Continuing “Credit Crunch” Could Spell Higher Bank Rates Sometime Soon
Posted on February 17th, 2010
The phrase “credit crunch” may seem, for the moment, like a relic of 2008. But upon closer inspection, it is clear that credit is not flowing freely whatsoever. This could lead to higher interest rates on CDs, money market accounts, and savings accounts if banks can figure out a way to put those deposits to good use in their lending operations.
Although the economic environment is certainly still bleak for businesses, the possibility that American businesses will once again enjoy success creates a perpetual need for banks to provide capital to budding entrepreneurs. After all, this is the American dream: to own your own shop, work for yourself.
In order to fund these new ventures, banks will need deposit money. Two years ago, banks could get money through a variety of “creative” methods. Today, those creative methods have by and large dried up.
Many banks are going back to basics: holding money on deposit, and then looking to lend out that money at a profit. If businesses can prove they can pay back these loans, banks will undoubtedly want to be in on the action.
An improvement in the condition of American businesses (and any other businesses, for that matter) would thus be great news for the conservative investors who have money in CDs, money market accounts, and savings accounts–that money would be in high demand again, leading to higher interest rates on deposits.
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Tags: Higher, “credit Crunch”
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