since it cost them more to keep depositors money in the books. I don't know exactly how they work.
Yes, they have to carry policies that surpass the regular $250K insurance per account that smaller depositors (like me) rely on.
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Old 01-01-2012, 10:11 PM   #27
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Low interest rates aren't all bad. Many people are actually benefiting from them - including pension managers and other investors who have pocketed good solid returns as the process of lowering interest rates pushed bond prices higher, current and future taxpayers who are funding smaller deficits, persons who benefit from government entitlement programs which would be more likely to be reduced if the government had to tighten it's belt to fund higher interest payments, equity and real estate investors whose asset values are at least partly a function of interest rate levels and borrowers generally. Probably a few others as well.

Sure, it would be nice to be able to get a nice safe real return on money presently sitting in bank deposits and CDs which is being slowly depreciated by inflation, but raising interest rates is going to cause a whole lot of pain (as parts of Europe are currently discovering - including European pension plans which are taking a (hopefully short term) hit on the value of their bonds).
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Old 01-01-2012, 11:35 PM   #28
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Hmm.... how about low interest rates instead of the ultra-low ones we now have. What if the 1 year T-bill yielded 1/2 of the inflation rate, for starters.
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Low interest rates aren't all bad. Many people are actually benefiting from them - including pension managers and other investors who have pocketed good solid returns as the process of lowering interest rates pushed bond prices higher, current and future taxpayers who are funding smaller deficits, persons who benefit from government entitlement programs which would be more likely to be reduced if the government had to tighten it's belt to fund higher interest payments, equity and real estate investors whose asset values are at least partly a function of interest rate levels and borrowers generally. Probably a few others as well.
Sure, it would be nice to be able to get a nice safe real return on money presently sitting in bank deposits and CDs which is being slowly depreciated by inflation, but raising interest rates is going to cause a whole lot of pain (as parts of Europe are currently discovering - including European pension plans which are taking a (hopefully short term) hit on the value of their bonds).
I'm OK with raising interest rates a little. But first could you drop them 1-2% so that we can pull off one more mortgage refinance? Thanks.

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The more i think about this the more I go back to the age old advice of diversification. There is simply no way to control or predict the future so one gets exactly what one wants.
Every sad media financial story (or should I say, every sad financial story in the media) is based on a lack of diversification.
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