The Wall Street Journal has an interesting article today which highlights how banks have become so completely awash in deposits that they are discouraging major companies from continuing to increase their cash deposits. It notes that CFOs and treasurers at companies, such as Verizon, ATT and Advanced Auto Parts, believe that the current economic circumstances require them to increase their allocation to cash, and that, in turn, is causing capital allocation problems for major banks.

The article is well worth a read, but it also raises the question of whether retail customers can expect to see any competition for their savings and CD dollars any time in the near future.

Given that total commercial deposits at US banks exceed $17.09 trillion according to the Federal Reserve, increasing by $411 billion over the last 2 months and by almost 50% over the last 3 years, and that the Federal Reserve seems intent on holding rates at zero for the coming two years, it seems unlikely that retail customers are going to see any competition among major banks for their deposits in the short term.

This is highlighted by the fact that the financial manager at ATT is quoted in the third paragraph of the article as saying that they really aren’t interested in optimizing their yield. So, if ATT is just trying to hold their cash, should you give up and do the same?

The answer is no. While the underlying economic circumstances are the same, as a retail depositor, you still have more avenues available to you to try to maximize your cash.

First, major online banks, such as Ally, Citizens Access, Synchrony, CIT, Purepoint and Marcus (Goldman Sachs) have invested tremendous amounts over the last several years in advancing their banks among retail consumers. So far, they have decided that there is a floor of about 0.40% APY below which they will not go for risk of eroding the retail investor goodwill and deposit basis that they have spent years building.

Compare the best online savings rates here.

Second, retail consumers have access to local banks and local credit unions that may not be able to even meet capital requirement rules required to service large corporate customers. Moreover, these banks are interested in retail customers that they can draw into other financial management and lending products and are therefore willing to remain competitive through the current environment.

Compare local bank savings rates near you here and compare local credit union savings rates near you here.

Certainly some depositors are going to be led to accept nothing or virtually nothing on their deposits, but for those who are willing to take the time to open new accounts within FDIC limits for banks and NCUA limits for credit unions, there continues to be incremental interest to be gained.

BestCashCow.com has been monitoring the best savings rates nationwide for over 15 years, and for the first 14 plus, the situation for the consumer was very straightforward.

You’d check to see what the best savings rate on BestCashCow, click through to apply and, voila, you’d be making more interest on your cash than you could possibly be making anywhere else.

Recently, we’ve seen an influx of so-called “fintechs” in the financial space. Fintechs are designed to do nothing that a traditional bank cannot do. They basically lend and borrow money (without the consumer protection of the FDIC or NCUA), facilitate financial transactions, etc. From a consumer standpoint they offer ease of use (an IPhone application) and sometimes lower transaction costs. In return, the consumer is forgoing the regulatory protections and parting with their personal identifying information (address, social security number, drivers license) and willingly or unwillingly creating a trove of information that can be used to market to them.

And, in the post-Facebook world, this personally identifying information has real value. Anyone who questions whether real value can be made off of this information need only look at the types of travel rewards that major credit card companies offer just to get a credit card in your hands. (Compare all of the best credit card sign-up bonuses here).

Against this backdrop, smaller banks are struggling to compete. Yet, many of these banks do not need new deposits (or customers) as they are also flush with cash and the entire economy is awash in liquidity. Hence, we are now getting reports of smaller lesser-known online banks that are “offering” savings rates or CD rates that are well above those of their larger competitors, and are walking people through the online application process and summarily rejecting all applicants (or the vast majority of applicants), either through an outright rejection notice or through never responding (and denying any knowledge of the application). Unfortunately, this is an easy way for them to build their valuable databases with your personal information and that is worth more to them right now than having you as a customer.

It pains us to see this occurring with regulated banks and credit unions. And, it pains us to expose that this is happening. But, we have received so many reports from readers of this happening in 2021 and we’ve seen it from own experiences. So, yes, it is happening.

And, the question becomes what you can do as a customer to protect yourself and your personally-identifying information. We recommend the following steps.

1. Err towards the better-known, more established online banks. These banks are always competitive over the long-haul and they don’t refuse customer accounts. While you may make a few basis points less, these banks are not going to take your information and refuse you as a client. You’ll find at least thirteen of these to choose from: Marcus, Ally, Synchrony, CIT, CitizensAccess, American Express, Purepoint, CapitalOne, Barclays, CIBC, TIAA, Sallie Mae and Discover. On the credit union side, places like Navy Federal Credit Union, Pentagon or Alliant are not going to deny your application if you meet the Field of Membership Requirements.

2. Consider established banks with strong local or national reputations that are spending large amounts of money to establish national online brands. These banks are also unlikely to refuse you as a client. In our observation, there are currently at least eight of these that are currently among the most competitive savings and CD issuers nationally, include Comenity Direct (New York), Amboy Direct (New Jersey), Live Oak Bank (North Carolina), Salem Five (Massachusetts), CFG Bank (Maryland), First Foundation (California), Merrick (Utah), Zions (Utah), TAB Bank (Utah).

3. Read the reviews on banks and credit unions that you have not heard of. Except in egregious situations where we are inundated with customer complaints and the bank or credit union has refused to provide an explanation, BestCashCow is not going to remove savings and CD offerings from our site. But, unlike sites like Bankrate or Nerdwallet, we do offer verified customer reviews, linked from our table of the best online savings rates. You should read these. If people are reporting that they are unable to open accounts (either through the bank’s outright rejection or non-response), you should take these reports seriously.

It seems absurd to imagine that a bank would want just your personal information and not want your hard earned money, especially when you are essentially offering to lend it to them at below 1% or a fraction of the current inflation rate (thanks Federal Reserve!) But, yes, this is really happening.

The Federal Reserve concluded its 2-day March meeting today with no change in the Fed funds.

The median forecast is for no change in interest rates through 2023 with 4 Fed officials seeing rate hikes in 2022 (up from 1 previously), and 7 Fed officials seeing them in 2023 (up from 3 previously).

It is surprising that the Federal Reserve members remain so dovish with so few hawkish members wanting to move interest rates to address inflation, which it now predicts will be above 2.40% in 2021, before dipping slightly below 2.00% in early 2022 and again rising to a level which is moderately and sustainably above 2%.

The Fed’s new policy, first articulated in December, of moving away from its dual mandate and decoupling short-term interest rates from inflation, is forcing people into high-risk investments in order to maintain the purchasing power of their savings. Earning a fully taxable 0.40% or 0.50% on your deposit accounts will lead to a diminution in your real value when measurable inflation is much higher.

The Federal Reserve continues to be concerned with downside risks to GDP and labor markets by COVID-19. Chairman Powell is also clearly concerned above virus variants and does not want to take his foot off of the accelerator when it comes to market accommodation and Federal Reserve interventions until we are well clear of the virus. The Fed therefore is prepared to let the market run hot. While this policy may be appropriate in order to assure the economy gets through the COVID-19 era without economic scaring, it is also pushing capital towards equity valuations that make little sense, and products like bitcoin and non-fungible tokens (NFTs) that make even less. Even those who know to be cautious when they hear the mantra “this time is different” are having a difficult time resisting the temptation to jump into frenzies in order to maintain the real value of their assets..

While it isn’t a good time to be a saver, it isn’t a great time to be a bond investor either. A lot of people are getting excited about the steepening of the yield curve with the 10-year US Treasury yields at 1.68% and the 30-year US Treasury yields at 2.44%. I think that these rates should not be bought as they are more than likely to go higher in the very short term.

Compare savings rates here.

Compare 1-year CD rates here.