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Different Bank, Different Interest Rates, Why?

Different Bank, Different Interest Rates, Why?

Products offered by the banks differ in needs and benefits for example, some banks offer more than others for similar products (e.g. a savings account with a loan product). It’s not uncommon when it comes to interest rates, to find a difference in percentage p.a. or more between banks, which may or may not add up to the lending cost.

Why are some bank interest rates higher than others?

Interest rates are some of the major sources of income for banks. A high interest rate attracts deposits, which the banks can then lend out earning revenue. Other sources of revenue come from fees for ancillary services offered e.g. fees and charges on credit cards and unsecured loans

Depending on the economy — possibly the local economy for small banks and credit unions — you’ll find that the “borrowing and lending” banks change rates as their customers’ needs change.

Organisational structure is also a key component, Banks have shareholders expecting higher share return for their shareholding and it’s hard for those banks to pay high rates to deposits and charge less for loans.

A competitive interest rate

What can you do to get a competitive interest rate? Shop around; if rates in general are low, you can’t do much, however to earn on deposits you can search out rates at the higher end of the range of rates available and to save on your lending products search out rates at the lower end of the rates available, keeping in mind the worthiness of your time and the amount of saving. Do the math and find out how much you’ll earn or save if you must switch banks, and remember that your money(deposits) might be “idle” — not earning any interest -while you move it around.

If you need to earn more, shop around. Start by investigating at least one of each of the following institutions:

  • Big 4 Banks
  • Tier 2 Banks
  • Online Banks
  • Credit unions& Tier 3 Lenders

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