Despite more and more people using credit cards, cash is once again in the top, to our big surprise. Thanks to a steady job market which is reluctant to spend, mostly due to economic uncertainty, a lot of middle-class US citizens are now hoarding their money in banks.
According to USA Today, citing a report from the Federal Deposit Insurance Corporation, the total bank deposits rose by 6.6% in 2016, reaching $10.7 trillion, exceeding the steady growth seen over the past years.
An 11-years-old record was just passed in the US!
Currently, deposits are 77.6% in the first quarter of the year – measured as a percentage of bank assets – this being the highest number since 2006. Also, it looks like Americans have a thing for liquidity!
With almost $2 trillion in checking accounts, the average U.S. value in such a deposit is now $3,600, reaching a huge value, compared to 2007, when it was just $1,000.
This growth is mostly the effect of the resilient U.S. economy which keeps expanding, after the financial crisis. Also, it looks like steady paychecks have also contributed to this. A lot!
“Incomes are up and people are choosing to deposit (their money) rather than increase spending,” Paul Merski, group executive vice president of congressional relations and strategy for the Independent Community Bankers of America, declared.
No interesting investment options, at least for the moment
Besides this, a lack of investment options is also influencing a lot this hoarding behavior. Just a half of Americans are tempted by the stock market, while other options, like certificates or deposits, alongside savings accounts, are offering interest rates that are way too low, compared to checking accounts.
Mike Moebs, CEO of research and consultancy services company Moebs Services, says that consumers aren’t actually spending!
“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,” he added.