Banks are desperate to attract cash-rich time-poor customers
Earning more than $150K a year? you are most likely to be working in Medicine, Law, Tech and Finance. Demanding jobs both to get and maintain to be sure. The last thing a young doctor or lawyer wants to do at the end of a long week is to manage their finances. This costs them dearly, potentially well over $100K in their lifetime of hidden costs and fees in banking and investing.
Banks are desperate to target these cash-rich time-poor customers to power their profitability for the next 16+ years. How? The average amount of money held in a checking account for someone earning over $160K is more than $42K.
The average interest rate for a top bank in the US is — 0.05% — pretty much nothing. On the other hand the banks can lend that money out for anything up to 12%. Top US Banks made record profits in 2019, there are over $2 trillion in checking deposits in the US — this is one way we all pay for “free banking”.
What about savings accounts? As the name implies these are accounts in which customers save their money — they have restricted access to it and in turn, the bank pays high interest. Or do they?
A review of checking and savings accounts by the biggest banks in the US shows that for all but 1 there is little or no difference between checking and savings accounts. You can see the source data here https://tinyurl.com/t4o95ep.
This means that even if you are putting the effort in to move money into your bank’s savings account — it’s likely to be earning pretty much nothing regardless.
So why do so many people put money with these banks? Over $12 trillion is deposits held by the top 15 banks alone.
A lot of the reason is the banks spend a lot of money convincing us that they are great value — the top 6 banks spent over $10bn in marketing in 2018. They also have a lot of methods to hide the reality of their underlying value. Here are the top 5 to watch out for.
- Offering a “savings” account that actually pays the same or marginally more interest than the checking product
- Offering upfront one-off incentives — typically cash incentives
- Making it really complex and hard to work out the actual interest rates
- Offering bonuses, bounties, and incentives that sound good but really aren’t
- Hiding their fees and making them look almost optional
Unfortunately optimizing your personal finance is hard, complex and boring. The conventional banking industry has become used to consumer inertia and to an extent relies on it for their massive profits. Unifimoney (www.unifi.money) has been created to solve this by integrating and automating money management so you don’t have to. Unifimoney is a single account accessed via mobile that integrated a high-interest checking account, a credit card and Robo investment platform. By doing absolutely nothing more customers model best practices in personal finance — effortlessly. Maximizing daily passive income and building a long term investment fund.
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