Banks are paying a pittance on deposits, but customers don’t seem to care.
Some banks are slashing deposit rates. Others are keeping already-low rates at next to nothing, sometimes 0.01%. But customers keep stashing cash at banks anyway.
The spring surge was driven primarily by bank customers with balances under $2,500, according to Novantas, a financial-services research firm. They increased their total deposits by 66% from mid-April to late May, compared with just 1% for higher-tier customers, or those with deposits of at least $5,000.
But for many people, money stashed in a savings account represents an important protection against potential financial hardship. Easy access to that money outweighs the fact that they are being paid peanuts in interest.
Andrew Frisbie, executive vice president for consumer pricing at Novantas, said the pandemic had made many customers more interested in saving money for an emergency.
“The pandemic was the ultimate rainy day,” he said.