Americans’ Bank Account Balances Are Flat. Why That’s Not Alarming

Bank account balances in the U.S. are lower than expected, but that’s not necessarily a bad sign.

Over the past year, households have held less in their bank accounts than what historical trends suggest they should, according to JPMorganChase, which examined 4.7 million Chase households. In May, the median bank balance had increased by 23% from 2019, far below the 40% jump analysts expected.

During the COVID-19 pandemic, checking and savings bank balances grew faster than ever before, thanks to government stimulus checks and fewer opportunities for spending. But after government support ended and inflation surged, post-pandemic bank account balances began to fall.

JPMorganChase said that’s probably not because consumers are struggling. Instead, it seems that consumers are simply transferring money from their bank accounts to investments.

“Our approximation of total household cash reserves suggests that households may have returned to positive cash balance growth much earlier than checking and savings balances alone would suggest,” wrote researchers at JPMorganChase.

Consumers Lock In High Interest Rates

While recent bank balances have not grown as they typically do, the combined amount of cash consumers have in their bank accounts and investments is still trending upward, as expected.

Bank balances aren’t keeping up with average growth rates, but the combined amount of cash consumers have in their bank accounts and investments is still trending higher.

JPMorganChase researchers said this indicates that many people are transferring money from their checking and savings accounts to investments with higher returns, such as Certificates of Deposits and high-yield savings accounts.

To combat rising inflation, the Federal Reserve began hiking the federal funds rate to recent highs in 2022. This typically influences interest rates on CDs and high-yield savings accounts, allowing consumers to lock in high investment returns.

The Fed cut rates in 2024 as inflation leveled out, but has held rates steady this year, which means consumers can still take advantage of high-yield investments.