Banks deposits fall for first time in 2 decades

By Becky Yerak
Posted Sep. 7, 2010 at 8:11 a.m.

It appears that consumers have had enough with the low interest rates paid by banks. Bank deposits are shrinking for the first time in two decades, a new analysis shows.

Market Rates Insight, a San Anselmo, Calif.-based tracker of pricing data for the financial services industry, said in the first half of 2010, deposit balances in U.S. bank branches fell by $29 billion or 0.4 percent.

For nearly two decades, deposit balances withstood fluctuation in deposit rates by growing steadily.

The first half of 2010 marks the first time deposit balances are showing sensitivity to the drop in deposits rates.

The national average rate for deposits fell from 1.2 percent to 0.99 percent in the first half of 2010 – a drop of 21 basis points; 100 basis points equal one percentage.

“For nearly two decades, deposit balances as a whole were very inelastic, and kept on growing despite substantial fluctuation in the average rate paid on deposits,” said Dan Geller, executive vice president of Market Rates Insight. “It looks like in 2010 the inelasticity reached it limit.”

Read more about the topics in this post:

One comment:

  1. John in Glenview Sep. 7, 2010 at 9:17 pm

    Dear Becky ~

    Please go back to school for basic math:

    “unenticed by 0.01 percent interest rates” does not equal “0.99 percent”.

    You are off by an order of magnitude. But you probably need to look that up.