Why is the yield on our cash account so high?

November 9, 2022
As of May 4, 2023, the Mayfair cash account APY is 4.42%.

Since launching the Mayfair cash account in October 2022, we're asked daily how we can offer an APY so much higher than what customers find at their own bank. The answer isn't any cleverness on our part or a novel financial structure—it's good old-fashioned economics. Banks can pay you the same APY we offer. But they make more money when they offer you a lower rate and keep the difference.

A simplified version of how banks work helps explain this. A bank will make loans at a certain rate to earn money, and pay its depositors like you another (lower) rate. The lower the rate they pay to you, the more profit they make. Historically, banks have consistently been quick to raise rates they charge on loans, but slow to raise what they pay on deposits, as you see in the chart below. That sliver of blue at the bottom is what you can expect them to pay you, yet that's only a tiny part of the interest they're charging at the top of the green area.

Source: FDIC, National Credit Union Administration, Federal Reserve Bank of St Louis

Benefits for businesses

Why do banks do this? According to Wealthfront, “We believe many banks pay you a low rate on your deposits because they’ve learned they can generally get away with it. Back around the start of the 2008 financial crisis, banks lowered interest rates to nearly zero and learned that they didn’t lose depositors.” As a result, while we’ve seen loan rates soar over the course of 2022, the national average deposit rate remains at only 0.21%.

Enter Mayfair. We believe you deserve a larger piece of the pie, and we prefer long-term business relationships over squeezing short-term cash out of our customers. If we can offer you valuable products over many years, that’s better for both of us.

Best of all, our automated software ensures that you never lack the operating cash you need to run your business day-to-day. It's like having a treasury team that works for you 24/7 to maximize the value of the money you already have.

Interested in learning more about cash management and our solution?