Updated on Monday, May 17, 2021
Deposits in U.S. commercial banks grew substantially in 2020, from $13.2 trillion at the start of January to $16.1 trillion at the end of December â€” a 22% increase.
In light of this surge in deposits, MagnifyMoney researchers explored how bank fees and interest have impacted consumersâ€™ â€” and banksâ€™ â€” bottom lines in the past decade. Between 2011 and 2020, deposit account bank fees outweighed interest by about 1.2 times.
â€śFor more than 10 years, deposit rates have generally been very low,â€ť DepositAccounts founder Ken Tumin says. â€śThe average consumer has been paying out much more in bank fees than they receive in interest on their savings.â€ť
MagnifyMoney examined 10 years of data and found that Americans paid the lowest total â€” $32.2 billion â€” in bank fees in 2020 than in any year since 2011.
Consumers have paid $345.1 billion in bank fees over this period, or a yearly average of $34.5 billion. Hereâ€™s a year-by-year breakdown:
|Bank fees since 2011|
|Year||Fees paid by bank account holders|
The coronavirus crisis could be the catalyst for the 2020 drop in fees, Tumin says. When the pandemic started in early 2020, many banks provided temporary fee waivers to assist impacted customers.
In addition, the federal government began issuing economic impact payments (also known as stimulus checks) and offering various relief programs to assist Americans with their bills. This likely resulted in fewer overdraft fees â€” which Tumin says make up a large percentage of the total fees that banks receive â€” being collected.
Tumin also cites consumers spending less money due to pandemic-related restrictions as another reason for the drop in overdraft fees.
How did this drop in fees affect consumers on average? Average bank fees in 2020 were $53.79 per account, which is significantly lower than $64.84 per account in 2019.
Bank fees per account peaked in 2017 at an average of $66.66. On average since 2011, banks have charged $60.75 yearly in fees per deposit account.
In 2019, banks paid out $66.1 billion in interest, but that amount plummeted to $26.6 billion in 2020, or about 2.5 times less. Since 2011, banks have collected $231 billion in interest â€” or an average of $23.1 billion yearly.
Notable: Banks paid out more interest in 2018 and 2019 than they collected in fees. Banks paid out $45 billion in 2018 and $66.1 billion in 2019, far above any year in the past decade â€” and the only two years that total interest exceeded bank fees in this period.
Compared to the interest payouts from 2011 to 2017, though, the 2020 amount was still high. Hereâ€™s a year-by-year breakdown:
|Interest since 2011|
|Year||Interest paid out by banks|
The pandemic relief measures that impacted the amount of bank fees collected also affected the amount of interest paid out on checking and savings accounts, Tumin says.
The Federal Reserve assisted consumers when the pandemic began, including lowering its benchmark interest rate to near zero. As the Fed lowered its rate, deposit rates also fell, reducing the amount of interest banks paid out.
This drop in fees and interest may have been years in the making, though. In 2017 and 2018, the Fed raised its benchmark interest rate seven times. This led to an increase in deposit rates at many banks.
The Fed started to reverse its rate hikes in August 2019, causing deposit rates to start falling in the second half of 2019.
Deposit rates then plummeted in March 2020 after the Fed slashed its benchmark interest rate to help the economy try to overcome the pandemicâ€™s effects.
The interest paid out to consumers dropped in 2020 to $44.48 from a record-breaking $118.33 the year before â€” a fall of $73.85.
In the past 10 years, average bank fees per deposit account have ebbed and flowed, as has the amount of interest paid out to consumers. The average interest paid out by U.S. banks grew by:
From 2019 to 2020, though, it fell 62%. Since 2011, banks have paid out $40.67 yearly per deposit account.
Despite all the turmoil that came banksâ€™ way in 2020, they more than doubled what they collected per account compared to 2019. For each dollar paid out in interest to deposit accounts in 2020, banks collected $1.21, a large jump from 55 cents in 2019.
However, this win for banks in 2020 still left them falling behind the much more lucrative years earlier in the past decade. Hereâ€™s a year-by-year breakdown:
|Bank collection per account since 2011|
|Year||For each dollar paid out in interest to deposit accounts, banks collected …|
Since 2011, banks have, on average, made out better than they did last year. Banks have charged a yearly average of $60.75 in fees per deposit account since 2011 and paid out $40.67 per deposit account â€” or $1.49 in fees for each dollar in interest (better than 2020â€™s $1.21).
â€śConsumers who are not careful with their bank accounts will likely pay much more in bank fees than they earn from interest on their deposits,â€ť Tumin says. â€śThis will likely continue since interest rates are expected to remain very low for at least the next couple of years.â€ť
Tumin believes it may worsen as fee waivers and government relief programs end, which may result in more overdraft fees.
Additional government impact payments in 2021 have contributed to record levels of deposits at banks. As noted at the top, deposits in U.S. commercial banks stood at $16.1 trillion at the end of December 2020. As of the latest available data through April 28, 2021, that figure now stands at nearly $17 trillion.
â€śThe large supply of deposits has put more downward pressure on deposit rates,â€ť Tumin says. â€śThis is unlikely to change much until the pandemic completely ends and consumers return to their pre-pandemic spending habits.â€ť
In the second half of 2021, Tumin expects consumers to start returning to their pre-pandemic spending habits as the pandemic ends.
â€śThat should help the economy strengthen, which should boost loan growth and reduce deposit levels at banks,â€ť he says. â€śSuch a combination should result in some small gains in deposit rates, but significant gains in deposit rates are unlikely to occur until the Federal Reserve starts raising its benchmark interest rate, which is unlikely to occur before 2023.â€ť
MagnifyMoney analysts aggregated quarterly call report data provided by the FDICâ€™s Federal Financial Institutions Examination Council to determine the average amount of bank fees charged for each deposit account and the average amount of interest paid per deposit account. Interest paid out included transaction accounts and savings deposits (including money market deposit accounts), which are predominantly checking and savings accounts. Certificates of deposit (CDs) were excluded.
The average amounts were calculated by dividing the total amounts charged and paid out each quarter by the total number of deposit accounts at the end of each quarter and then summing those results for each calendar year.