Does a difference in opinion justify the government freezing your bank account? For some in Canada, this has been a sad reality, with the rest of the world watching on the sidelines and imagining it could never happen at home. But what if it did?
As we witnessed Canada invoking the Emergencies Act to freeze or suspend a bank account without any court order and the power grabs that big banks have gotten away with scot-free, perhaps it’s time to take control of the hold that commercial banks have over you.
Our generation seems to be getting soft in our response to shameless restrictions of freedoms. After two years of on-again-off-again restrictions, unsettling experiences, and growing distrust in large-scale industries, there is a renewed movement of people feeling empowered to express their free speech by moving their money out of big banks.
Seeing more people around you joining in the trend might make you ask yourself: Is it time to break up with my bank?
What’s My Bank Doing with My Money Anyway?
It’s no secret that banks use our money in their own investments to make money. You may have wondered how it is that your bank can pay you interest on the hard-earned cash that you store away in your savings account.
Well, when you deposit your paycheck into that savings account the bank then borrows a portion of it to lend out to other borrowers to cover credit, personal loans, auto loans, or home loans.
The bank borrows a portion of your savings to lend to other borrowers to cover credit or loans.
The same is true when you take out a loan: your big bank makes revenue from the interest that you pay on a loan balance. Part gets repaid back to you and part gets repaid back to the person whose savings account was dipped into.
In short, your deposits go to fund other people’s loans, and a small portion of the interest that they pay back on that loan becomes a part of the interest that you earn on your account.
Your interest is just a small portion of the pie for what your big bank could potentially earn overall. Big banks might offer extremely low interest rates on loans, but offset any potential loss by having incredibly high interest rates on a credit card that you might want to open. These ways, and many more, are how mega-banks can get mega-rich off your money.
Your Big Bank Might Be Using Your Money in Ways You Don’t Like
Like many big companies and corporations do, big banks are putting their money where their mouths are. It might be a bit disheartening to know what that ends up looking like. Let’s use Black Lives Matter for example. Among the top six organizations that were making pledges to the organization BLM were Bank of America and Wells Fargo.
If you bank with JPMorgan Chase, you might be surprised to know that they froze donations to lawmakers based on partisan politics and instead chose to revamp their donations to lawmakers who address “racial wealth gap, education and criminal justice reform,” “racial equity,” and “climate change.”
Do you know if your bank directly funds Planned Parenthood? If you bank with Bank of America, JPMorgan Chase, US Bank, Wells Fargo, Citibank, Comerica Bank, Morgan Stanley, and many more, and do not want to support that organization, then you might want to reconsider your bank.
These megabanks protect your money, invest it, and profit off it, all while potentially coming into conflict with your personal code of ethics.
Breaking up with big banks can also mean choosing to ethically invest your hard-earned money. This is all about aligning your own personal moral compass with your bank of choice. What that ethical drive is to you entirely depends on your set of beliefs!
So what’s ethical to you? Do you agree with your money going toward oil companies? What about Big Pharma? Tobacco companies?
If you want to feel more intentional about your investments or create a positive change, you may want to look into the companies your bank is using your money with. Perhaps it’s time that you take control of the message your money makes – it could feel empowering!
Big Banks Are Not Forgiving, Historically
With branches from coast to coast, big banks pulled in trillions of dollars in cash during the first year of the pandemic lockdowns alone. At the same time, the government sprung to its feet to administer hundreds of billions of dollars in small business relief, stimulus checks, and unemployment benefits. Megabanks became loaded with cash, whether it was fearful families choosing to hoard cash or the Federal Reserve creating an unlimited bond-buying program to counter the cash shortage.
So while nearly 22 million Americans found themselves out of work by 2022, overdraft fees simultaneously reached record highs. Whether Americans were struggling with unemployment due to their workplaces being shuttered or by their employers needing to lay off workers to keep the lights on and some not qualifying for government aid, many people let their checking account balances get a bit too low.
In response to this, some U.S. legislators have been calling for big banks to refund overdraft fees and have put pressure on them to change their “predatory fee” policies.
JPMorgan Chase collected $1.5 billion in overdraft fees during pandemic lockdowns.
To put their profits into perspective, JPMorgan Chase topped the charts, having collected $1.5 billion in overdraft fees during pandemic lockdowns. Bank of America saw overdraft profits of $1.1 billion and Wells Fargo gained $1.3 billion.
Online only and neobank alternatives to those big banks like Ally Bank were much more forgiving. They chose to waive overdraft fees and excessive transactions, and defer car and home loan payments.
If you haven’t heard of a neobank, I wouldn’t be surprised! Neobanks are a relatively new way of banking. They offer no-frills, slimmed-down versions of online banks that streamline the mobile banking experience. They might have very limited credit or not even offer credit and loans at all. If you don’t want to go the community bank route, but feel comfortable with app-based management of your finances and want to avoid exorbitant overdraft fees or monthly maintenance fees, then consider looking into neobanks!
What’s with the Hype Around Alternatives Like Community Banks?
As you can deduce from the name, a community bank serves a more intimate community. If you bank with a local, community bank, your money stays within that area and instead of being able to bank at branches nationwide, you’re locked into one single region.
Making the switch from a commercial bank to a community bank is becoming popular, despite us living in the era of newer digital banking technology. But why?
If you bank with a community bank, your money and your access to it stay local.
It’s true that big, commercial banks can offer you the latest technology. It’s easier now more than ever before to not even have to step foot into your bank with online banking services, 24/7 mobile banking (as long as you have service), and remote check deposit. You get a clear, standardized level of service and can find your ATM of choice on any block of any major city. But commercial banks are also driven by profits.
Furthermore, in our age of comically bad customer service, there’s a push to bank small. A community bank revolves around “relationship banking” which could be long-term clients and even accounts that get passed down from family member to family member. You could benefit from more personalized financial planning services and may even be able to take advantage of smaller fees such as free checking or lower interest rates on your loans.
Trying to afford a home? In today’s economy? Your community bank may be more likely to grant you a loan than the typical commercial bank, especially if you’re in the low to moderate income bracket.
Alright, but I’m Probably Not Staying in My Town for Forever
In terms of scalability, there’s a different option to community banks if you don’t see yourself staying in one particular region for too long: credit unions.
When you break up with big banks and move to credit unions, you’re still participating in the community aspect in that members of the credit union pool together their money to help one another based on a “common bond.” Where a community bank is for-profit and can be either privately or publicly owned, a credit union is generally private and not-for-profit.
Often times though, they’re part of shared occupations or are regionally based. For example, if you have an active-duty spouse in the U.S. military or are a veteran yourself, then you could use the Pentagon Federal Credit Union. SchoolsFirst Federal Credit Union is another common credit union that’s broadly used by teachers or those who have worked in schools.
Whichever path you may take to break up with big banks, make sure your pick is FDIC-insured if it’s a community bank or NCUA-insured if it’s a credit union.
Governments across the world are inching closer and closer toward “social credit”-style measures that suppress protest, whether that’s in historically authoritarian countries or ones which everyone would assume to operate on Western freedom-focused values. Dissent is subjective, yet differences in opinion are being used to justify restrictions of freedom. Canada freezing bank accounts as a political statement is only one example of this, but it sets a dangerous precedent.
To add insult to injury, some of these same companies and corporations genuflecting to overbearing mandates may have been working against your morals all along. The money that you make and your access to it is your livelihood. If you’re practicing a more introspective expression of your values, it might be time to break up with your bank.
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