It’s the end of the month, and if you’re anything like me, your local bank has probably charged you some sort of fee just for having an an account with them. Your bank account might have a monthly maintenance cost, sales tax, or (as I just paid) a $40 annual charge for the “privilege” of using a debit card. This sucks. But, today I want to share an easy way for you to actually turn these negatives into positives.
That’s right, we’re covering the fastest (and best) way to turn your bank account into a cash machine which pays you way more than the standard savings interest rate.
You’re The Bank’s Product, Not Their Customer!
Banks are businesses, not charities. And when you open up a bank account (or take out a loan), you become the product. “How is this possible?” you might ask. Well, the answer is simple really. When you put your money into a bank account, the bank is able to invest those funds for a higher interest rate. And meanwhile, they pay you less in interest than whatever amount they earn.
On top of this, banks can charge accounts all kinds of maintenance and service fees. They’ll often bill customers anywhere from $5 to $25 if the customer’s account has less than $1,500 in it.
This means customers spend more on one month’s banking fees than the bank pays them in interest all year.
{Side note: There are some exceptions to this such as the CIT Savings Builder Program. This is a high-interest savings account with no maintenance fees as long as you deposit $100 every month. I highly recommend it.]
It’s not very fair and many people complain about this issue. But, there is a simple and easy solution. One which puts you on the same team as your bankers, making money alongside them. And here’s how it works…
Invest Your Money In The Bank, Not In Your Bank Account
Most banks are publicly traded companies. This means that you can buy stock in them. And by doing so, you grow your wealth along with the bank. Here are some examples of major institutions you can invest in:
- Citigroup
- Wells Fargo
- Bank of America
And here are some smaller banks and regional banking funds that are publicly traded too:
- Pacific Western Bank
- People’s United Financial
- SPDR S&P Regional Banking ETF
You can even legally invest in offshore banking through stock in the Butterfield Bank (they operate out of Bermuda).
Banking is something that many masters of finance invest heavily in. Warren Buffett, Ron Baron, and James Crown love owning bank stocks. One of the reasons for this is because smart banks are able to make money off their customer’s accounts (through fees or investments, like we talked about earlier), and another reason is due to the fact that most banks pay dividends. This means that a portion of their annual earnings is paid out, in cash, to you the shareholder.
Wells Fargo, for instance, pays around $2.04 per share in annual dividends. At first this doesn’t sound like much, until you realize that each share costs about $53.
As such, you could buy 10 shares for roughly $530 and earn $20 a year in annual dividend payments. This is far more than your typical savings account will accrue. Of course, Wells Fargo is just one example (I’m in no way recommending it or declaring it “the best bank stock”), and if you do your research you can easily find an investment that suits your needs.
Once you do, put some of your money into buying the institutions stock and enjoy those annual dividends and capital gains for the rest of your life. It’s a far smarter and faster way to grow your wealth than using a traditional bank account.
P.S. If you’re looking for a free investment app that allows you to buy banking stocks, index funds, crypto currencies, and thousands of other investments, check out Robinhood. This service allows you to buy and sell stocks with absolutely no commission fees. Best of all, you’ll get one free stock when you sign up using this referral link.
