Saving money in a bank is still one of the most common ways households manage their finances, largely because it offers security, easy access, and, increasingly, useful digital tools. In the United States, deposits held at FDIC-insured banks are protected up to $250,000 per depositor, per insured bank, per ownership category, which means customers have not lost insured funds even during bank failures (FDIC, n.d.). According to the FDIC’s 2021 National Survey, the percentage of unbanked households reached its lowest point on record, showing that more people are relying on banks for both day-to-day transactions and savings (FDIC, 2022). For anyone who needs a place to store an emergency fund or save for short-term expenses, insured accounts remain a practical and low-risk choice.
That said, the advantages of bank savings accounts need to be balanced against some clear limitations. Research over the last few decades has shown that deposit rates tend to rise more slowly than market interest rates when the Federal Reserve tightens policy and fall more quickly when rates are cut (Hannan & Berger, 1991; Drechsler, Savov, & Schnabl, 2017). This pattern—confirmed in later industry analyses—means savers often earn less than they could in other safe vehicles during rising-rate periods (Deloitte, 2023). In periods of high inflation, the real value of money in a low-interest savings account can erode quickly, making the opportunity cost of leaving large balances untouched more significant.
Fees are another factor to consider. Overdraft and non-sufficient-funds (NSF) charges, while declining in recent years, still make up a major portion of account fees for many banks. CFPB research has shown that a small percentage of customers—often those with lower average balances—pay the bulk of these charges (CFPB, 2014; 2017). Even in 2021, overdraft and NSF fees were still a steady source of revenue for many institutions (CFPB, 2021). Consumers can reduce this risk by using accounts with low or no fees, enabling balance alerts, or linking savings accounts for overdraft protection. While some banks have reduced fees and increased transparency, these improvements only help if customers actively choose products and features that match their needs.
On the positive side, banks have made big strides in convenience. The 2022 McKinsey Global Banking review noted that banks entered the post-pandemic period with strong capital positions and a renewed focus on digital services, including real-time payments, budgeting tools, and automated savings transfers (McKinsey, 2022). These tools can make it easier to set aside money consistently and organize savings by goal without taking on investment risk. Federal Reserve data from 2021 also show that many households still cannot cover a modest emergency from cash savings alone, highlighting the ongoing importance of having an accessible cash buffer (Federal Reserve Board, 2022). A sensible approach is to keep one to three months of expenses in a liquid, insured account, place additional short-term funds in higher-yield insured options like online savings accounts or CDs, and invest longer-term money in diversified assets.
In short, saving in a bank works best for money you might need quickly or can’t afford to risk. The trade-offs are lower returns compared to other safe options and potential fees if accounts aren’t managed carefully. By confirming insurance coverage, automating deposits, comparing interest rates across institutions, and avoiding high-fee account structures, savers can make the most of what banks offer—while recognizing that bank accounts are just one part of a well-rounded financial plan.
References
Consumer Financial Protection Bureau. (2014). Data point: Checking account overdraft. https://files.consumerfinance.gov/f/201407_cfpb_report_data-point_overdrafts.pdf
Consumer Financial Protection Bureau. (2017). Consumer voices on overdraft programs. https://files.consumerfinance.gov/f/documents/cfpb_consumer-voices-on-overdraft-programs_report_112017.pdf
Consumer Financial Protection Bureau. (2021). Data point: Overdraft/NSF fee reliance since 2015—Evidence from bank call reports. https://files.consumerfinance.gov/f/documents/cfpb_overdraft-call_report_2021-12.pdf
Deloitte. (2023). Higher deposit costs will challenge banks, even after interest rates stabilize. https://www.deloitte.com/us/en/insights/industry/financial-services/bank-deposit-costs.html
Drechsler, I., Savov, A., & Schnabl, P. (2017). The deposits channel of monetary policy. The Quarterly Journal of Economics, 132(4), 1819–1876. https://academic.oup.com/qje/article/132/4/1819/3857743
Federal Deposit Insurance Corporation. (n.d.). Deposit insurance. https://www.fdic.gov/resources/deposit-insurance
Federal Deposit Insurance Corporation. (2022). FDIC National Survey of Unbanked and Underbanked Households (Executive summary, 2021 data). https://www.fdic.gov/analysis/household-survey/2021execsum.pdf
Federal Reserve Board. (2022). Economic well-being of U.S. households in 2021 (SHED). https://www.federalreserve.gov/publications/files/2021-report-economic-well-being-us-households-202205.pdf
Hannan, T. H., & Berger, A. N. (1991). The rigidity of prices: Evidence from the banking industry. American Economic Review, 81(4), 938–945. https://www.jstor.org/stable/2006653
McKinsey & Company. (2022). Global banking annual review 2022: Banking on a sustainable path. https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/our%20insights/global%20banking%20annual%20review%202022%20banking%20on%20a%20sustainable%20path/global%20banking%20annual%20review%202022%20banking%20on%20a%20sustainable%20path.pdf
