CU Checking Account Balances Set Record High

Checking account balances at credit unions spiked 3% during the 12 months ended June 30, 2018, but checking account balances at banks dropped 1.8% over the same period, according to new data from financial institution analytics company Moebs Services.

The Lake Forest, Ill.-based firm said the $2,837 average checking account balance at credit unions marked an all-time high and was largely due to offers of free checking accounts and lower fees compared to banks.

At $4,019 per account, banks still had higher average consumer checking balances, however. In addition, the average checking account balance at thrift institutions rose a whopping 20.7% to $2,374 for the year ended June 30, 2018. But the average checking account balance for all financial institutions remained flat year over year, at $3,673, Moebs Services reported.

“Consumers checking account balances at credit unions and thrifts rose so much in the year ending June 30 it offset the banks’ decline, so overall consumer checking balances per account stay the same year over year,” Moebs Services CEO and Economist Michael Moebs said.

According to the data, credit unions, banks and thrifts held over $2.1 trillion in deposits as of June 30 — far above the $700 million that Moebs Services described as a more normal level. There are approximately 354 million consumer checking accounts in the United States, it noted.

Fundamental changes is consumer habits may be driving the increase in checking account balances, the reported added.

“The true significance of the consumer maintaining the highest checking account balance in the history of the United States is economic uncertainty still prevails,” Moebs explained. “When times are uncertain, the consumer engages less in spending impacting the economy. Wall Street may be doing well, but the American consumers have not fully participated in retail goods or services spending since the Great Recession — buying only what they need and stockpiling the rest in their checking accounts. In fact, for many consumer households the Great Recession of 2008-2009 is not over.”

If and when consumers decide to start spending the money in their checking accounts, some financial institutions could suffer, Moebs warned.

“When this excess $1.4 trillion starts being paid to retail providers of goods and services, these merchants will be the big winners as will the economy, while banks, thrifts and credit unions will be the big losers unless these depositories are prepared to offer much higher rates along with free checking and low fees to keep the consumer, especially millennials,” he said.

The report is the latest is a series of Moebs Services studies finding that the number of checking accounts has fallen by almost 100 million in the last six years, and that banks have 2.5 accounts per household on average compared to 1.1 for credit unions.