Quick Cash Access May Be Culprit Behind Deposit Flux
Rates and balances for money market accounts and certificates of deposit continue to seesaw indicating that consumers may be reluctant to lock their money amid economic uncertainty.
That's according to research firm Market Rates Insight. Nationwide, MMA rates at banks kept up their downward trend. However, balances increased by $380 billion in the first half of the year. The data tracked does not include rates at credit unions. The average rates for CDs are also continuing to drop with balances mirroring the slide. MRI found that balances decreased from $128 billion for short-term CDs up to one year and were virtually flat for those over three years.
Those CDs in the one to three-year term range were down 0.24% followed by MMAs at 0.19%. Long-term CDs over three years had the smallest drop at 0.05%. At the same time, MMA balances increased by $380 billion while short-term CDs up to one year dropped $128 billion.
"These findings indicate that consumers are reluctant to lock their money, and prefer to have cash readily available even if it means lower interest rates" said Dan Geller, executive vice president at MRI. "Fear of inflation combined with uncertainty about the prospects of meaningful economic recovery is causing some consumers to sit on their cash."