USA Today Reviews Negative Rates
USAToday.com posted "Negative interest rates: What they are, how they work and whether they are coming to the U.S.," which tells us, "Negative interest rates, in the unlikely event that they become pervasive, would drastically alter the playing field for savers as well as borrowers. Here are some things consumers should know.... Everyone is accustomed to paying interest to borrow money and earning interest when depositing money. Negative interest rates would reverse that. A bank might not actually charge savers a negative rate, but it might levy a 'storage fee' that exceeds any positive interest earned, said Dennis Hoffman, an economics professor at Arizona State University. This scenario would represent a 'penalty for holding cash,' he said. By pushing rates ever lower, economic policymakers would be 'encouraging you to rid yourself of cash by spending money and hence stimulating economic activity,' he said." The piece explains, "With deposit accounts, money-market funds and other ultraconservative investments already paying next to nothing, it doesn't take many additional fees, or much inflation, for real returns to slip into negative territory, Hoffman said. But as a practical matter, he considers it more realistic to think about negative interest rates as ‘really low rates.'" The article adds, "For savers, today's ultra-low rate environment makes it more important to shop around for better deals and be wary of fees that can erode returns even further. Many types of fees, including account-maintenance and overdraft fees and ATM charges, were slowly rising at many banks anyway, even before the coronavirus pandemic hit, [BankRate’s Greg] McBride said. Conversely, he noted that it's still possible to obtain fee-free checking accounts at roughly 40% of banks and 80% of credit unions, especially if you sign up for direct deposit. Economists continue to debate how quickly and with what intensity the recovery will materialize, but most see the economy growing again by early next year at the latest. With an economic rebound, interest rates could start pushing higher, relegating further speculation about negative rates to the background."
