The news: US banking consumers are keeping their funds at traditional big banks, despite better interest rates on offer for deposits at smaller banks and other financial alternatives, per The Wall Street Journal.
Savers missing out: US consumers that keep their deposits in savings accounts and money market accounts at the five largest banks are missing out on billions of dollars by sticking to lower interest rate accounts.
Staying put: Why are customers leaving all that extra money on the table instead of making the move to higher-yielding accounts? According to Gary Zimmerman, CEO of MaxMyInterest, a company that moves customers’ deposits to new accounts, there are a few reasons.
Long-term customers at big banks usually build up additional benefits that they don’t want to give up. Some banks offer loyalty benefits like low or no fees, mortgage origination discounts, and lower rates on auto and home equity loans.
Change is slow but it’s happening: Though many consumers have stuck with larger banks with lower-yielding accounts, there are signs that both the banks and consumers are making changes.
Our take: It’s tough to tell if savers’ tendency to stick with lower-yielding deposit accounts when better options are available is a result of strong customer loyalty or inertia. But banks shouldn’t take the stickiness for granted.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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