10 Dec It’s No Joke, Banks Ready to Charge Customers To Hold Their Money
The big banks are at it again. This time, in effort to protect their profits, banks might soon charge you to keep a savings account. Yes, we know what you are thinking, banks already charge fees–for most services! But if the Federal Reserve decides to boost the economy by cutting a special interest rate it pays banks, fees could become even more outrageous. According to a Financial Times reporter, “Such a move by the Fed would cause banks to lose some easy money, and they could take the difference out of their customers’ hides.”
The reason the Fed is threatening banks in this particular manner stems back to the fact that the Fed is desperately trying to find ways to dial back on its $85 billion per month in bond purchases. This extreme measure is a stimulus program known as quantitative easing. Basically, the Fed wants to discontinue it’s interest payments to the banks, hoping they would then be more inclined to put money to work in other areas: such as mortgages, small business loans, & other lending, thus stimulating the economy. The goal of the Fed is to give the American people more money, to invest, start businesses, buy homes and create new jobs.
But according to banks, the special interest rate that the Fed pays them, is the only thing that helps them break even on savings accounts and deposit services they provide to customers. According to FT reporter, “Right now we’re able to at least break even from a revenue perspective with interest payments, but without the interest payments, banks would be disincentivised to take deposits and potentially charge for them, placing the burden on and punishing customers.”
But that’s not the only bad thing to come out of this threat, the banks say. They claim that without the interest payments, they would be forced to take on very high risks with the money that was once safe and secure with the Fed. But until the Fed passes this act, fees and interest rates to the bank will remain the same.
The subject of quantitative easing has always been controversial. The banks despise it and the Fed sure thinks the economy would benefit from it. Economists say that quantitative easing may not be the best options when it comes to digging our government out of the ditch, and for good reason: if the supply of money increases too rapidly, quantitative easing can actually cause higher rates of inflation. This happens mostly because there are still a fixed amount of goods for sale, so when more money hits the economy, inflation is likely. Whatever the outcome may be, Americans will likely not see an effect until early next year.