Why I’m leaving Ally Bank

Lets discuss the recent interest rate changes from Ally Bank, Marcus by Goldman Sachs, and Wealthfront - Enjoy! Add me on Instagram: GPStephan

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Here’s what happened: Ally Bank lowered their interest rate from 2.2% to 2.1%, Marcus by Goldman Sachs lowered theirs from 2.25% to 2.15%, and Wealthfront RAISED theirs from 2.51% to 2.57%.

So first - WHAT’S GOING ON AND WHY DID THIS HAPPEN?

Without getting too complicated, banks want you to deposit money with them so they can turn around, and use that money to loan out to other people. The bank will then make a profit on the spread between the loan that they give someone else, and what they pay YOU as interest.

And when it comes to how much banks can reasonably charge someone for a loan, for the most part, they’re based on the 5 and 10 year treasury yield, which is largely driven by market expectation of supply and demand. Since the yield has been dropping, savings accounts begin to pay out less.

Second, it’s really important to understand that the interest rate you get from a Savings Account WILL fluctuate over time

None of these rates are set in stone, and a bank can raise or lower rates at any point in time, at their discretion. If the FED decides to RAISE interest rates, you will get paid more from your savings account…and if the market expects a rate CUT, then you will get paid LESS from a savings account.

Third…this is NOT that big of a deal, and I’m really surprised how upset people are getting over this.

With Ally Bank and Macrus by Goldman Sachs, we’re talking about a .1% interest rate cut…that means for every $10,000 you have, you are getting paid 83 CENTS LESS PER MONTH. And after taxes, that’s like a difference of 60 CENTS per month, for every $10,000 you have deposited. That’s NOT that big of a deal.

But when it comes to this, I do absolutely need to mention the elephant in the room…Wealthfront.

They just took an entirely opposite approach from EVERY other bank out there, by RAISING their cash account interest rate from 2.51% - 2.57%, just moments after Ally Bank announced they were lowering theirs.

Now all of this is PURELY just my opinion…not financial advice…BUT, I think Wealthfront did this on purpose because they saw a weakness in their competitors, and determined THIS was the moment that they could make some BIG power moves to gain marketshare…and I have to say, it worked.

My biggest concern, however, is whether or not the 2.57% interest rate is sustainable…I have a feeling this might be a teaser rate to gain some traction, and once they feel like they’ve got a large enough foothold on the market, they’ll lower them back down.

But honestly, only time will tell…and for a no frills, pure cash account JUST to keep your money in…Wealthfront seems pretty decent, and SO FAR I’ve been happy with them.

For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com