Consumers opt for deposit safety over returns

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The adage – a bird in hand is worth two in the bush – is proving true for investors, who are flocking to safety.

In a continued sign of uncertain economic times, year-over-year financial institution deposits, as of June 30, increased $520 billion, indicating that investors are choosing safety over higher rates of returns from the stock market or other investments.

A market analysis by Market Rates Insight showed that the average interest rate on deposits had declined 37 percent – but total deposits increased 8.4 percent, from $6.22 trillion to $6.74 trillion.

The $520 billion increase in deposits is not “new” money, said Dan Geller, executive vice president of Market Rates Insight. “So consumers must be transferring this cash from other investments.”

Bank deposits are insured by the Federal Deposit Insurance Corp. for up to $250,000, and credit union deposits are insured for the same amount by the National Credit Union Administration’s National Credit Union Share Insurance Fund.