Question of the Day: What percent of American bank deposits are controlled by online banks?
Answer: 8% (but growing almost 3X faster than American deposits over all)
This chart demonstrates why their growth should continue to outpace traditional brick and mortar banks. The interest rate they offer on their savings accounts has continued to rise almost matching Federal Reserve interest rate hikes. Meanwhile interest rates at traditional banks....remain close to 0%.
- Why should you care about interest rates when choosing a bank?
- Would you consider using an online bank? Why or why not?
- Why do you think online banks have such a small percentage of deposits given that the interest rates on savings accounts is so much higher than the competition?
- You have $1,000 saved for college and earn almost 0% in your current savings account. You just saw an ad for an online bank offering an interest rate of 1.5% per year. How much more would you earn per year by making the switch to the online bank? Would you do it?
Behind the numbers (NY Times):
Some people are noticing. Since the end of 2015, deposits at online banks as a whole have risen by 24.5 percent, compared with a 9.3 percent growth rate for American bank deposits over all, according to Fitch. That growth is from a much smaller base, but online banks now control roughly 8 percent of U.S. deposits, up from 5.5 percent in the middle of 2010, according to Ally Financial, an online lender.
Looking for more resources to help encourage savings habits? Check out the NGPF Saving resource page.