The Confidence of Americans in US Banks and How to Protect Your Savings

By Alexa Serrano Cruz

Despite the collapse of Silicon Valley Bank on March 10, 67% of Americans have some confidence in the nation’s banking institutions, according to a recent poll from AP-NORC. Results are consistent with a mid-March Morning Consult survey, which reports that 70% of Americans expressed trust in the US banking system, a 5% increase from last month.

But when asked about whether they trust traditional banks over online banks, 69% of Americans say they trust traditional banks, versus the 44% who say they trust digital banks. These findings suggest that while overall confidence in the banking system remains relatively high, there’s a notable difference in trust between traditional institutions and their online counterparts. 

As Americans contemplate the safety of their savings, it's essential to address the distinction among banking institutions and measures you can take to safeguard your money against potential bank failures.

Are large brick-and-mortar banks safer?

While you might assume that large or brick-and-mortar banks are safer than their smaller or online counterparts, history says different. The 2008 Great Recession serves as a reminder that large banks aren’t immune to failure, as demonstrated by the collapse of Washington Mutual, the sixth-largest bank in the U.S. at the time with assets totaling $307 billion. So, while larger banks may have more resources to weather financial storms, size alone doesn’t guarantee safety.

When it comes to deciding where to bank, the size of the institution doesn't necessarily determine the safety of your savings. This is also true when deciding between online or brick-and-mortar banks. They are equally safe, as long as they’re FDIC- or NCUA-insured. Although typically insured up to $250,000, there are variables that can increase that limit, such as your account ownership category. For instance, if you have a joint account, each account owner is insured up to $250,000 for a total of $500,000.

When choosing between a large or small bank, consider factors beyond safety. Larger banks may offer a wider range of products and services, more options for customer support, and a larger network of branches and ATMs. On the other hand, smaller banks may provide more personalized service.

The same thinking applies for keeping your savings at a brick-and-mortar versus an online bank. Online high-yield savings accounts offer several advantages over traditional banks, including fewer fees and higher interest rates that are at least 10 times higher than your neighborhood bank.

Online banks are able to offer low fees and strong rates because they don’t often bear the overhead costs associated with brick-and-mortar branches. The digital Marcus by Goldman Sach online savings account earns 3.75% APY, while Bank of America's savings account earns 0.01% APY — a rate that’s much lower than the national average of 0.37% APY.

The average American has some $24,872 in savings, according to Finder's Consumer Confidence Index. To put this into perspective, if you were to keep $24,872 in an online high-yield savings account earning 3.75% APY, you'd have about $25,822 in your account after a year. Keep that same amount of money in a traditional account earning 0.01% APY, and you'd have only $24,874 — or $948 less than the online account.

3 steps to protect your savings

Protecting your savings boils down to three points:

1. Make sure your bank is FDIC-insured, or NCUA-insured, if it's a credit union.
2. Confirm how much of your money is covered — typically $250,000. Remember, you might be insured for more, depending on your account ownership category.
3. If you’re close to or have more than the insured limit in your savings account, spread your savings across banks. Now is a great time to take advantage of opening a high-yield savings account, where you can find rates as high as 5% APY or more.

Keep in mind that not all funds held at a bank are insured under the FDIC. About 29% of Americans currently keep their money invested in stocks, according to Finder’s Consumer Confidence Index. Although funds in a high-yield savings account are insured, investments like stocks, mutual funds and bonds aren’t.

About the author:

Alexa Serrano Cruz is a lead personal finance editor at Finder, specializing in consumer and business banking, including kid’s debit cards. A certified anti–money laundering specialist, Alexa helps guide readers to the best savings and checking accounts for their financial goals. Her expertise and analysis on saving, budgeting and getting the most out of your money has been featured in Best Company, U.S. News & World Report, MSN and Yahoo, among other top media. Her commentary has been included in broadcast news publications that include Fox News and NBC News.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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