passing along savings on interest rates

[VicNicSor]

rip off
If someone rips you off, they cheat you by charging you too much money for something or by selling you something that is broken or damaged.
The Consumer Federation claims banks are ripping you off by not passing along savings on interest rates...
Collins Cobuild

Explain to me please tha part in bold.
Thanks.

 

[boozer]

It is a complex image and largely a matter of conjecture out of context, but the following picture is forming inside my head:

For some reason, banks now have to pay less interest on deposits. In this way, they save money. However, that means they can now afford to charge you less when you draw a loan from them. This they do not do. In both cases 'you' are the same 'you' - the consumer. Whether you are a depositor or a debtor is of no importance - the article just addresses 'you' in whatever capacity.

But it could easily mean something else...

 

[ewie]

Banks borrow money (usually from each other*). They have to pay interest on those loans, at a given rate (e.g. 8%).

At the same time, ordinary bank customers borrow money from banks. They too have to pay interest on those loans, at the same given rate.

It occasionally happens rolleyes:astonishingly) that when the given rate of interest drops (e.g. to 4%), while banks now pay 4% on their loans, they somehow 'forget' to start charging their customers at the new lower rate. That's not passing along savings on interest rates.

*Why on earth they do this I can't begin to imagine.

 

[boozer]

Ah, yes, Ewie, I think the principle is the same - whether they have borrowed money from people (deposits) or from other banks makes no difference.

 

[VicNicSor]

I've understood your explanations, and, in general, have understood what this phrase means.
But could you tell me, what exactly 'pass along' and 'on' mean in this context? I didn't find it in dictionaries (in this meaning), maybe this is an economic term?

 

[gramman]

>>what exactly 'pass along' and 'on' mean in this context

Here's a definition from Cambridge Dictionaries:

pass sth on/along to sb

if a company passes higher or lower costs on to its customers, it raises or reduces prices:

The lack of branches means financial companies are able to pass on significant cost savings to their customers.

Banks typically borrow from each other to meet regulatory requirements for deposits set by a central bank, like the Federal Reserve in the US.

 

[VicNicSor]

if a company passes higher or lower costs on to its customers, it raises or reduces prices:
The lack of branches means financial companies are able to pass on significant cost savings to their customers.

I think I understand this example but I don't understand how it fits the original
are able to pass on significant cost savings to their customers. -- pass on something to someone
Banks do not pass along savings on interest rates... -- pass along something on something

 

[boozer]

No, the preposition 'on' is here for a different reason.

You save on heating and this means you pay less for heating.

Similarly, banks save on interest rates, which means they pay less money in interest (to someone else...).

 

[ewie]

Banks do not pass along savings on interest rates... -- pass along something on something

Banks pass along [savings on interest rates] [to their customers].

The 'to the customers' part isn't explicitly mentioned because it's obvious from the context who is the victim of that particular bank rip-off.

=

The Consumer Federation claims banks are ripping you off by not passing along [savings on interest rates] [to you].

 

[VicNicSor]

Thank you, all !