Just when bank customers were finally getting something reasonable for their hard-earned savings, the party is coming to an end.
After several years of increasing the meager interest they paid on savings accounts and certificates of deposit, banks are starting to trim their offerings to savers. The declines are slight, usually less than 0.25 of a percentage point, but the trend is certain to continue for at least the next six months to a year, experts say.
Blame the Federal Reserve, which cut interest rates in July and is expected to cut them again this year to help insulate the economy from trade disruptions and to support the stock market.
President Donald Trump has repeatedly attacked the Fed for failing to cut rates aggressively, and has linked the Fed's moves with the stock market. However, while nearly all households have savings accounts, a tiny minority own the vast majority of stocks.
Some banks didn't wait for the Fed to cut rates. Earlier this summer, Goldman Sachs cut Marcus' online savings rate to 2.15% from 2.25%.
The average online-only bank now offers an interest rate of about 1.68%.
After the Great Recession, savers looking to safely store their cash and make a modest return had few options. The Federal Reserve cut its benchmark interest rate to zero and kept it that way for years. It was not uncommon to see a big bank like Bank of America or Wells Fargo offer 0.02% or even 0.01% on a traditional savings account.
Banks didn't have to offer enticing rates because they largely didn't need deposits. Lending slowed considerably after the Great Recession, and new regulations kept banks from lending too dangerously, so the need for deposits to fuel that lending waned.
But as the economy recovered, however, and the Fed steadily raised interest rates from near-zero to 2.50% at its highest level, banks started offering more to savers. Banks also started offering more loans, which in turn meant the competition for deposits heated up.
But that competition for deposits is now dwindling and banks are not as willing to pay for deposits as they used to.
Savers looking for new places to lock away money and get some sort of yield should check out no-penalty CDs offered by banks like Marcus, according to Ken Tumin, founder of banking news site Depositaccounts.com.
While the rate is not much higher than what a customer might get in an online-only savings account, no-penalty CDs allow a customer to lock in a rate for a year.
Ken Sweet writes for the Associated Press.