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2022

Banks paid out $78.7 billion in interest to domestic deposit accounts

BY MAGGIE DAVIS, SPECIAL TO BANKING NORTHEAST MAGAZINE

Two major U.S. banks — Silicon Valley Bank and Signature Bank — closed in March 2023 and First Republic Bank was forcibly sold on May 1. But while the shutdowns came as a shock to the general public, there is some positive news for the average bank account holder: Over the last two years, banking has shifted to favor the depositor. Not only have the amount of banking fees dropped, but consumers’ interest earnings have risen dramatically — with interest rates seeing particularly notable increases in the third and fourth quarters of 2022.

For this study, DepositAccounts.com, trasts sharply with the $24.3 billion paid out in 2021, for a year-over-year increase of 223%.

• Banks collected $33.1 billion in fees on these same accounts in 2022, down from $34.0 billion in 2021, a drop of 2.6%. Combined, this represented a net gain for depositors of $45.6 billion in 2022, compared to a net loss of $9.6 billion in 2021.

• This translates to average interest earnings of $90.99 per deposit account in 2022, compared to $32.60 in 2021, a gain of 179% for depositors. Deposit accounts include demand deposit accounts, such as checking accounts; savings deposit accounts; time deposits, such as certificates of deposit; and certain retirement savings accounts.

• Meanwhile, the typical account was charged $39.35 in bank fees in 2022, down 12% from $44.86 in 2021. Overall, this left depositors with a surplus of $51.64, compared with a deficit of $12.26 a year earlier.

• Looking at the quarterly progression, the average account basically broke even in the second quarter of 2022, earning an average of $10.71 that quarter in interest while paying $10.63 in fees. By the fourth quarter of 2022, the accounts earned an average of $47.16 in interest and only paid $8.47 in bank charges.

• In fact, banks paid out $23.0 billion and $41.6 billion in interest on deposit accounts in the third and fourth quarters of 2022, re spectively. This compares to a total payout of

$38.4 billion in the preceding six quarters combined.

• Banks also ended 2022 with 882.3 million individual deposit accounts, an increase of 68.1 million (8.4%) compared to the end of 2021.

Banks paid out 223% more in 2022 than 2021

Money talks, and in 2022, banks had a lot to say. In fact, they paid out a whopping $78.7 billion in interest to domestic deposit accounts, a stark contrast to the mere $24.3 billion they paid out the year prior. That’s a staggering year-over-year increase of 223%.

What’s driving this surge in payouts? According to DepositAccounts founder Ken Tumin, rising interest rates are largely to blame here.

“The Fed increased its benchmark rate in 2022 at the fastest pace in decades,” he says. “Even though banks were slow to pass on these rate increases to their deposit accounts, over the past year, consumers were still able to see a widespread positive impact on deposit rates.”

What’s also clear is that banks are ramping up their efforts to attract and retain customers — especially with deposit accounts (which include checking accounts, savings accounts, certificates of deposit (CDs) and certain retirement savings). One way they’re doing so is by charging less in fees: In 2022, banks collected $33.1 billion in fees from domestic deposit accounts, a decrease of 2.6% from the $34.0 billion collected in the previous year.

According to Tumin, overdraft fees — which make up the bulk of fees that depositors pay — are likely the single largest contributor to this drop. That’s because in the last year, many banks either revised their overdraft fee policies to be more consumer-friendly or eliminated those fees altogether.

When you add it all up, depositors walked away with a net gain of $45.6 billion in 2022, a stark contrast to the net loss of $9.6 billion in 2021.

For consumers, that means a 179% increase in average interest earnings

What does that mean for the average depositor, though? More green. The average interest earnings per deposit account were $90.99, a massive 179% increase from the previous year’s average of $32.60. This surge in interest earnings tells just one part of the story, as bank fees were down too: The typical deposit account was charged $39.35 in bank fees in 2022, down 12% from $44.86 in 2021. Overall, these increasing earnings and decreasing fees left depositors with a surplus of $51.64 — that compares with a deficit of $12.26 a year earlier.

Maggie Davis is a writer for DepositAccounts, where this article first appeared.