Are Big Banks Really Considering to Charge For Deposits

big banks

big banksThe way the financial world is moving and looking at the problems faced by the banks these days, one cannot deny the possibility of banks charging for deposits instead of offering you interest on the deposits you make with them. This can always be possible in the case Federal Reserve discontinues giving the banks an interest of 0.25% on the huge deposits they currently keep with the central bank.

Current Scenario

There was recent news where the CEOs of two of the banks were found reporting to media that the curtailment of interest rates by the Fed will push them into a state of loss.

They were of the opinion that the recent cuts of 0.25% on the interest rates offered to them on their reserves which amount to over $ 2.4 trillion will force them increase their charges by the same amount. All of this means that the customers of the banks are set to lose on the interest rates they receive on their deposits at the banks.

The Background

Why would the banks charge interest from the customers or reduce the interest they offer is a simple question which comes to the mind of everyone? Banks argue that they have to pay higher charges to some basis points to the governmental programmes, and there is a cost they are required to bear and hence the deposits are not free.

Right now when looked at from the revenue perspective banks are barely able to get a break even. However, any rate cut would mean negative revenues and hence making the deposits from the customers a non-viable option for the banks.

The news of the interest rate cuts on the deposits raised a lot of concern by the customers. However, there is little to fear for them. With around 6813 banks backed by the FDIC and 6895 credit unions spread in the different states of US, one can easily find a place to deposit their money with better returns on the same. If the top banks like the Wells Fargo or the Bank of America start charging customers on the deposits, you can always look for the new banks or credit unions available around you.

This is not very encouraging news, and the Fed would never like to spend out huge sum in the form of risk-free returns to the large banks. Most of them think that they can alienate the depositors without much trouble and with the amount of money they have as deposits.

In the current scenario, with economy taking turns, there are a lot of financial institutions namely the banks, credit unions, local banks and the NBFCs which are present in a big way. Customers being the king have to think little to getting the services they require along with the returns they expect.

So, now that you have gone through the excerpt you need not get scared with the Fed rate cuts.

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About the Author: Jay

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