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Savings account rates in Indiana among lowest in nation

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In Indianapolis, you can find interest rates on savings accounts so low that even Mr. Potter from “It’s a Wonderful Life” might shed a tear for bank customers.

The average savings account in Indianapolis now pays a mere 0.072 percent, according to a survey by GoBankingRates.com.

You read it right: 0.072 percent.

It could be worse. Banks in Indiana’s second-largest city, Fort Wayne, pay an average 0.046 interest on basic savings. 

As a whole, Indiana averaged 0.056 percent—making it fifth-lowest among 50 states and the District of Columbia, according to the survey. Arkansas had the highest average savings return, at 0.204 percent, while North Dakota had the lowest, at 0.035 percent.

In a banking world where you once could earn 5 percent on a savings account, even the country's most generous current rates might seem sub-atomic. Los Angeles-based GoBanking didn’t use an electron microscope, but rather surveyed more than 4,000 financial institutions around the country.

The Indianapolis metro area came in at mid-pack, at No. 55 for highest rate among the nation’s top 100 cities. Fort Wayne was No. 95.

The city with the highest average rate was New Orleans, at 0.216 percent, while the lowest was Lincoln, Neb., at 0.034 percent. 

The second-worst city for savings rates was nearby Cincinnati, ranking No. 99 at 0.037 percent. Cincinnati is home of the some of the biggest banks in the region, including Fifth Third Bank and First Financial Bank.

Rates in any city are determined by numerous factors in the local economy, said Amanda Garcia, an analyst at GoBankingRates.

The intensity of competition among banks in a given market can be one factor, said Michael Renninger, CEO of Renninger  & Associates in Carmel.

Each bank’s management needs to balance the need to attract deposits with loan demand, anticipated deposit run-off, availability of other borrowing alternatives and other liquidity needs, he said.

“For instance, if loan demand is light, the need to attract additional deposits is diminished,” he said.

Other factors include rates being earned by the bank on investments and loans, Renninger said.

“We all know that actions by the Federal Reserve Board have kept [lending] interest rates artificially low. Low rates earned by banks on assets results in lower rates paid by banks for deposits," he said.

But Indiana's dismal ranking among other states makes one wonder why financial institutions pay such low interest rates here in the state.

It could be that banks in the state have comparatively lower loan demand, Renninger said.

GoBankingRates.com Managing Editor Casey Bond noted that the difference in average rates between the highest- and lowest-raking states was pretty miniscule—just 0.169 percent.

"The averages are indicative of the local savings climate and can help depositors determine whether banks are actively encouraging deposits in their area," Bond wrote in the study.

“After years of rock-bottom rates we’re all hoping to see savings account rates rise again,” Bond wrote. “And while we might not get our wish any time soon, some depositors will find that they can eke out slightly higher earnings on savings if they live in the right place.”

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  • Ditch your local bank (at least for savings)
    Online, FDIC-insured banks pay 10+ times the amount that local banks pay. Yes, the rates are not great historically speaking, but they're way better than want local banks are paying. Current savings rate examples: Ally Bank 0.85%, GE Capital Bank 0.90%. No fees, no minimums (I sound like a bank salesman!). Check for yourself: https://origin.bankrate.com/funnel/savings/savings-results.aspx?local=false?s=33

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  1. The east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

  2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

  3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

  4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

  5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.

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