I’m never going to be honored by any banker as a person of the year, let me tell you. I’m always on a slow burn about the banks because banks are not putting the public interest first. This comes up repeatedly and we have bailed out the banks again and again.
It is the worst possible thing: private gain, public loss because we’ve had to do these bailouts of the banks. Basically, nobody ever went to prison for all the banking scandals 16 years ago that became known 16 years ago.
And even Wells Fargo, the criminal enterprise impersonating a bank, virtually no one has ever been prosecuted for any of the repeated criminal acts that have happened at Wells Fargo.
And they keep saying, “Hey, we’re not going be bad anymore”. And then another thing erupts with them. I mean I’m on slow burn about this. It’s absolutely true.
Big Banks Offer Low Savings Rates
And then I read this in the Wall Street Journal. Okay, this is really something. So Chase Bank, according to Wall Street Journal research is still paying one 100th of a percent on their savings accounts.
I want you to think about that. You can go online today without breaking a sweat. You can earn five plus percent on your savings. Five plus percent! And Chase is paying one 100th to 1%. Wells Fargo is paying 0.15%. So they’re paying 15 times nothing basically.
The average bank, the average bank is paying less than one-half a percent. Just ripping off their customers left and right and center. And we’re letting them do it with trillions of dollars that people are putting in savings or CDs with these stinking banks who are happy to raise the interest rates on all their loans. Happy to charge a 22% average interest rate on a credit card, but instead are going to pay you basically nothing on your savings.
Discount Brokers Are a Great Option for Savings
On the same day that The Wall Street Journal story appeared, there was a story in USA Today where they surveyed, what were you making if you put money in CDs that are FDIC-insured through my three favorite children: Fidelity Investments, Charles Schwab and Vanguard.
What are you earning by comparison? I’m so glad you asked. The rates you’re earning, depending on exactly when you check and the length of the CD, are often from five and three-quarters percent to a low of 5.45%.
So let’s review that. The average bank, if you walk in their front door, is paying you 0.45%.
On the other hand, you go through the wholesale side of the bank through one of the three giant discount brokers and instead of earning 0.45%, you are often earning a minimum of 5.45%.
Come on, so many of us have some business we do at some point in our lives with one of these three big discount brokers or discount houses: Vanguard is the world’s second-largest money manager. Fidelity Investments, gigantic, Schwab, gigantic. I mean think about it: It’s funny because with Schwab, if you have a regular account with Schwab, an investment account, they’re paying you on your cash sitting in your account the same as the banks at 0.45%.
But at the same time, buy a CD through them that will pay you over 5% for any term length you’re looking at. I mean this is easy stuff.
Interest rates are really at or near the top. It’s possible the Federal Reserve might do another bump up a little bit, but we’re pretty much done. And then what will happen is the economy slows. If I’m right, the economy’s going to slow in ’24, the interest rates will start going the other way.
So this is a really good time to treat yourself as an early Christmas gift. Lock in some money that you don’t need right away in CDs where you can earn five-plus percent for whatever length term you’re interested in.
And if you go to the website of any of these three, whichever one or ones you do business with, Vanguard, Schwab or Fidelity and just put in the search box, “CDs” and it’s not going to be an old compact disc playing “Purple Rain” or something. It’s going to be you taking your money and putting it to work for you.
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This segment was originally recorded by Clark Howard and aired in the November 27, 2023, podcast episode. You can listen to the full segment or watch the full show.
