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Banks are making $40 billion/yr from interest rate spread. My checking account pays 0.01%. [1]
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Date: 2023-03-10
Bankers are making a killing off the rise in interest rates.
Banks are making a killing off the rise in interest rates.
Here’s how.
The Federal Overnight Bank Funding Rate is the rate that banks get on your deposits.
The overnight Fed funds rate has increased from just above 0% to 4.57% in the past year as the Federal Reserve has increased interest rates.
As you can see from the image, this rate has skyrocketed in the past year from just above 0% to 4.57%.
However, checking account interest rates have not skyrocketed. They have barely budged.
The banks are just pocketing the difference.
How much money are they making?
There’s at least $1 trillion in US checking accounts. The banks are making 4%+ on these deposits: they are collecting the overnight rate of 4.57% while paying us approximately 0.01%.
$1 trillion * 4% = $40 billion/yr profit
There is something you can do: go to smaller banks that are paying better interest rates.
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