In an illuminating recent survey conducted by NerdWallet, an intriguing trend has been observed among Americans and their savings habits. The data reveals that nearly three out of five Americans, equating to 59% of those with financial accounts, have successfully bolstered their savings, boasting a more substantial sum now compared to their financial state 12 months prior. This statistic brings to light a crucial question: Are these additional savings accruing the interest they rightfully deserve?
Gone are the days when savings account interest rates were so measly they barely merited a second glance. The current financial landscape offers a striking contrast in the potential for your savings to grow, influenced drastically by the choice between traditional brick-and-mortar banks and their online-only counterparts. With the economic climate continually evolving, selecting the right home for your savings could mean the difference between your money simply sitting idle and it working for you.
Delving into the crux of this financial inquiry, NerdWallet’s survey reached over 2,000 U.S. adults, specifically zooming in on 1,996 individuals who hold financial accounts. Conducted online by The Harris Poll in the mid of the year 2024, participants were quizzed on their banking preferences, whether they lean towards traditional brick-and-mortar establishments, favor the online-only banking experience, or a blend of both. Moreover, the survey sought to unravel what banking features and services hold the paramount importance to these banking customers and what fuels their loyalty to brick-and-mortar banks in an era that is increasingly veering towards digital.
Key findings
Bank users prioritize both online and in-person services: The landscape of banking customer preferences spells out a desire for the best of both worlds. A significant 57% of banking customers pinpoint online access as crucial, with mobile app utility close behind at 54%. Yet, traditional banking hallmarks like physical branches and phone customer service remain indispensable for 53% and 44% of users, respectively.
Many brick-and-mortar banking customers are satisfied with online services: A fascinating revelation from the survey is that among those who solely bank with brick-and-mortar institutions—eschewing the online-only entities—half reported that their needs for online services are fully met by their current banks.
Some opened savings accounts at new banks to get better rates: In a move driven by the quest for superior yield on savings, 12% of Americans have ventured into new banking territories within the last year. The primary motivator? A compelling 36% pointed to the allure of higher savings account interest rates offered by their new banking institutions.
“Every consumer’s banking needs are unique, ranging from the necessity for in-person engagements to the pursuit of minimal fees,” elucidates Elizabeth Ayoola, a seasoned personal finance writer at NerdWallet. “Fortunately, the contemporary banking landscape doesn’t force a binary choice. Combining the strengths of online bank accounts with those of traditional brick-and-mortar outlets can create a banking synergy unparalleled in efficacy.”
Online access, fee-free ATMs important to banking customers
Diving deeper, the survey unveils that the pillars of banking satisfaction for customers encompass online access (57%), a nationwide network of fee-free ATMs (56%), and mobile applications (54%). Amidst the digital preferences, a substantial faction still cherishes the tangible aspect of banking, with more than half (53%) considering physical bank branches as vital, and a notable 44% valuing telephone customer service.
What you can do: Evaluate your current accounts
An overwhelming majority of banking customers (87%) express satisfaction with their current banking arrangement. However, if there’s a nagging feeling that something’s amiss with your current bank, perhaps it’s time for introspection and possibly, a change. It starts with a personal audit—identifying services and features that resonate with your banking ethos and embarking on a quest to unearth banking options that align with your criteria.
“Embarking on this journey necessitates a clear vision of your banking utopia,” advises Ayoola. “Contemplate on what truly matters—be it the absence of fees, the ease of ATM cash deposits, expansive withdrawal limits, responsive customer service, intuitive mobile features, or competitive savings interest rates. Once your banking ideals are crystal, the path to either reaffirmation with your current bank or the exploration of new banking horizons becomes discernible.”
Brick-and-mortar banks still going strong
A pivotal decision in the banking selection process is the dichotomy between opting for a brick-and-mortar or an online-only bank. Each comes with its own set of advantages. While online banks often entice with higher interest rates, traditional banks offer the immediacy and personal touch of in-person banking services. The survey sheds light on the enduring appeal of brick-and-mortar banks, highlighting that a significant 40% of Americans exclusively use these institutions for their savings accounts.
Echoing this preference, half of the individuals with savings at traditional banks, devoid of online-only accounts, underscore their satisfaction with the digital offerings provided by their brick-and-mortar banks. Close behind, 47% revel in the community aspect of local banking, while 46% place a premium on face-to-face customer interactions.
While certain online banks do boast physical branches to facilitate cash deposits and personal customer service, these are predominantly nestled within larger metropolitan areas. Consequently, individuals who prioritize the convenience of cash movements and substantial transactions, along with other in-person services, might find their needs best met by a traditional bank. Nonetheless, for those less dependent on physical branch access, exploring online banks with loftier interest rates could significantly amplify their savings growth, meriting a calculation of potential gains from making the switch or incorporating an online institution into their banking portfolio.
What you can do: Compare rates, just in case
An intriguing 8% of individuals with savings solely in brick-and-mortar accounts hesitated to switch to online banks, doubting the competitiveness of the interest rates. However, with the right insight, this perception could shift. As of September 2024, the allure of DeFi Daily News high-yield savings accounts at online banks, boasting interest rates around 5%, starkly contrasts with the national average APY of a mere 0.46%. Illustrated through a hypothetical scenario—$10,000 saved at 5% APY versus 0.46%—the benefits are compellingly clear with a potential interest earning of $512 versus $46 in just one year. Over five years, the difference becomes even more pronounced. Using tools like a compound interest calculator can vividly bring this comparison to life, emphasizing that rate shifts may occur but online banks have traditionally outshone their brick-and-mortar rivals in offering superior savings account interest rates.
“Transitioning between banks may seem daunting, yet it holds the potential to transform your financial landscape from modest savings to a more substantial nest egg,” reflects Ayoola. “If an outright switch seems too cumbersome, why not diversify? A hybrid banking model, incorporating high-interest online savings for long-term deposits, complemented by a traditional bank for everyday transactions, could offer the perfect equilibrium between convenience and profitability.”
Interest rates are a top reason for opening new savings accounts
The quest for higher interest rates is not a niche trend but a significant financial maneuver undertaken by many Americans. The survey corroborates this, indicating that 9% of respondents shifted their primary bank within the last year, with 12% pioneering into accounts at new banks, primarily driven by the pursuit of better interest rates (36%) and enticing promotional bonuses (32%).
A desire for improved customer service experiences and the aversion to fees on savings accounts propelled nearly a quarter (24%) and 22%, respectively, to embrace new banking relationships. This shift underscores a broader theme of financial empowerment, where customers are no longer passive participants but active seekers of value and service in their banking experiences.
What you can do: Consider all the factors when opening a new bank account
Nearly half of the surveyed banking customers (46%) indicated that a promotional bonus might tempt them to switch their primary banking institution. While these bonuses are appealing, it’s crucial to weigh them against other factors such as interest rates, fee structures, customer service quality, and accessibility. A promotional bonus, although attractive, should be considered as part of a broader assessment to ensure the bank’s overall offerings align with your financial strategy and daily banking needs.
“Selecting a bank that adeptly matches your requirements is a cornerstone to achieving a sound financial foundation,” states Ayoola. “Factors such as competitive interest rates, enticing promotional bonuses, manageable fees, and a suite of banking products can collectively bolster your financial trajectory, enabling both immediate convenience and long-term growth.”
Methodology
This survey, diligently carried out by The Harris Poll on behalf of NerdWallet from July 9-11, 2024, among 2,095 U.S. adults aged 18 and above, of which 1,996 possess financial accounts, sheds light on banking behaviors and preferences across the United States. Employing a Bayesian credible interval, the sampling precision of Harris online polls is meticulously measured. This particular study boasts a sample accuracy of +/- 2.5 percentage points at a 95% confidence level. For an in-depth exploration of the survey methodology, encompassing weighting variables and subgroup sample sizes, inquiries are welcomed at [email protected].
NerdWallet, through this disclaimer, outrightly and implicitly, distances itself from all warranties, be they of merchantability, fitness for a particular purpose, or the accuracy, reliability, and error-free nature of the article’s information. The entity emphasizes that reliance on the information is solely at the user’s risk, without guaranteeing its completeness or accuracy. The content herein should not be perceived as indicative of future performances of NerdWallet or any affiliate or subsidiary. Statements not anchored in historical facts are forward-looking, inherently carrying risks and uncertainties, as suggested by terms like “believes,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates,” or their semantic equivalents. It’s imperative to note these forward-looking statements could significantly diverge from NerdWallet’s discourses to analysts, and its actual operational and financial outcomes.
