Finally ... Savers Are Seeing Higher Deposit Rates - WSJ Your Money Briefing

Summary4 min read

WSJ Your Money Briefing – Finally ... Savers Are Seeing Higher Deposit Rates

Host: Charlie Turner (Wall Street Journal)
Guest: Aaron Back, “Heard on the Street” Columnist, WSJ
Date: August 14, 2018

Episode Overview

This episode explores the recent and long-awaited rise in bank deposit rates—a reversal after a decade of rock-bottom returns for savers. Host Charlie Turner discusses with columnist Aaron Back why banks are finally paying more, the role of Federal Reserve rate hikes, pressures from new technology and online banks, and the broader implications for both consumers and banks.

Key Discussion Points & Insights

1. The Era of Near-Zero Deposit Rates is Ending

[02:37] Charlie notes: “It seems like ages since savers have earned a decent rate on their bank deposits. Actually, it’s more like a decade. But now the days of depositors earning next to nothing are ending.”
Aaron Back confirms that rising Fed rates, and especially growing competitive pressure, mean banks must finally start raising what they pay depositors.

2. How Federal Reserve Rate Hikes Affect Deposits

[03:03] Aaron Back: “It takes a while… for those Federal Reserve rate hikes to feed through to the consumer… banks take a while to respond on purpose. They’re not eager to pay out money to the depositors. It costs them money. But as rates move higher and higher, the pressure… grows. I think we're really at an inflection point now where people are going to start seeing better deposit rates.”
[03:36] Federal funds rate at the time: “between one and three quarters and two right now.”
Banks are passing along a higher percentage of rate increases: “About 44% of the increase in rates was passed on to depositors last quarter, and that's up from only 20-some percent in previous quarters.”
Quote:

“We’re finally moving out of the days where consumers are used to earning nothing.” – Aaron Back [04:13]

3. Tech & Online Banks Are Reshaping Deposits

[04:21] Tech makes it easy for consumers to move money: “Just a few clicks on a smartphone, you can move your money from one bank to another.”
Online-only banks, with lower expenses, are “hungry to get deposits.” They’re driving competitors (even big names like Goldman Sachs, via its Marcus online platform) to offer better rates.
Quote:

“Online only banks are new, they’re young, they’re hungry, and they’re in a mood to get deposits.” – Aaron Back [04:32]
Marcus by Goldman Sachs is cited as an example, approaching 2% APY—a stark contrast to near-zero of recent years.

4. Bank Profit Pressure Amid Low Long-Term Rates

[05:36] Banks face a squeeze when deposit costs go up (driven by rising rates and competition), but many loans—especially long-term, fixed-rate ones—do not reprice quickly. This can squeeze profits.
Banks with lots of “flighty deposits” and large portfolios of long-term loans are particularly exposed:

“Banks that are really suffering right now are banks with a lot of flighty deposits… and very long term loans that they can’t reprice…” – Aaron Back [06:12]

5. Looking Ahead: Will Saver-Friendly Rates Last?

[06:30] Charlie asks: “What happens for depositors' rates when the Federal Reserve stops hiking…?”
Aaron Back: “Every cycle is different. If we're going into a recession…deposit rates might start falling pretty quickly or they may simply stabilize at a higher level. It all depends.” [06:54]

Notable Quotes & Memorable Moments

“We’re really at an inflection point now where people are going to start seeing better deposit rates.” – Aaron Back [03:02]
“Just a few clicks on a smartphone, you can move your money from one bank to another.” – Aaron Back [04:25]
On Marcus by Goldman Sachs:

“They’re offering some of the best rates on the street, around 1.83% for people, which is a whole lot better than zero.” – Aaron Back [04:55]

Timestamps for Key Segments

[00:46-02:40] News headlines (consumer pessimism, vocational training revival)
[02:40] Main topic introduction: Deposit rates rising
[03:01-03:30] Why Fed rate hikes are finally reaching depositors
[03:36-04:21] Details on current interest rates and how much banks are passing on
[04:21-05:07] Online banking disrupts the old model, Marcus and competition
[05:36-06:30] How rising costs squeeze certain banks' profits
[06:30-07:01] What could happen to rates if economic conditions change

Conclusion

The episode delivers welcome news to savers who’ve waited years for higher returns: thanks to Fed actions, competition, and technology, deposit rates are rising. But the interplay with broader rate policies and economic shifts means this is far from a static story—for both consumers and the banking sector.

Recommended for: Listeners wanting to understand recent changes in bank deposit rates and the forces shaping their savings’ future.

End of Summary

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Transcript25 lines

[00:00]
A
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[00:23]
B
one most trusted app based on August 2025 proprietary survey. Over 500,000 new listings every month based on average new for sale and rental listings July 2024 to June 2025. Your Money Briefing Money and market stories from the Wall Street Journal. Welcome to your Money Briefing. This is Charlie Turner in New York. Some good news for bank customers. Banks are finally starting to pay significantly higher deposit rates.
[00:47]
C
As rates move higher and higher, the pressure for them to pay out grows. And I think we're really at an inflection point now where people are going to start seeing better deposit rates.
[00:55]
B
We'll explore this in a moment with the Wall Street Journal's Aaron Back from First. These top money headlines A new monthly survey shows consumers turning decidedly pessimistic on a number of fronts. The July survey by the New York Federal Reserve found declines in one year expectations from consumers on earnings growth, household spending, stock prices and house prices. The survey was based on a panel of 1300 households across the U.S. for example, median one year ahead. Earnings growth expectations fell from 2.7% in June to 2.4% in July. The decline in earnings expectations was broadb across income groups, but largest among those below the age of 40. It looks like more young people are deciding against going to college and instead opting to train for a job while still in high school. And it's free. The Wall Street Journal says there's been a revival in vocational training or career education programs. More big companies are tying up with local high schools to help equip students with skills for steady employment. Volkswagen is helping schools in Tennessee modernize their engineering programs. Tesla is partnering with Nevada schools on manufacturing curriculum. In Rhode Island, Coventry High School established its welding program after Electric Boat, one of the state's largest employers, declared it was looking to hire 14,000 new employees in the next decade. Nationally, the number of high school students concentrating in career education has risen 22% over the past decade to 3.6 million. That's good news for businesses that are trying to find workers in a tight labor market. Coming up, banks are finally boosting their deposit rates. This is your Money Briefing from the Wall Street Journal. Welcome Back, it seems like ages since savers have earned a decent rate on their bank deposits. Actually, it's more like a decade. But now the days of depositors earning next to nothing are ending. That's good news for consumers, but bad news for some banks, according to Aaron Back, whose Wall Street Journal Hurt on the street columnist. Now, Aaron, I assume these higher rates have something to do with interest rate hikes by reserve.
[03:02]
C
Absolutely. It takes a while though for those Federal Reserve rate hikes to feed through to the consumer. Partially that's just because the Federal Reserve as it hikes, the banks take a while to respond on purpose. They're not eager to pay out money to the depositors. It costs them money. But as rates move higher and higher, the pressure for them to pay out grows. And I think we're really at an inflection point now where people are going to start seeing better deposit rates.
[03:31]
B
And where exactly are interest rates right now? The federal funds rate, I believe it's
[03:36]
C
between one and three quarters and two right now. There's a lot of debate as to where exactly that turning point is. If you look at past cycles, it was a little bit higher, but we were also starting from a higher point in past cycles. This time we were starting at zero. So the exact number we can debate. But what's clear is that the response is accelerating. So banks deposit costs, about 44% of the increase in rates was passed on to depositors last quarter, and that's up from only 20 some percent in previous quarters. So clearly banks are now passing on more of those hikes to consumers. And we're finally moving out of the days where consumers are used to earning nothing.
[04:22]
B
And I assume this is also because of online competition.
[04:25]
C
Absolutely. So one difference between this rate hike cycle and other rate hike cycles is that we were at zero for a decade this time. The other difference is that there's better technology. It's easier for you to move your money. Just a few clicks on a smartphone, you can move your money from one bank to another. And there are online only banks that don't even have branches, that have lower expenses. And these online only banks are new, they're young, they're hungry, and they're in a mood to get deposits. So you're seeing people like Goldman Sachs, which is, you know, not a new bank, but they've never taken consumer deposits before until recently. That's a new business for them. And they're offering some of the best rates on the street, around 1.83% for people, which is a whole lot Better than zero.
[05:08]
B
Online banks are charging higher deposit rates. This is Marcus that you're talking about, right?
[05:13]
C
We're talking specifically in this case about Goldman Sachs's operation.
[05:16]
B
Marcus, is that online or is that general?
[05:19]
C
It's online. You go online, you register. It's relatively simple to move your money from wherever you're keeping it to.
[05:25]
B
Marcus, you're right. They're approaching 2%, these deposit rates. Yes, you write. At the same time, long term interest rates are staying low, which is not good for certain banks. Why don't you talk about that?
[05:37]
C
Yes, there are different kinds of loans. Okay, so there are short term loans that banks make. Maybe they give a company one year loan for working capital. That kind of loan reprices very quickly. It's automatically adjusted to certain short term benchmarks. So when the Fed raises rates, those rates go up right away. However, if I'm a bank and I make a fixed rate loan for five or 10 years, for example to a construction project, I can't reprice that loan until it comes due in five or 10 years. So now I have an issue where my deposit costs are going up. But I have made all these, these long term loans that I can't reprice. Banks that are in that situation, different banks have different kinds of loans and different kinds of deposits. But the banks that are really suffering right now are banks with a lot of flighty deposits that could leave any minute and very long term loans that they can't reprice. Those banks are going to start to see pressure on their profits.
[06:30]
B
Let me understand something. Interest rates are rising right now, short term interest rates and they're expected to keep rising for some time, I guess at least through next year. What happens for depositors rates when the Federal Reserve stops hiking short term interest rates? Are they going to keep the rates level for depositors or might we see them go back down?
[06:51]
C
Every cycle is different. If we're going into a recession or something, then yeah, deposit rates might start falling pretty quickly or they may simply stabilize at a higher level. It all depends.
[07:02]
B
Wall Street Journal heard on the street columnist Aaron back. Thanks a lot, Aaron.
[07:05]
C
My pleasure.
[07:06]
B
And that's your money briefing. This is Charlie Turner from the Wall Street Journal.
[07:10]
A
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[07:15]
B
Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.
[07:25]
A
See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources
[07:30]
B
they need while increasing megastore profits. They deserve it, don't they tell Congress
[07:37]
C
stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.