It could happen if the Federal Reserve reduces an interest rate it pays banks on their reserves.
Instead of paying interest on consumers’ savings, banks could soon charge for holding our money.
However measly savings account rates are, at least they are positive numbers. But according to the Financial Times, some banks are considering plans to charge for deposits. That’s because the Federal Reserve is considering lowering an interest rate it pays banks on the $2.4 trillion they keep in reserve.
“The logic is that the Fed wants the banks to stop parking their ‘lazy cash’ at the Fed and start doing something with it,” MarketWatch says. The federal government wants banks to lend or invest more. But banks also have to pay insurance premiums on the deposits they take in. Without the interest they make from the Federal Reserve, bank executives tell the Financial Times that taking deposits would cost them money:
“Right now you can at least break even from a revenue perspective,” said one executive, adding that a rate cut by the Fed “would turn it into negative revenue – banks would be disincentivized to take deposits and potentially charge for them.”
It’s not guaranteed any of this will happen. Banks are essentially just making contingency plans based on what the Federal Reserve might do. But the Fed might also find another way offset the expense for banks, eliminating the need to charge consumers for deposits.
“If it were to [cut the interest rate now], it would most probably expand a new facility that lets banks and money market funds deposit cash at a small, positive interest rate,” the Financial Times says. “That should avoid any need for banks to charge depositors.”
Would you be willing to pay a fee for your savings? If not, where would you put it? Comment below or on our Facebook page.