With the popularity shown from the Fed to hike interest rates we are also seeing some movement from banking rates when it comes to their customers savings. When 2023 came in the movement was to money market and treasury but it seems here lately the buzz word is high yield savings. I guess I should say “buzz words” rather than the singular but then again, I do numbers if you know what I mean. Even in the local markets we see things like short term CDs ramp up which we haven’t seen in more than a decade. Until the yield curve reverts back to the good ole days we will continue to shop for short term guaranteed products.
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Driving through central Alabama just last week I saw a billboard for a local credit union offering 7-month CDs with a 5% interest rate! I honestly can’t remember the last time I saw something even close to that on the local level. And I am saying this tounge and cheek considering that we have had an inverted yield curve for more than a year. It generally takes a little longer for smaller member credit unions and local banks to catch up with the movement of national chains. It shows the longevity of this climate we are in. I remember just a few years ago going into our CU and seeing the posted rates. I remember it shocking me how almost all the rates where the same. Why would someone tie their money to a 48-month contract while you can get the same rate in a 12 month. It wouldn’t make sense. Five percent APY on a deposit where I get my money back in 7 months? Yea I think I will!
Mega banks like Chase and BOA can always offer impressive rates even when the norm is in due to the number of customers and the sheer number of investments they can make with simple deposits but I have always had a soft spot for the local CU and knowing the teller, loan officer, and branch manager. There is just something about walking in time after time and seeing the same faces. A few months ago, we saw online banks offering 4.5-5.5% on general savings accounts. This didn’t last long as even a few closed shop soon after. But during that time a paycheck could be, for simplicity’s sake, be invested by direct deposit. Why wouldn’t someone take advantage of that? Well, I can tell you why I didn’t, because I was afraid of what could and did happen to so many. I didn’t want to go through the BS of moving my money, linking my paycheck, and having to redirect my bills to new accounts all to have my money locked while some fly by night online bank closed its doors.
I guess you can tell that when it comes to savings, my money in general, I tend to be a little more conservative. Yes, that generally means I miss out on some of the quick gains but if I avoid the next scheme or getting my money frozen in an account, I will rather take the consistent low returns and reliability for the account my obligations come out of. But I don’t hold it against anyone chasing a better return! I do think that in the next year-18 months we will see a significant drop in short-term interest rates but that is a long time before having to think about moving your funds back to a normal savings or checking. Maybe if it last for longer I will eventually come around to the model…
Until next time, keep swinging and never stop chasing.