BIRMINGHAM, Ala.–While the failures of several banks has been getting the headlines, there is actually some good news for the average person, according to a new analysis--over the last two years, banking has shifted to favor the depositor.
“Not only have the amount of banking fees dropped, but consumers’ interest earnings have risen dramatically — with interest rates seeing particularly notable increases in the third and fourth quarter of 2022,” stated DepositAccounts.com in a new study.
For its study, DepositAccounts.com said it looked at Federal Deposit Insurance Corp. (FDIC) data to determine how banking fees and interest earnings changed between 2021 and 2022.
The Key Findings
According to the study, the key findings include:
- Banks paid out $78.7 billion to domestic deposit accounts in 2022, according to analysis of quarterly FDIC filings. “This contrasts sharply with the $24.3 billion paid out in 2021, for a year-over-year increase of 223%.”
- Banks collected $33.1 billion in fees on these same accounts in 2022, down from $34.0 billion in 2021, a drop of 2.6%. “Combined, this represented a net gain for depositors of $45.6 billion in 2022, compared to a net loss of $9.6 billion in 2021.”
- This translates to average interest earnings of $90.99 per deposit account in 2022, compared to $32.60 in 2021, a gain of 179% for depositors. “Deposit accounts include demand deposit accounts, such as checking accounts; savings deposit accounts; time deposits, such as certificates of deposit; and certain retirement savings accounts.”
- Meanwhile, the typical account was charged $39.35 in bank fees in 2022, down 12% from $44.86 in 2021. “Overall, this left depositors with a surplus of $51.64, compared with a deficit of $12.26 a year earlier.”
- Looking at the quarterly progression, the average account basically broke even in the second quarter of 2022, earning an average of $10.71 that quarter in interest while paying $10.63 in fees. “By the fourth quarter of 2022, the accounts earned an average of $47.16 in interest and only paid $8.47 in bank charges.”
- In fact, banks paid out $23.0 billion and $41.6 billion in interest on deposit accounts in the third and fourth quarters of 2022, respectively. “This compares to a total payout of $38.4 billion in the preceding six quarters combined.”
- Banks also ended 2022 with 882.3 million individual deposit accounts, an increase of 68.1 million (8.4%) compared to the end of 2021.
‘Widespread Positive Impact’
“The Fed increased its benchmark rate in 2022 at the fastest pace in decades,” said DepositAccounts founder Ken Tumin. “Even though banks were slow to pass on these rate increases to their deposit accounts, over the past year, consumers were still able to see a widespread positive impact on deposit rates.”
What’s also clear is that banks are ramping up their efforts to attract and retain customers — especially with deposit accounts (which include checking accounts, savings accounts, certificates of deposit (CDs) and certain retirement savings), according to DepositAccounts.com.
“One way they’re doing so is by charging less in fees: In 2022, banks collected $33.1 billion in fees from domestic deposit accounts, a decrease of 2.6% from the $34.0 billion collected in the previous year,” the company said.
According to Tumin, overdraft fees — which make up the bulk of fees that depositors pay — are likely the single largest contributor to this drop.
“When you add it all up, depositors walked away with a net gain of $45.6 billion in 2022, a stark contrast to the net loss of $9.6 billion in 2021,” the company said.
The full findings can be found here.
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