Study: Georgia banks' interest rates below average

By J. Scott Trubey

The Atlanta Journal-Constitution

The interest rates depositors earn from banks are at record lows, and Georgia banks' rates are lower than most, according to a national study.

The national average interest rate for all deposits — checking or savings accounts, money markets or CDs — dropped in July to 0.99 percent, according to Market Rates Insight. The average in Georgia was 0.75 percent, MRI said.

It’s the lowest national figure in a decade and the lowest MRI has ever seen, according to Dan Geller, executive vice president of California-based MRI.

The figure reflects the severity of the recession, low inflation rates, high unemployment rates and the near zero interest rate at which the nation’s banks borrow cash from the federal government, the study said.

“Historically, the (Federal Reserve) did not increase the funds rate during high unemployment periods, and therefore, when we see the unemployment rate start to decline, it will be a sign that interest rates on deposits are about to go up,” Geller said in a news release.

Instead of stocks, the proverbial piggy bank is where fearful investors put their dimes, and consumers are pouring money into short-term CDs and savings accounts despite the low returns, said Greg McBride, senior financial analyst with Bankrate.com.

“Banks don’t have to pay up for deposits when investors are eagerly gravitating toward them regardless of the rate of return,” McBride said. “Yields are at record lows and we continue to reset those record lows. There’s not a lot of prospect for improvement near term.”

Deposit interest rates also reflect loan demand. When demand is low, interest rates stay low, McBride said.

Georgia has traditionally been a high-interest rate market, given the state’s plethora of banks. But the fallout of the economy has squeezed banks on both ends, as some banks paid handsomely for certain deposits while borrowers had trouble repaying loans.

Some troubled Georgia banks have been ordered by regulators to bulk up on local deposits and shed wholesale ones.

“You can’t lose the money if you are within your FDIC insurance limits, and you are guaranteed to earn some money on the deposits at no risk,” said Joe Brannen, president and CEO of the Georgia Bankers Association. “That safety and security has been important as more people have been building larger rainy-day savings and emergency cash accounts.”