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Online Bank Accounts With High Interest Rates Could Lose Some of Their Shine

Banks have broad latitude over what they pay on deposits, though they tend to move interest up and down as the Federal Reserve adjusts rates. Banks often are quicker to cut deposit rates than they are to raise them. Banks including Goldman Sachs Group Inc. and Ally Financial Inc. recently cut their deposit rates even before the Fed did.

The Fed lowered short-term rates by 0.25 percentage points this summer—its first rate cut in a decade—and it could cut rates again this month. If it does, banks could be more inclined to keep lowering their deposit rates. The trend marks a reversal from a year ago, when the Fed was still raising rates and many bankers expected the rate increases to continue through this year.

But those accounts still pay better rates than many lenders. Andrew Frisbie, executive vice president for consumer pricing at consulting firm Novantas, said the central bank would need to cut rates by something like 1.5 percentage points for customers to potentially lose interest in moving their money into these offerings.

Read the article at The Wall Street Journal.

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