Why More Americans May Start Putting Money Under Their Mattresses

Money under the MattressSome people still keep money under their mattresses, and as savings account interest rates decrease, data breaches at banks increase, and the chances of a U.S. debt default rise, the practice is likely to grow.

The reality is that millions of people keep most of their money at home. Back in 2009, the AP reported that "As many as 28 million people in the United States are forgoing traditional financial institutions because of mistrust, cultural and language barriers or a belief that by the time all the bills are paid there will be nothing left for an account."

Money invested in "safe" securities does not yield much. American Express (AXP) offers high-yield savings accounts that pay 1%, and six-month CDs with a 0.5% rate. Bankrate.com shows that most financial firms don't offer much better.

Bank account and personal credit information isn't secure enough, if a recent data breach at Citibank (C) is any indication. Hackers gained access to data on as many as 200,000 credit card accounts, and it wasn't the first time Citi accounts were exposed. The FBI investigated the theft of millions of dollars from Citi accounts by hackers in Russia in 2009, The Wall Street Journal reported then. At the time, experts said such virtual bank heists were not unusual at all. And Morgan Stanley (MS) recently lost two CDs containing account information on 34,000 customers.

Meanwhile, the practice of e-commerce operations keeping customer data on remote servers -- in the cloud -- has led to data breaches in systems like the Sony (SNE) PlayStation Network. The exposed data may have included customer credit card information.

A New Risk in the Mix for Bank Customers

And, of course, there is the issue of a U.S. default if Republicans in Congress and President Obama cannot come to an agreement to raise the cap on federal debt before Aug. 2. The Treasury could cancel payments on billions of dollars of U.S. obligations, which means people, institutions and foreign governments that hold American sovereign paper may lose their already-modest payouts. The value of those Treasuries -- viewed as the safest investment in the market -- could plunge. The drop could be particularly severe if the standoff over the debt ceiling goes on for more than a few days past the deadline. Some experts predict global financial mayhem if the U.S. doesn't meet its obligations. Pessimistic analysts believe a default could cause another credit crisis.

The mattress was once viewed as a dangerous place to keep cash. But even though your money doesn't earn a yield when it's in your house, that's beginning to look like a better place to keep it safe.

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Hi Peg and Matt

We may have the shoes on the wrong feet. We depend on the seller to pay sales tax. There is no incentive to do so.If on the other hand,the buyer has to pay the sales tax, there are many reasons for them to find reasons for having the cost lowered.

July 10 2011 at 5:46 PM Report abuse rate up rate down Reply

Your money isn't safe anywhere. As long as they keep printing more, your money will be worth less every day.

July 09 2011 at 10:24 PM Report abuse +1 rate up rate down Reply

The trouble with keeping US money under the mattress is that the dollar is still rapidly trending lower and, coupled with rising inflation, will be much closer to worthlessness when you take it out. If your bank fails at least you might have some compensation from FDIC if it hasn't gone bankrupt by then (it too is trending toward worthlessness). The safest place to put your dollars is in one of the too-big-to-fail banks, which have grown by 40% since they were classified as such and are making a killing in credit default swaps (remember what caused the recent crisis?) covering the European bank loans to the PIIGS nations. If they lose their shirts again, guess whose standing by to bail them out (look in the mirror). A better alternative: buy Swiss francs or Canadian dollars and stick them under the mattress.

July 08 2011 at 12:53 PM Report abuse rate up rate down Reply
1 reply to jondanl's comment

nice to see someone talking up Credit Defalt Swaps....I hear that there are a quadtrillion dollars in these contracts. As soon as the American people become aware of their existence, we may start to get an understanding of just how deep this mess the investment banks have got the world into.

July 08 2011 at 11:24 PM Report abuse +1 rate up rate down Reply

This depositor gave up on banks a long time ago, and loaned the deposits to a first mortgage land contract. Americans need help to buy a home, and the banksters want to rob them, so if all of America got together to help, then the banks would all be whistling without depositors. They don't want to pay any interest, so that is the final cure.

July 08 2011 at 12:18 PM Report abuse rate up rate down Reply

Mr. McIntyre,
Please report facts. There is NO danger of a US default on its debts. $200 B flows into the Treasury each month. Interest needs are $20 B each month. Us financial obligations are easily met, under existing ginancial conditions. The problem is NOT enough revenue, rather, too much spending and waste.

July 08 2011 at 12:14 PM Report abuse rate up rate down Reply

Full service brokers should only take a commission when you make a profit. Otherwise what good are they?

July 08 2011 at 9:22 AM Report abuse +2 rate up rate down Reply
1 reply to ultraz2's comment

They are good at taking your money.

July 08 2011 at 10:53 AM Report abuse +1 rate up rate down Reply
1 reply to thagrus's comment

and smile while doing it.

July 08 2011 at 11:26 PM Report abuse +1 rate up rate down


July 08 2011 at 9:20 AM Report abuse +1 rate up rate down Reply

Graduated flat tax for all. Four brackets with a maximum of 20 % for the rich, NO DEDUCTIONS AND NO LOOPEHOLES. The first 15,000of each individuals income will be tax exempt. 20% FLAT TAX FOR ALL US CORPORATIONS ----NO DEDUCTIONS and NO LOOPEHOLES

July 08 2011 at 9:19 AM Report abuse +1 rate up rate down Reply
1 reply to ultraz2's comment

Bad idea that leaves no room for the crooks to work their majic.

July 08 2011 at 10:55 AM Report abuse rate up rate down Reply
Harry Piels

The supply-siders mounted up the debt and now they want the elderly to accept holes in the "safety net." Say NO to cuts in Medicare/social security. You already have taken a cut. Based on the REAL inflation level, you should be getting a sugnificant COLA. However, the government omits food and fuel when they compute it. Don't allow the political hacks to cut the most vulnerable (seniors).any further.

July 08 2011 at 9:15 AM Report abuse rate up rate down Reply

Most people don't have savings accounts because their money comes in and goes right out to pay bills. It has nothing to do with bank safety. One thing congress can do to put more money in the pockets of americans is make more competition in the phone and cable industry, so that these rip off prices being charged everyone get cut by 80 % per month. Tens of billions are being extracted every month from the American people that could be spent elsewhere or saved.

July 08 2011 at 9:12 AM Report abuse +2 rate up rate down Reply