What You Need To Know About A Rising Rate Environment

rising interest rate environment

Ever since the economy started to pick up after the recession, the Fed has been raising interest rates. While that may mean the economy is doing well, it also means there are things you need to know to protect and grow your investments.

Read the news

This may seem obvious, but you need to stay on top of what’s happening in the economy.

Here’s the thing: in a rising rate environment, banks will raise interest rates on loans the same day that new interest rates are announced, however, banks are not as quick to adjust your deposit account rates.

It’s in your best interest to stay informed because banks are not always quick to call higher interest rates to your attention.

Negotiate with your bank

When you see rates are rising, it’s up to you to call your bank and negotiate new interest rates on your deposits.

Look, your money is valuable, and banks are using your deposits to make money on loans they give out. We totally believe they should be able to make money because our economy needs banks to be successful, but we also think you should be getting a piece of the pie as well.

Know your earnings credit

On accounts that can’t collect interest, you need to know  if you receive an earnings credit, and if so, how your business accounts are affected by it. What is that exactly? Your earnings credit looks like interest, smells like interest, but isn’t interest.

What an earnings credit does  is cover all banking fees associated with the account. If your earnings credit is higher than the fees, your bank pockets the extra.

For instance, if your earnings credit is $200 but your fees are only $100, your bank gets a hundred bucks. You want to keep your earnings credit at the same level as your fees so you’re not losing that money.

In a rising rate environment, your earnings credit may go up, so you need to make sure you know its current level and if it is covering your fees but not exceeding them. Winners and losers in a rising rate economy

For the most part, banks can be one of the  winners when the Fed raises rates. That’s not necessarily bad, but you need to get in on the action as well. If you stay proactive and know what’s going on, you’ll be able to be a winner, too.

This is also where ADM can play a role. Calling every single bank you hold a deposit with is pretty time consuming. But when you do your deposits with us, we do that heavy lifting for you.

We’re making sure you are getting competitive rates, and banks work with us because we make large deposits on behalf of our many customers, so it’s in their best interest to negotiate with us.

Want to learn how ADM can make sure you get the best rates? Get in touch!


*American Deposit Management Co. is not an FDIC/NCUA-insured institution. FDIC/NCUA deposit coverage only protects against the failure of an FDIC/NCUA-insured depository institution.