LEILA FADEL, HOST:
The Fed is holding interest rates at its highest levels in two decades. A plain vanilla savings account, meanwhile, has an average interest rate at a mere 0.45%. Our colleagues over at The Indicator from Planet Money are digging into why you may not be raking in cash from your bank savings. Wailin Wong and Darian Woods have our story.
WAILIN WONG, BYLINE: Looking at the earnings reports of major banks confirms that they have been broadly paying out more in interest. In the most recent quarter, for example, Wells Fargo paid an average rate of 2.46% on its interest-bearing deposits. That's up nearly a percentage point from a year earlier.
DARIAN WOODS, BYLINE: I imagine that's got to be an average, 'cause my bank account with a certain big-name bank is only giving me a pathetic 0.1% interest rate.
WONG: Not that you're sore about it or anything, but yeah (laughter).
WOODS: No.
WONG: The higher interest rate is not being paid out on your normie savings account.
WOODS: To understand what goes on in the mind of a bank CEO, we called up Kiah Haslett. She's an editor at Bank Director.
KIAH HASLETT: Banks are paying more in deposits. They're just not paying it to us.
WONG: (Laughter) OK. The juicier rates come with products like CDs, aka certificates of deposit. That's where money is locked up for a period of time, like three or six months. They also come with corporate accounts that carry hefty deposits. Banks definitely want to hang on to those customers.
HASLETT: Banks are wondering, what is the price that I have to pay my depositors that will keep them happy because if they leave in search of a higher rate, now I have to figure out how I'm going to replace the deposits?
WONG: In other words, banks would have to borrow from elsewhere, which could be more expensive.
WOODS: And Kiah says that for a long time, bank customers - you know, everyday people and companies - were pretty complacent. They'll just leave their money in their accounts. It's what the industry calls sleepy money or sticky money.
WONG: Now, once upon a time, when interest rates were at or near zero, depositors didn't have much incentive to take their money out because rates were at rock bottom pretty much everywhere. Now, naptime is over.
WOODS: As the Fed hiked interest rates, bank customers were finally motivated to look for higher returns on their money.
WONG: Another reason this sleepy money woke up is the collapse of Silicon Valley Bank in March of 2023. Some corporate treasurers and CFOs took a second look at where they were keeping their money, and they shifted their deposits to money market funds or to larger banks.
WOODS: And the third reason affects both corporate and everyday deposits, which is improved technology like mobile apps that let customers manage their money without needing to visit a bank branch.
WONG: So where does this leave the ordinary, everyday bank customer? Well, the big banks do still want these deposits, but they're not wooing customers by hiking rates on savings accounts. Instead, they're offering other incentives, like one-time cash bonuses for setting up direct deposit.
HASLETT: They want you to deposit your money there and then build the relationship forward. They don't necessarily just want your emergency savings account that you never really access and you don't add any products on. You might almost be costing them money.
WONG: Darian, you should go shopping around, see if you can get something better than 0.1%.
WOODS: Yeah, I really should wake up and have a look around.
WONG: (Laughter).
WOODS: Darian Woods.
WONG: Wailin Wong, NPR News.
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