Could banks start charging to hold your money?

Normally, banks use your deposits to make more for themselves. But that could change if the Federal Reserve cuts its interest rate for overnight deposits.

By Benzinga Nov 25, 2013 6:32PM

Images: Bank Vault (© Radius Images/Jupiterimages)By Jim Probasco

Last week’s release of the October Federal Open Market Committee Minutes included a brief but important discussion that, if acted on, could significantly change the way U.S. banks operate.

The main focus of the meeting had to do with the possibility of the Federal Reserve tapering the $85 billion a month in asset purchases it has been making.

What drew the attention of U.S. bank executives, however, was talk about reducing the interest rate the Federal Reserve pays for overnight deposits.

According to The Financial Times, representatives of two of America’s top five banks said that if such a reduction were to take place, banks might actually start charging customers to hold their money.

Pointing out that interest rates for depositors are already “near zero,” FT said, “Paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.”

Russian English-language news channel RT, noting that financial institutions keep trillions of dollars parked overnight with the Fed as a risk-free revenue generator, said large U.S. banks like Bank of America (BAC), JPMorgan Chase (JPM), and Wells Fargo (WFC) would have little incentive to hold these deposits in the first place if the Fed cuts the interest rate it pays.

Cutting interest rates on bank reserves was part of a discussion about finding ways to add stimulus should the Fed decide to taper. There had been speculation that tapering could start as early as next month.

One bank executive, in revealing that U.S. banks have to pay deposit insurance premiums on the money they park, told The Financial Times, “Right now you can at least break even from a revenue perspective.” A cut in interest rates, the executive said, “would turn it into negative revenue.”

The danger of negative revenue has deterred the Fed from cutting interest on bank reserves in the past. If it were to do so now, one possible solution would be to expand the new Fixed-Rate, Full-Allotment Overnight Reverse Repo Facility, FT said. This would allow banks and money market funds to accrue a small – but positive interest rate.

The net result would be that banks would have no need to charge consumers and businesses for keeping their deposits.

At the time of this writing, Jim Probasco had no position in any mentioned securities.

More from Benzinga

Nov 26, 2013 2:44PM
Simple solution......Do not deposit your money with any of the "too large to fail" banks. Do all of your banking business only with your local and regional banks and credit unions. Do not do any business of any kind with any of the big banking savings or checking accounts, no credit cards issued by them, no loans.... you can bring them to their knees, they are not too big to fail.
Nov 26, 2013 2:52PM

Had $100 in a savings account at a bank. The bank charged me $5.95 a month because my account was below their "minimum balance" requirement. I called them, they told me they would continue to charge the $5.95 a month. I asked what happened when the balance reached zero.

Here is where the fun started. I was told they would continue to charge $5.95 a month. Eventually they would take me to court to collect the negative balance.

I closed the account, and deposited it in my credit union.

I also closed my checking account and opened it in my credit union. The beauty of it is since then, I have come across a sizeable amount of money. That also is deposited in my credit union, awaiting the day I will use it.

Talk about cutting off your nose to spite your face.


Nov 26, 2013 2:47PM
Nov 26, 2013 2:05PM
Seriously? With all the fees the banks charge already? Plus, they loan out our money, in exchange, they pay the tiniest bit of interest they pay while the bank racks up the rest.  
Nov 26, 2013 3:05PM

WHAT, WHAT, WHAT????????

So let me get this straight: A banks purpose for existing is to take your deposits and loan them out to make money. Now they want to charge YOU too for 'holding' your deposit ?


Ummm... where did I put those coffee cans ?

Nov 26, 2013 2:26PM
No problem, my mattress doesn't charge anything!  Dolts!!!
Nov 26, 2013 2:35PM




Nov 26, 2013 2:37PM
Best to keep the money yourself,and spend it,Bank of American made 10 billion dollars last year due to bounced checks,overdrafts,pulse machines .They charge an average of 35 dollars and can run the check trough 3 times,when they no there no funds.Over all there sticking it to the working man (what else is new)  Happy Holidays  BYE
Nov 26, 2013 2:16PM

....not to belabor the point:


So, I guess this is a prime example of how the "really smart people" get even richer - while the really stupid and lazy people (the rest of us) - stand on the sidelines and watch? Really????

Nov 26, 2013 3:14PM
If a number of big banks start charging customers just to keep customer deposits, then I think it will be a golden opportunity to invest in companies that sell safes. I'd trust my money in a safe more than a bank any day, especially one of those awful chain institutions.

Seriously, charging customers for YOU having access to THEIR money? Customers should be charging YOU for playing around with their money when you give out loans and risky mortgage contracts. They should be charging YOU $35 every time you make a mistake with THEIR money, like my Wells Fargo did when you disbursed a check TWICE by mistake and disbursed money to me BEFORE deposits I submitted, when I specifically ASKED you, IN PERSON, to deposit the money first and then disburse a cashier's check to me immediately afterward.

Nov 26, 2013 3:26PM
avatar of America's least favorite businesses!!!
Nov 26, 2013 3:30PM
Don't trust your money to any of the financial institutions.  They are not your friends.  They are there to make as huge a profit off of you as they can.  That is why they scream against regulations.  Whether they are national, regional, local, credit union, mortgage companies or what have you, don't do business with them.  They all pay tiny amounts of interest to borrow your money, and that is what they are doing when you open an account whether it be checking, savings, cd, money market and charge much greater rates of interest to lend you the money they have borrowed from you and others, if they deign to make a loan to you.  Don't do business with them.  They need you more than you need them.  Bring these swine to their knees and make them serve the people instead of the people serving them.  Boycott, boycott, boycott.  It works, just give it a try.
Nov 26, 2013 3:50PM
Corruption is as rampant as it is in China!
back door deals and undercover bribes... we all know but do nothing..
Next we will be like India paying bribes to get our license back when a police officer asks to see it.. or bribes to get the broken pipes fixed in an emergency when they know they have you like other corrupt nations.. is that what we want??

It IS time for a real All OuT REVOLUTION!!!!
Nov 26, 2013 3:26PM

Change the point of a bank to hold my money?  Sure. And they can hold someone else.

I'll resort to just my credit union. 

Isn't capitalism based on banking in the first place?  What is this new ecnomic system we're going into?

Nov 26, 2013 3:45PM
Stand up and REVOLT!!
 there was less going on for the first American REVOLUTION!!
We have nothing left to loose folks!! we only have power in mass numbers our great country is a 2nd world nation for most who built it!!

Nov 26, 2013 3:30PM
It's going to get better folks. Check out what the big banks in Europe tried to do to the people of Crete. Because of "austerity" the banks wanted to take money out of each customer's savings and checking account. They needed it to help pay off the debt apparently. Laws are in place in this country that would allow the banks to do the same thing here.
Nov 26, 2013 3:39PM
This is crazy.
They give you saving of .01% interest
But they use your money to charge 20%-30%(or more interest)

And they don't make money??
That's there choice to insurance the money
Plus we already pay $6.00 to much just to have the account.

Oh well if they do start charging my cash is going out from there then ..1.. (>_<) ..!. Them
Nov 26, 2013 3:35PM
For real !!!! The banks charge people enough fees as it is. I have to pay on checks I use,even the use to be free checks with free checking,WELL guess what it's not FREE anymore.  These banks need to cut their people a break for crying out loud.  This is why banks go bankrupt.  GREED !!!!!!!!!!
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