Consumer bank deposit rates are rising as high as they have at any point in the last 18 months. What’s the rush to deposit more cash in the banking till? It’s actually a combination of rosier economic predictions, more income, and a stronger savings ethic in the aftermath of the Great Recession. The question is now – can credit-wise consumers keep it up?
The data checks in from MarketRatesInsight.com, which publishes a “National Pricing Indicator” which includes U.S. consumer bank deposit rates.
MRI reports that even as bank deposit rates are at historic lows (Bank of America offers a paltry 0.05% rate for its regular savings account), bank consumers are pouring more cash into deposits than at any point since summer, 2009.
And, over the past 36 months, U.S. bank deposits increased by $1 trillion, MRI reports.
Why are consumers ignoring low interest rates and plowing more and more cash into bank deposit accounts? Part of it is uncertainty – Americans are really unsure where the economy is headed, so putting money away for a rainy day seems like a good idea. When Americans are anxious about the economy, more money goes into fixed-rate investments (like banking accounts) and less into riskier ventures like the stock market.
Consumers are also concerned about paying down debt. In 2009 and 2010, Americans have paid down $1 trillion in debt, according to the Federal Reserve Bank of New York. Having more money on hand to pay down credit card debt has become a big priority for U.S. consumers. So not spending the money, and instead pouring it into bank accounts to pay bills, is certainly a reflection of the “New Normal” economists are talking about.
However, all that saving may not be helping the economy in the short term. Economists would love to see more consumers out there spending rather than saving. But over the long haul, the newfound respect for the traditional bank deposit account could show that Americans are finally mending their wicked financial ways.
Image by mccmicb, via Flickr