Increased Interested Does Not Mean Increased Consumer Savings
On Wednesday, December 16th, 2015 the Federal Reserve increased interested for the fist time in a very long time. Increasing interest rates is generally bad news for everyone who is borrowing money because their money payment increases as the federal reserve increased the interest rates.
Since the interest rates have not been raised in nearly a decade, many borrowers are experiencing such an increase for the very first time and the are surely not too excited about payment more interest.
However, the everyone who is not borrowing money and who has been saving money, an increase in the federal interest rates has, in the past, been a positive thing.
Bigger Interest Earning on Bank Savings
One would expect that the banks who all immediate increased the interest rates they pass on to everyone who is borrowing money from them, to protect their margins. Most of these banks also made it very clear that they would not increase the interest rates on money they hold from their customer who saves money.
That means that we who give the banks our money so they can use the deposits to make loans that they, in turn, make interest, will continue to earn zero or virtually zero interest on the money we have saved.
Feder Reserve Interest Rate Changed From 0.25% to 0.50%
Although the change was very minor, it would be nice so see the consumer being rewarded for savings money and depositing such savings into banks who ultimately profit greatly from these deposits.
Unfortunately, Banks don’t have to appreciate their customers and reward them for saving money. In today’s world, they make billions simply charging fees to their costumers. Fees the NSF (No Sufficient Funds) fees that could easily be avoided have become a huge portion of bank profits and they, because of “fees”, do no longer need to reward their customers for saving money.