Negative Bank Interest Rate

RegularJoe | May 15, 2020 | 6 posts since 2020

I never felt more strongly then as of now that negative interest rates for the banks are coming. Maybe not today or tomorrow but whenever. Of course, I hope I am wrong but hope is not a strategy. And that leads me to my question but please feel free to discuss further with what any of you may do in same boat. In mine, I have no risk tolerance to put monies into stocks nor want to spend it. In fact, I plan on hoarding it in safes etc. I want to start acting soon before banks start imposing stricter rules etc. So amount is over 100K. How and in what amounts can I or should I go and get the cash out? (P.S. - I shop around as it is making sure I get free checking, no fees for this or that account etc.. so I will be damned to be charged having that money sit in there and pay for the bank simply holding it.)

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Answers

111 | May 16, 2020 | 672 posts since 2019

Joe, regarding your concern about having to actually pay the bank to hold your money - to reiterate what someone said above, even in Europe, where several countries have had negative rates for a while, INDIVIDUALS are not charged interest by the banks. Only some institutions are.

https://apnews.com/48fd5784e2ab9536c450f947f53a918f

RegularJoe | May 21, 2020 | 6 posts since 2020

This is no longer true. A couple of months ago (if not longer), some european banks mentioned how they can no longer hold off on avoidance of charging individual accounts (based on amounts over specific tiered thresholds etc.) and so begun doing so.

CDmanFL | May 15, 2020 | 286 posts since 2019

Personally, I think this question is ludicrous. Even with the Fed rate at zero today, you can still find 5 year CDs at or near 2%. The thought that a 5 year CD would be negative yielding is not something I buy into. Just put it in a 5 year CD now and in 5 years we’ll probably have much higher rates.

anony | May 16, 2020 | 28 posts since 2019

Agreed, seems ludicrous to me too. Remember banks will always need cash for liquidity too. It's not like tomorrow we will wake up and see savings accounts at -1% and no banks offering any CDs at all. If the OP is so worried, stick it in a 5 year CD at 2%, as mentioned. Beats me why he's even keeping 140K in a checking acct to begin with, at the least it should be a money market/high interest savings acct/no-penalty CD.

RegularJoe | May 18, 2020 | 6 posts since 2020

2% is a threshold for me on going out to 5 years. (Actually it is really around 2.3% for me more specifically.) That notwithstanding, as of mid May, 5 year bank CD rates are hovering around 1.4 - 1.5%, NOT 2% now. Better than zero let alone negative of course. But 5 years is long time. Current rates at this lower level is NOT worth locking up for that long imho. So I am well aware of pros/cons of locking it up vs. negative rates.

GreenDream | May 21, 2020 | 358 posts since 2019

You are not going to be charged to keep your money in the bank. For several reasons.

1) The fed funds rate would first have to go negative. Powell has said that's not in the cards (and he's not the only one at the Fed that's against it). It simply won't happen any time soon, if ever. (remember, we've seen how poorly that policy has worked elsewhere in the world, why would we follow suit?)
2) even if the Fed changes it's mind and drops below zero. Banks won't immediately follow suit, certainly not if it's only slightly below zero. They need deposits in order to make loans. The prime rate, which loans rates are based off of, will still be positive (it's 3% higher than the fed rate), so even with a negative fed rate banks will be competing for your deposit money, which means they can't go negative, as people would pull their money out and take it to a competitor who stayed positive.
3) if the fed drops so far negative that the prime rate would also be negative (unlikely, I don't know of any country that's gone below 3% negative, so it's not likely the Fed would be the first), then banks won't be making loans (you really think they'd give money away?), but then they wouldn't need deposits either so would probably close their doors ending your dilemma.

RegularJoe | May 21, 2020 | 6 posts since 2020

Your analysis is cogent and I hope you're right. But time will tell inevitably. And like I said before, I am not banking on hope (no pun intended). I will plan proactively and accordingly. The plutocrats have exacerbated US economic conditions worse and worse over the last 30-40 years now. It would not surprise me that they would do this despite their words currently to the contrary.

me1004 | May 18, 2020 | 1,379 posts since 2010

I don't think it a good idea, at least not to jump the gun and pull money out. It is not likely you would have to pay for them to hold your money. You might get fees left and right, but not to simply hold your money. I can't swear there would not be a transaction fee to take the money out, whether as cash or otherwise.

However, as for how much cash to withdraw, you would first have to ask your bank how much they allow you to take out at once. And you might have to put in an order to take out more than their usual limit in a day. Banks are not sitting around on a million dollars cash in the branch safe! I know some will not let you take out more than $5,000 in cash in a day -- their rule now, without negative rates a factor.

Alan1, your thought about structured tranasactions really is not a concern either. The tracking is not simply for transactions over a certain amount. Banks and CUs also must report any suspicious pattern, and they do (just ask Eliot Spitzer). So the OP's transactions definitely would be reported, that is not an issue. But of course, the pattern does not mean anything is wroing, it is simply to take a look and make sure.

alan1 | May 15, 2020 | 877 posts since 2015

I hope Deposit Accounts removes this inquiry. The poster asks: "So amount is over 100K. How and in what amounts can I or should I go and get the cash out?"

This is a simple informational question, BUT it could appear to a reader to involve "structured transactions" designed to avoid the reporting requirements contained in Title 31 of the United States Code.

I have no reason to believe that the poster is in any way attempting to circumvent the statute, but it might seem that way to someone. Let's not pursue this matter. Thank you.

RegularJoe | May 15, 2020 | 6 posts since 2020

It is 140K cash in a checking account. It was earned legally. If I go to the bank tomorrow and ask to take out that cash, they will probably not let me because they may not have it for a variety of reasons. So BEFORE negative rates may occur in this American Bank, I will NOT tolerate like a Japanese or European person the monies being charged in the account sir. And that is MY CASH. I hope Deposit Accounts keeps this inquiry as I represent many others with such a consternation. And frankly, I am insulted by your insinuation otherwise. Good day to you.

Robb | May 15, 2020 | 322 posts since 2018

RegularJoe based on what I have read over in Europe very few banks actually charge to hold deposits although there have been a few if your deposit amount is above certain levels. I still think we are a ways away from anything like that happening here but always a good idea to be prepared just in case given how much the Fed has caved into the POTUS well before this virus struck. Let's just hope it never comes to that!

blazer9 | May 15, 2020 | 228 posts since 2019

hey joe where you going with that gun in your hand?
how many trustworthy friends you got?
look up GIFT TAX

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