U.S. banks captured roughly $485B a year by paying savers far less than the Federal Reserve paid banks, according to a 17-year analysis of Federal Reserve and FDIC data by Alan Percal of Compare Personal Finance. At the August 2023 peak, the Fed Funds rate stood at 5.33% while the FDIC's average savings rate was just 0.43%, a 4.90 percentage point gap that was the widest on record and more than double the prior modern high. Across four complete rate cycles, the study found banks passed through no more than 7% of any Fed hike to savings accounts, and consistently kept at least 93% of every move. The lag is one-sided: after the Fed's December 2015 hike, the average savings rate did not budge for 26 months, while rate cuts reached savers within weeks. The analysis estimates the average American household left about $3,300 in interest on the table during the most recent cycle by holding cash in standard accounts rather than high-yield ones.
