There is some brutal competition for retail deposits right now and I think the banks are getting sophisticated about balancing interest rates and consumers’ who satisfice versus those who optimize. They can probably afford to lose the latter.
The fed funds rate doesn't set the interest rate at banks, it just influences it. They have wide (probably 100 bps or more) interest margins even for premium savings accounts; the big question is who bids how much to get accounts and how stable those deposits/bids are.
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Correct the feds don’t set but influence it. Let’s see what happens when the feds rate drops (think recession). Would be willing to bet my salary all these banks will also drop their rates.
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On a separate note, I know that some of the “Neo-banks” which are digital first/digital only are just fronts for traditional banks. EX: Azlo is a digital “front” powered by BBVA. I think of them as a “new flavor” of the same old thing….con’t
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Marketing focusing on a mix of underbanked and millennials.
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But back to what I think may have been your point. I don’t believe any of these banks will do anything that is 100% best for their customers (keeping 2.25% interest if feds drop to 2 or 1.5%).
End of conversation
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Randomly spoke to someone about this tonight at my financial meetup group. Banks usually adjust rates anywhere from 1-7 days after Feds change their rates.
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