How to Find a Better Bank
Too many people are still earning next to nothing on their cash reserves despite big interest rate increases. I just met with a client who has a Capital One 360® Account earning .30%. That account is advertised as currently having a 3.30% variable rate. She called to ask for the market rate and they said she had to close her current account and open a new one. Countless others are likely in the same position and missing out on thousands of dollars of interest per year without even knowing it.
Check your Bank Statement
Obtain your most recent bank statement. Look at the APY % and compare it with the market rate. I google “Ally Online Savings Account” to quickly get a pulse on what the market rate is. If your rate is below market, contact your bank to see if you can upgrade to a higher interest rate option. If your bank requires you to close your current account and open a new one to take advantage of today’s rates, use the opportunity to evaluate if you want to keep your money where it is.
What do Banks do with your Money?
While banks are paying you 3% on the cash sitting in your Savings account, a portion of that money is being lent out as loans to other members at a higher rate, such as 7%. Banks profit from this delta.
Things have changed since you started your first banking relationship. There is now more information and transparency than ever before about what banks are doing with the money we house with them. You can not only find a new bank with good rates and services, but you can go one step further and find a bank that is using your deposits to strengthen the local community or advance causes that you care about.
How to Find a Bank that Operates in Line with your Values
Mighty Deposits allows you to search, for example, for banks that use their deposits to invest in low-income communities, small farms, and public works projects. You can also exclude banks that use their deposits to fund fossil fuel projects. Southern Bancorp is the bank a friend, originally from Arkansas, uses. Over 80% of the deposits are used to strengthen the community she is from and they rank above average in lending to small farms and investing in public works.
Bank for Good similarly allows you to search for a bank based on location and then select characteristics such as “focused on clean energy financing” as a mission. For example, I had a client that had a low rate on a loan that allowed him to install solar panels on his house. The loan originated from a credit union whose mission was to help homeowners transition to renewable energy.
Re-Thinking Where your Money Lives
Don’t ignore the cash portion of your portfolio. Maximize your return and your positive impact. Making a change can help accelerate the good work that a mission-driven organization is already doing.
Share Your Story
Have you successfully moved to a mission-driven or community bank? Email me and share:
Why did you want to leave your old bank?
How did you choose the new bank?
What services are important to you that the new bank offers?
Overall, are you happy with the new bank?
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients nationwide and is based in San Diego. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a virtual fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning and ongoing impact-focused investment management. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and its advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.