The Federal Reserve has only just started cutting interest rates, but brokerage firms are already whittling down what they're willing to pay for idle cash. The Fed last week dialed back interest rates by a half percentage point, bringing the target fed funds rate to a range of 4.75% to 5%.
It didn't take long for banks to get with the program: Ally Financial , Discover Financial and Marcus by Goldman Sachs are among the institutions that trimmed annual percentage yields (APY) on savings accounts since the Fed lowered rates, according to an analysis by Wells Fargo. "We expect that more rate reductions could be forthcoming since the avg. savings rate is down just 6 [basis points] vs.
the Fed's 50bp cut," wrote Wells Fargo analyst Michael Kaye on Friday. A basis point is equal to one one-hundredth of a percent. Brokerages have also jumped in on the action, with several companies dropping the rates they pay on sums held in cash sweep accounts.
This is where investors hold money that they haven't yet deployed into investments. Charles Schwab recently trimmed its cash sweep rate to 20 basis points, where it was previously 45 basis points, according to an analysis by Bank of America. Wells Fargo also dropped rates by 3 basis points to 30 basis points, based on the level of clients' household assets.
Right now, Wells Fargo Advisors offers an APY of 0.02% on accounts with up to $999,999 in assets, and 0.20% on those with more than $20 million.
A few outliers still pay solid rates on i.