The Great Recession Cost Savers Billions: Here’s How to Turn That Around

The Great Recession Cost Savers Billions: Here’s How to Turn That Around
Photo by NARONGRIT LOKOOLPRAKIT / Shutterstock.com

More than a decade after the worst of the Great Recession, American savers are still feeling the pain.

In fact, bank customers have lost an estimated $500 billion to $600 billion in interest payments on bank accounts and money market funds during that time as a result of low rates, according to a new report from Wells Fargo analyst Mike Mayo.

Mayo’s observation was recorded in a research note about a congressional hearing, according to a CNBC report.

Federal Reserve policies in the wake of the financial crisis are to blame for the lost wealth, Mayo says.

To get the economy moving — and to keep the U.S. from falling from recession into a full-fledged economic depression — the Federal Reserve cut its benchmark federal funds rate to a low target range of 0% to 0.25% in 2009.

Banks responded to this move by slashing the rates they paid to customers with bank accounts and money market funds.

Rates remained in subterranean territory for years, costing savers billions of dollars in lost interest payments.

Recently, the Fed has begun raising rates again — nine times since 2015 — to a current range of 2.25% to 2.5%. Although rates on savings accounts and money market accounts are now a bit higher, they remain anemic by historical standards.

As Mayo says:

“Savers are still paying due to the financial crisis. It’s absolutely a wealth transfer from prudent savers to the borrowers and risk takers.”

How to boost your own savings rate

Fortunately — as with most things in life — you have the power to take a bad situation and make it a lot better.

If the return on your savings account remains stubbornly stuck in the cellar, take steps to move it to higher ground. Compare rates at various banks and credit unions, then transfer your money to the institution willing to give you the best deal.

Start by going to the Money Talks News Solutions Center and comparing rates. You’ll likely be glad you did.

Money Talks News Managing Editor Karla Bowsher took the plunge two years ago. In “How I Boosted My Savings Account Rate by 413 Percent,” she details how a willingness to survey the savings landscape paid big dividends. Her takeaway?

“For folks who have yet to switch to an online bank, the fastest way to get a higher interest rate for your savings is to leave a big brick-and-mortar bank for a competitive online bank.”

These days, you can earn more than 20 times the average interest rate at an online institution like CIT Bank, as we recently reported in “Earn 20 Times More on Your Savings Now.”

If the idea of moving money to an online bank makes you nervous, it shouldn’t. Check out “2-Minute Money Manager: Are Online, Internet-Only Banks Safe?” In that piece, Money Talks News founder Stacy Johnson shares insights that will put your fears to rest.

When you’re ready, start comparing rates. Investing a few minutes of time today can pay dividends for months and years to come.

Have you found a bank that pays great rates? Share your discovery with fellow savers in comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next

5 States Where Drivers Pay the Most for Car Insurance
5 States Where Drivers Pay the Most for Car Insurance

Auto insurance will cost you more than three times as much in one state compared with another. Here’s how to lower your rates no matter where you live.

8 Ways to Cut Your Internet Costs Every Month
8 Ways to Cut Your Internet Costs Every Month

No matter what price you are paying for internet service, taking these simple steps can lower it.

12 Reusable Products That Will Save You Money Over and Over
12 Reusable Products That Will Save You Money Over and Over

Buy a reusable version of these household items and you won’t have to spend another dime on them for years.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Comments

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed.

Trending Stories