Interest Rate Greed

The consumer always loses

I am a die hard capitalist through and through but I’m also a consumer so I’m very against anti-consumer behavior. There are lots of examples of this but one that has hit the news recently is the disparity in how fast banks are to slash some interest rates vs. others.

Last week, the fed dropped Effective Federal Funds Rate by 0.5%. Lower rates cause people to theoretically spend more and companies to borrow more (thus increasing their own spending). This signals that the Fed thinks inflation is easing but also that the economy may need some stimulus. I of course agree with the latter but worry very much about the former as I still see prices going up everywhere.

In any case, one of the benefits of high rates is that savings accounts have actually delivered useful interest rates for the last few years, up to 5.5% at the highest I saw. These rates go up and down in lock step with the rate set by the Federal Reserve.

Similarly, credit card rates have risen significantly over the last few years.

My own rates are outrageously high although I’m careful to never carry a balance, but I did notice them go up severely over the last few years.

Now, when rates were rising, credit cards seemed to respond immediately and savings accounts took around six months to raise their rates. Apple happened to launch its high interest savings account during this time period. Just like all savings accounts, Apple rarely increased the interest rate they pay out to consumers and made minor increases when they did.

So of course, when rates were lowered last week, many savings accounts dropped the rates within days. My personal account went from 5.25% to 4.85%. And today, Apple dropped its savings rate as well.

But, shockingly, none of my credit cards have lowered their rates. Nor do I expect they ever will. Maybe new card holders will get lower interest rates.

See, it seems to be a rule that when dealing with banks, the consumer always loses. Banks are very slow to give out money and fast to choke it off and very fast to take every last penny they can but won’t give up the gains they have gotten. You can similarly never expect prices to go down for any commodity any time soon since we have already adjusted to the new prices.

It’s just a bit of hypocrisy I particularly hate. I don’t see a solution, just sickening amounts of greed.