Commercial banks stay operational by lending at higher rates and letting customers save at dirt cheap rates. But have you seen those rates on savings accounts? They make Treasury bonds look like they’re giving cash away. There are many ETFs that may be a better way to earn income.
U.S. News & World Report enumerates the three ways commercial banks are ripping people off.
- First, most commercial bank savings accounts are only paying 0.10% interest. Higher yielding CDs offer around 1.5% per year.
- Secondly, banks also include monthly fees, such as fees for not maintaining an account minimum and now withdrawal fees for taking out your own money.
- Lastly, some banks are even including stipulations that prevent accounts from accruing interest. For instance, if an account is below minimum balance requirements, the account may not earn interest for the month.
There are a variety of ETFs in several asset classes that are delivering better yields without the harsh penalties that banks seem fond of these days:
- SPDR Dow Jones Industrial Average (DIA) yields 2.45%
- SPDR S&P Dividend (SDY) yields 3.44%
- iShares iBoxx $ High Yield Corporate Bond Fund (HYG) yields 8.98%
- iShares S&P U.S. Preferred Stock Index (PFF) yields 6.92%
- WisdomTree International LargeCap Dividend (DOL) yields 8.4%
- Rydex S&P Equal Weight Utilities (RYU) yields 3.9%
Read the disclaimer: Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.