Why Interest Rates Are So Low

By Stacy Tran

For the last two years, money market and CD rates have been steadily falling. No matter where you look you are not going to find anything very high right now. For retirees who rely on interest income, this is a trying time. Retired people who are older have Social Security and many of them also need the income that comes from interest on their savings. With interest rates so low, this interest income has dwindled and put many retirees in a bind.

With CD interest rates and money market interest rates so low, there is really no safe place for retirees to put their money and get a reasonable rate of return. This is why retirees are also having a tough time in this atrocious economy. They don't have to worry about losing a job like many folks do but their income has taken a big hit too.

CD and government bond interest rates are usually going to be higher than those of money market accounts. This is because the money you put in a money market account is not locked up like it is with a CD. Interest rates can depend somewhat on the time frame you agree to loan the money and with most money market accounts, you can make periodic withdrawals and you can take all of it out at any time. This means you get a lower interest rate than something like a CD where you agree to leave the money in for a predetermined length of time.

Money market accounts are a place to park money that is in transition and they are very common in stock market portfolios and stockbroker accounts. No matter how much you search, you will not find any interest rates that are anywhere near as high as they were 3 or 4 years ago. Anyone that has extra money and wants a safe place to put it should be prepared to get little in return.

There is something called social lending that will give you a higher rate of return but it does come with some risk. With social lending, you are lending money to another person rather than a banking institution. This is done through the Internet and you might be able to get a rate of return of 6% or higher. In exchange for this higher rate you will be exposed to more risk as the person you loan your money to could default on the loan. Even with the risk, if you absolutely need to find a place where you can get a higher interest rate, this type of social lending is worth looking into. - 23208

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