Americans are socking away
record sums in bank accounts. But they are leaving money on the table.
Savings
and money-market deposit accounts at U.S. financial institutions held $7.3
trillion at the end of March, according to an analysis of Federal Reserve data
by Moebs Services, an economic research firm in Lake Bluff, Ill. Another $1.6
trillion was sitting in checking accounts. Both figures are all-time highs,
though neither is adjusted for inflation.
The
catch: The accounts often pay mere pennies in interest. Savings accounts carry
an average annual yield of 0.08%, the lowest since at least 1984, according to
Bankrate.com, a bank-account comparison website. Checking accounts yield an
average of 0.06%, and many pay nothing at all.
Jittery
depositors often favor savings and checking accounts and certificates of
deposit because the Federal Deposit Insurance Corp. insures balances up to
certain limits.
Yet
there are ways to get the same protection while generating extra income. In
some cases, that could mean hunting down accounts that pay higher interest. In
other cases, that could mean considering alternatives, such as prepaid cards.
The
cash buildup is in part a sign of caution on the part of individuals and
businesses. Keeping cash close at hand can be wise, as many workers learned
painfully as job losses spread during the financial crisis, and as many
businesses learned when borrowing money became difficult. The amount in savings
and money-market deposit accounts has been growing every quarter since the end
of 2008, according to Moebs.
In
addition, investors may be shifting into cash because of concern about
potential losses in the stock market or other assets, having learned during the
financial crisis that money that is invested in the market can start to
evaporate just when you need it most.
There
also are signs that individuals are curbing their consumption. Consumers spent
0.3% less in April than they did in March, based on the latest
inflation-adjusted data from the U.S. Commerce Department, the third time in
the past six months that spending was flat or down.
"The
money that they would have spent, they're instead putting to the side,"
says Dan Geller, executive vice president at Market Rates Insight, a banking
research-and-analysis company in San Anselmo, Calif.
Finding a better place to keep cash can be simple. Websites such
as Bankrate.com, DepositAccounts.com and WalletHub.com track what banks offer. Those three
provide information about yields as well as fees and account minimums or
maximums. Typically, they also provide links that take you directly to
financial institutions' websites.
The
payoff can be significant. Some savings accounts offer an annual yield of just
0.01%, while one of the highest annual yields on a savings account available
nationwide is 1%, according to DepositAccounts.com.
Someone
who deposits $100,000 into the lower-interest account will earn $100.05 in
interest over 10 years, if the interest rate remains unchanged. Someone who
puts the same amount in the higher-interest account will earn $10,462.21.
Here's
how to make the most while stashing your cash.
Click here
for the full article in the Wall Street Journal.