Lending Club Blog

Grim Outlook for Bank Account, CD and Credit Card Holders

Economic news this week show a grim outlook for bank account, CD and credit card holders:

Average Interest Rate on Savings and CDs Falls to Below 1%: Lowest in a Decade
The San Francisco Chronicle and Bloomberg News announced yesterday that “the average interest on savings, checking, money market and certificate of deposit accounts fell to 0.99 percent in July, the first decline below 1 percent in a decade”.

The author comments that this trend is pushing people, who see their deposit earnings dwindle, to consider alternatives in smaller banks and credit unions, as well as higher yield CDs via online banks.  At Lending Club, we have also seen an inflow of funds to invest in Lending Club Notes accounting for a 5-15% growth in monthly investments each month this year.

 

Read more: “Savers seek alternatives as bank interest falls” by Alexis Leondis, Bloomberg News.

Credit Card Rates Soar to Nine-Year High
Earlier in the week, the Wall Street Journal announced that the majority of credit card holders are seeing their rates go up to levels that hit nine-year high fueled by new rules limiting penalty fees.  In the second quarter of 2010, the average interest rate on existing cards reached 14.7%, representing an increase from 13.1% a year earlier.

The author believes this is due to 2 major reasons: “The Credit Card Accountability Responsibility and Disclosure Act of 2009 has given card issuers less flexibility to raise interest rates as they wish. At the same time, issuers are still dealing with credit-card delinquencies that remain above historical levels.”

Read more: “Credit card rates climb” by Ruth Simon, Wall Street Journal.

Trend: Americans Are De-banking
Out of every crisis, there is always an opportunity to do things in better ways.   Innovation seems to be enabling a customer trend of moving away from banks. In agreement with the The San Francisco Chronicle and Bloomberg News article, Fortune and CNN Money posted this morning that Americans are “de-banking” meaning that “everyone from consumers to some of the world’s largest companies are straying away from large financial institutions as sources of funding.

Read more: “Are Americans de-banking?” by Nin-Hai Tseng, Fortune.

@svPatrick
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Friday, August 27th, 2010 at 8:07 am

Comments (12)

  1. I hope this thing goes better. I still remember when those rates
    well above 3 or even 4 percent. Then everything start to going
    down. But now less than 1% and Credit Cards interest going
    up…what a deal for banks :)

    August 28th, 2010 at 4:22 pm

  2. Julia Louis:

    wow!…not good. Thankfully, there are places like Lending Club,
    where the banks and credit card companies are taken out of the
    equation. Keep up the good work.

    August 29th, 2010 at 2:12 am

  3. Ugh, some definitely negative news there. Lower savings rates and
    higher lending rates are one thing, although a trend towards
    de-banking will mainly just make the lending-to-savings ratio
    wider. Not good news, all-in-all!

    August 29th, 2010 at 1:15 pm

  4. Tom:

    This is obviously not the news that we as consumers want to hear,
    but it was seen coming by most of us for a long time now. Ever
    since the government did get involved and told the financial
    companies to take responsibility, it was only a matter of time
    before they throw the cost of their mistakes onto the consumers.
    This is not an industry that is known for learning but is known for
    pointing fingers.

    August 31st, 2010 at 1:25 pm

  5. Jason:

    What happened to borrowing at 3% and loaning at 6%? It’s such an
    easy formula. Now they’re borrowing at 1 and loaning at 20.

    September 2nd, 2010 at 9:56 am

  6. Negative news for sure, seems like someone is cleaning up?

    September 2nd, 2010 at 12:37 pm

  7. Spence:

    The banks are killing us … they get their money at basically
    nothing and then jack up their rates to us, the lowly consumer.
    There is definately a need for your concept.

    September 2nd, 2010 at 1:22 pm

  8. This looks quite bleak… cant say Im shocked though, it was
    coming.

    September 2nd, 2010 at 11:34 pm

  9. aksesoris:

    let’s use the borrowed money wisely, make it productive rather than
    consumptive

    September 4th, 2010 at 12:18 pm

  10. I live over in the UK and this is definately a global problem at
    the moment. Historically I have never seen such apalling rates of
    interest for savers and what is especially disturbing is that
    despite the low interest rates which were designed to keep lending
    low, the banks have not been influenced by this in terms of their
    lending rates of interest!

    September 7th, 2010 at 12:32 pm

  11. We may become like Japan where you have to pay the banks to keep
    your money. Not good…deflation big time.

    September 8th, 2010 at 2:00 pm

  12. It was only a matter of time, before innovation created
    alternatives. Banks….will one day be a thing of the past.

    September 17th, 2010 at 11:36 am

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