Goldman Sachs Group Inc.’s consumer bank Marcus is offering the highest interest rate for its high-yield savings account since the pandemic began.
The firm raised its annual percentage yield to 1.7%, up from 1.5% at the end of July. The last time Marcus boasted a rate that high was in early 2020, before central banks around the world cut interest rates in response to the spread of Covid-19.
Online high-yield savings accounts became popular in the last few years as a low-risk way to keep cash liquid while still generating a return higher than traditional savings accounts. Marcus, along with similar options from firms including Barclays Plc and Ally Bank, generally follow the trajectory of the two-year Treasury yield, with a lag.
That meant high-yield savings rates plunged in 2020, as the Federal Reserve eased monetary policy to stimulate the economy. Now, as the central bank raises benchmark rates to curb inflation, online banks are following suit.
The recent move catapults Marcus above its competitors, which previously raised rates more aggressively this year. Ally Bank currently provides a 1.6% annual percentage yield, while Barclays Plc and Synchrony Bank offer 1.65%.
Seeking Yield
American consumers feeling the pain from rising prices are looking for ways to make the most of their money, as the consumer price index just showed a 8.5% increase from a year earlier. With equities rebounding after inflation appeared to cool slightly in August, some may find their money better invested in the stock market. Yet for those hoping to keep their cash liquid while also generating some return, high-yield savings accounts are an appealing option.
The number of retail banking customers who opened new online savings, certificates of deposit or money market accounts with their direct bank jumped from 47% in 2022 to 37% last year, according to a J.D. Power survey. In the firm’s July survey of 4,000 retail banking customers, about 10% opened a high-yield account in the last 30 days.
“The concern about inflation and a potential recession has made more customers attracted to the opportunity that high-yield accounts offer,” said Jennifer White, a senior director of banking and payments intelligence at J.D. Power.
For those who already had a high-yield account, 48% actively sought out a way to get more bang for their buck by moving their deposits to another account with a higher annual percentage yield.
“We expect, given the volatility in the equity markets and rising rate environment, that may lead to an acceleration of growth through the remainder of the year,” said Synchrony spokesperson Lisa Lanspery.
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