About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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How Much of Your Bank Deposits Are Held At Internet Banks?


Do you hold most of your bank deposits at internet banks? If you’re an average Joe, most of your bank deposits are probably at brick-and-mortar institutions. According to this Financial Brand article, the online share of deposits was only 4.2% in 2012. In addition, the article shows that the growth of online deposits has slowed in recent years. There’s an interesting graph that shows the growth rate of online deposits falling from 28% in 2007 to 12.3% in 2012. During this same timeframe, the growth rate of brick-and-mortar deposits have increased from 3.3% to 7.4%. Thanks to DA member Shorebreak who posted on this article in this forum thread.

The article attributes the slowing growth of online deposits to two factors:

  • Maturity of online banks
  • Zero interest rate environment

In my opinion, the very low interest rate environment is the most important factor. I described how this hurts the appeal of internet banks in my post Do Internet Banks Offer Enough Advantages?. The higher internet savings account rates used to be a major incentive to go online (Remember those 5% and 6% online savings accounts in 2007?) The interest rate spread between internet banks and brick-and-mortar banks used to be over 3 percentage points back then. Now that most internet banks pay less than 1% APY on their savings accounts, the spreads are under one percentage point.

Poll Question

This article gave me the idea of this poll question: As a percentage of your bank deposits, how much are held at internet banks? I have a feeling, this percentage for many of us will be under 50% since so many of us use credit unions for CDs. It’s not part of the poll question, but do you plan to add more to your internet bank accounts or to accounts at brick-and-mortar institutions? Please let me know in the comments. If you’re cutting back on CDs due to the low interest rates, you may actually be adding to your savings accounts at internet banks. As I mentioned in my post, CDs or Savings Accounts in Today's Low-Rate Environment?, CDs don’t hold much rate advantage over online savings accounts. Member Pearlbrown just posted in the forum on a Credit Union Times article that shows that credit union CD balances are in a 4-year freefall. I think this trend will continue as long as this zero interest rate policy continues.

Related Posts

Shorebreak   |     |   Comment #1
Who knows how long this ZIRP and QE fiasco will continue so at the present time I remain in a limbo state as far as adding more to either internet-only or brick-and-mortar institutions. Currently my internet-only bank accounts hold 25 percent of my deposit funds with saving/money-market account balances increasing overall as long-term CD opportunities evaporate on a daily basis.
Anonymous   |     |   Comment #2
Is there a poll?
Anonymous   |     |   Comment #3
It is in the graphic at the top.
emdtech   |     |   Comment #4
SFGI Direct holds all of my short term funding on a taxable basis (.94%). Alliant CU holds day to day & IRA / Roth money (.68% to 3%). Key Bank has cash flow and 10 year CD's (5.7%) - mostly Roth / traditional IRA's. Just looking at those companies, B&M hold ~75%, 25% to Internet Banks. Interest rates upon renewal have been a challenge to predict.
paoli2   |     |   Comment #5
Put me in the "none" category.  Too old fashion to put money into anything I can't walk into.  Just a quirk of mine.
pearlbrown   |     |   Comment #6
I wouldn't hesitate to do business with Internet banks.  However, I'm currently in the "none" category because I go where the rates are - as long as the institution is insured by either the FDIC or NCUA and has a certain minimum health rating.  As it happens, when funds have become available recently, the great rates I found (thanks, Ken!) have been at B&M institutions.    
wolfie   |     |   Comment #7
I'm with pearlbrown.  I follow rates as long as they are insured by FDIC or NCUA.  I have about a 50/50 split with B&M v. Online banks.  Show me the money!!!
Anonymous   |     |   Comment #8
I go along with Pearlbrown's comments too.  Accept I haven't found any GREAT rates anywhere!  Great rates are a thing of the past and are non-existent today and the foreseeable future.
pearlbrown   |     |   Comment #9
Two points:  

a) would like to amend earlier statement in post#9 from "I wouldn't hesitate to do business with Internet banks." by adding "and I have done business with them in the past".

b) Ken, I wonder what a poll of your readers as to what percentage of bank deposits are held at banks vs credit unions might reveal.  

Considering only CDs, 88% of my funds are at credit unions, which is consistent with your statement that most of us use them for CDs.  However, the percentage is essentially unchanged when considering total cash deposits across the board (CDs, reward checking accounts, savings, Money Market accounts, etc).   My distribution may/not be typical - but clearly I do the majority of my business with credit unions.  As mentioned in the prior post, it's not due to personal preference, but because that's where I'm finding (thanks again to you) the best rates for the products which interest me. 
Anonymous   |     |   Comment #10
I would estimate that at least 2/3 of my liquid assets are in internet banks (those without a branch office). I have only small balances in local banks in my area because the interest rates for all of them are all below 0.25%.  I don't have RCAs.
lou   |     |   Comment #11
I consider any money that is deposited in CDs or savings accounts at credit unions or banks not located in my community to be internet banks, even though they have brick-and-mortar branches. Since all transactions are done by either mail or online, I don't really see any difference.
Anonymous   |     |   Comment #12
I'm in the high end of the 70% to 90% group and am surprised that, by far, most of the respondents are in the 70% to 100% range.  At least, I'm not out on the limb alone and that in itself is of some comfort. Thanks to this forum and the internet, we are not at the total mercy of the local banks, etc.
Anonymous   |     |   Comment #13
All I have local is a checking account at Chase and I use a branch (Just the ATM for all services deposits and cash).  All my CD's are at internet banks or CU's throughout the country.
Shorebreak   |     |   Comment #14
Re: pearlbrown - #9, Wednesday, April 17, 2013 - 5:46 PM

"b) Ken, I wonder what a poll of your readers as to what percentage of bank deposits are held at banks vs credit unions might reveal."

At present, 70 percent of my deposit account funds are at credit unions. 

cumulus   |     |   Comment #15
Like PB, I pretty much follow the rates (with great thanks
to Ken's efforts).  My non CD deposits are 98% with Internet
banks; using lou's (post#11) definitions my CD's are  all with
Internet banks/credit unions.  There are no competitive local
rates in my community.
Anonymous   |     |   Comment #16
I have 22 CDs, all of them are at credit unions except for 1.
Anonymous   |     |   Comment #17
Non CD money is in Vanguard,TDAmeritrade,Merrill Lynch, American Express and Chase.
psjf   |     |   Comment #18
Very interesting poll and comments.  Like PearlBrown said, i would be interested to see another poll showing the % of deposits in credit unions vs. banks.  
Smokeboat   |     |   Comment #19
"Who knows how long this ZIRP and QE fiasco will continue" .... just untill default.
Wil   |     |   Comment #20
I have about 50% of my cash in internet bank accounts. Both of my two CDs are at internet banks; one is maturing in three months, and I don't plan to put the proceeds into another CD.
Anonymous   |     |   Comment #21
Most of the posters are mixing up Internet banking with Internet only banks (CUs).

There are very few Internet only banks and their products and rates are inferior to other banks and credit unions.

Every bank and every credit union that has B&M branch has Internet presence and that is what most of you reported to Ken in the survey i.e. Internet only transactions for opening CDs and bank accounts.
Wil   |     |   Comment #23
#21: Exactly how do you know that? Telepathy? None of the comments seems to indicate a failure to distinguish between internet banking and "internet-only banks." Also, on exactly what factual basis do you base your claim "There are very few internet only banks and their products and rates are inferior to other banks and credit unions." Have you conducted a survey? Or could you provide a reference to a survey?
Shorebreak   |     |   Comment #22
Re: Anonymous - #21, Thursday, April 18, 2013 - 10:46 AM

Here is a review of the top ten online-only banks for 2013

Anonymous   |     |   Comment #24
To Shorebreak - #22.

Would you please tell me from the list of your web page, which banks do not have brick and mortar presence?

And, which ones are online banks only?
Shorebreak   |     |   Comment #25
Re: Anonymous - #24, Thursday, April 18, 2013 - 8:59 PM

All you have to do is click on the name of each bank at the top of the review to determine if any of them have a B&M branch.

Shorebreak   |     |   Comment #26
Re: Anonymous - #24, Thursday, April 18, 2013 - 8:59 PM

I believe Flagstar and Everbank have B&M branches available.
dpandslemmen   |     |   Comment #27
As to pearlbrown comment of Credit Union vs. Bank. currently for me I have my non-retirement funds, Non-investment funds, funds that are used for everyday expenses:

47% Credit Union

21% Bank

32% Other - employer savings program (this is not stock or investment in the company)

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