Interest rates on certificates of deposit at small banks, internet banks and credit unions are now a full 1 to 1.5 percentage points higher than at big banks. While all financial institutions have raised the lending rates they charge their borrowers in response to Federal Reserve rate hikes, only the smalls have been raising deposit rates.
Previously, most financial institutions were reluctant to raise deposit rates because their profit margins had been so squeezed by the ultralow rates that prevailed before the Fed finally started hiking at the end of 2016. But now, competitive pressures to attract deposits are forcing small banks, internet banks and credit unions to raise their full range of CD deposit rates in line with the increase in Treasury bill rates (though offerings on lowly savings accounts are still paltry).
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