Americans are Hoarding Money in Checking Accounts

[bjl584]

https://www.usatoday.com/story/money/2017/07/13/americans-hoarding-money-checking-accounts/472736001/

Americans are hoarding money in checking accounts

Roger Yu , USA TODAY Published 7:00 a.m. ET July 13, 2017 | Updated 3:14 p.m. ET July 13, 2017



Cash — or something close to it — is king again.

Enjoying a steady job market but reluctant to spend freely due to economic uncertainty, a wide swath of middle-class Americans are hoarding money in banks.

Total bank deposits rose 6.6% last year to $10.7 trillion, extending steady growth seen in recent years, data from the Federal Deposit Insurance Corporation show.

Deposits measured as a percentage of bank assets are 77.6% in the first quarter of 2017, the highest since 2006, according to data economic research firm Moebs Services.

And Americans love liquidity. They hold about $2 trillion in checking account now, says Mike Moebs, CEO of Moebs Services, which provides research and consultancy services to financial institutions. The average U.S. checking account deposit is about $3,600, climbing from $1,000 in 2007, he says.


Much of deposit growth surely has to do with the resilient U.S. economy that continues to expand from the depths of the financial crisis. Steady paychecks are the industry's best friend.

"Incomes are up and people are choosing to deposit (their money) rather than increase spending," says Paul Merski, group executive vice president of congressional relations and strategy for the Independent Community Bankers of America.

A dearth of investment options is also driving the hoarding behavior. Only about half of Americans are invested in the stock market, according to Gallup. And other common options, such as certificates of deposits and savings accounts, are offering interest rates that are barely above those of checking accounts.


While saving is deemed a personal finance virtue, would-be shoppers holding tightly onto their budgets can also be a drag on the economy. U.S. consumer spending was relatively flat, up only 0.1% in May, the latest data from the Commerce Department show. Retail and auto sales have also been sluggish.


Consumers "are not spending," Moebs said. "The Great Recession isn’t over for consumers and small businesses. Small businesses feel a great deal of uncertainty and they’re being very cautious, especially with any capital plans they have. "

High debt obligations also are affecting household spending decisions. Total household debt balances rose by 1.2% in the first quarter from the previous quarter to $12.73 trillion, according to the Federal Reserve Bank of New York. That's 11th consecutive quarter of growth and surpasses the peak of $12.68 trillion seen in the third quarter of 2008.


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Bountiful customer deposits also likely helped boost large banks' incomes, and the rising numbers will be reflected in a slew of bank earnings reports due in the next few days.

Banks also stand to benefit from "a reasonable rise" in interest rates, Merski said. Federal Reserve Chair Janet Yellen told Congress Wednesday that the central bank plans to keep raising its key short-term rate. As interest rates rise, the "spread" in the rates between what they earn in loans issued and the interest paid to deposit customers also increases. "If banks can make more spread, they may also make more loans," he said.

[disneysteve]

I'm not sure if the conclusions drawn in this article are necessarily accurate.

We are definitely keeping more money in checking/savings than we were a year ago but because of that, we're also spending more than we were then.

My income has climbed over the past year. Thanks to that, we're able to maintain a higher balance in our liquid accounts and we have the freedom to spend more while still meeting all of our savings goals and other financial obligations.

I realize we're probably in the minority, as usual, but for us, that higher account balance actually equates to spending more.

[Joan.of.the.Arch]

The very use of the word "hoarding" gives a negative slant to the practice of having more money in your checking account. Perhaps it is not hoarding but planning ahead. For example, the kids need new school uniforms in August, two of them will start new instruments in band and will need some travel money for out of town games this school year, plus we're going to have to pay for an after-school program for little Jason, so we better be adding to the checking acount this spring and summer. Oh yeah, and the car will be due for a big maintenance in August. .

[Fishindude77]

With CD rates so low, many are just holding cash it their checking and savings accounts. Why tie money up for 1.5%?

[disneysteve]

The very use of the word "hoarding" gives a negative slant to the practice of having more money in your checking account.

So true. It's sad that the media chooses to portray saving as a bad thing.

Perhaps it is not hoarding but planning ahead.

That would describe us exactly.

Last July, we took out a $15,000 PLUS loan to pay our daughter's tuition.

This year, we've been socking money away regularly and have about $9,000 in our online savings account plus a few thousand more in our checking account as of yesterday's paycheck. Tuition is due August 10. Rather than having to borrow 15K, we'll probably only have to draw about 3K from our HELOC specifically because of the money we've "hoarded" in our checking and savings accounts.

And as soon as we spend that money, we will continue to "hoard" money to pay the January tuition bill.

[james.hendrickson]

So true. It's sad that the media chooses to portray saving as a bad thing.

Yes, my initial assessment as well. This journalist obviously does not understand that a healthy savings rate is one of the foundations of financial health.

[kork13]

The very use of the word "hoarding" gives a negative slant to the practice of having more money in your checking account.

I had the same thought. Heaven help us if Americans are actually responsible in any way with their money, or make plans to use our resources wisely... Not that an average $2000 more in a cash account will be life altering, but whether it's an indication of increased saving, planning for future expenses, or a reduction in current spending, I see any of these things as good news. Of course, it could also be less good if it means people are avoiding investments (and going to safer banks instead), a trend that could trigger a broader downtown in markets, but even that is a natural cycle in macroeconomics.

But the media and much of the government tends to demonize thrift and responsible spending (I mean heck, the government can't handle its money responsibly, so why should anyone else?).... So this slant on the article is hardly surprising.