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Road to Recovery: Why We Bank Where We Bank

Recent and ongoing turmoil in world financial markets have a direct effect on U.S. retirement savings, and hence on consumers and on their spending in the U.S. This only serves to highlight how important it is to understand the mindset of the American consumer.

Whatever else is the case, this much is true: the U.S. consumer has by and large provided himself with a certain amount of buffering against the effects of world—and U.S.—financial turmoil. MasterCard’s Global Insights has established that the U.S. consumer, of whatever segment, never wants to find herself in the position she was in for Christmas 2008, with $5,000, $10,000 or $20,000 in consumer debt and no idea—at least at that time—what to do about it.

What the U.S. consumer did was massively deleverage on card debt, and even as credit card spending continues to grow, credit card outstandings are not rising dramatically

  • 2014 saw significant growth in spending on both credit and debit cards with credit card spending growing by $235 billion to approximately $2.6 trillion, up 9.8 percent from 2013
  • Debit card spending grew by $147 billion to $2.3 trillion, up 6.9 percent in the same period
  • Q1 2015 credit card spending increased $48 billion, up 8 percent from the same period of 2014
  • Credit card outstandings grew only by 3.8 percent, or $32 billion from in 2014

Meanwhile, the latest edition of Road to Recovery report of credit and debit card spending provides insight into one of the most vexing questions U.S. retail bankers confront: the nagging suspicion that they are not seeing all of their customers’ deposits, even if one or more paychecks are deposited in the DDA account through the automated clearing house (ACH).

Surprisingly, it’s doubts about safety and security that motivate U.S. consumers to maintain multiple checking accounts: U.S. depositors simply don’t know how safe their money is.

Briefly, 35 percent of U.S. households maintain multiple DDA accounts, and fully 63 percent of that segment maintains them at different institutions: 22 percent of U.S. depositors. 40 percent of those consumers say that issues of safety and security motivate this bet-hedging.

While U.S. retail bankers can’t do much about a hard landing for the Chinese economy, they can do a lot about creating programs, marketing and consumer education to get more of their consumers’ deposits. And the first step is knowledge.

Read this latest edition of MasterCard’s Global Insights Road to Recovery series to learn more.