Is Your Bank Returning The Favor?


Banks make money in a few different ways. One of them is by charging you interest or fees for the services they provide. Another major way banks make money is from YOUR money.

In other words, when you deposit money in a bank, the money doesn’t just sit there. It gets pooled with other deposits from millions of customers and is sent to work!

The money is invested in different things and generates billions of dollars for the bank. In return for “holding” your money, most brick and mortar banks will pay you a few pennies.

You Vs The Bank

Back in the days when I started my very first job out of college, I needed a bank for direct deposit and where I could start saving some money.

The first bank I signed up for to deposit my hard-earned money was paying about 0.01% interest in savings. Note that this is standard (even to this day!) for most brick and mortar banks. 

I didn’t have a choice back in those days and had to go with it.

Here’s a simplified example of what it meant to get 0.01% interest on savings:

Let’s say I saved about $150 per month during one year for a total of $1,800. In one year – the bank paid me about $0.98 in interest. Yup. You read that right. 98 cents. 

That means I’d end up with $1,800.98 in my bank account by the end of the year. Remember, the bank is making billions in the back end – for themselves.

Thankfully, I eventually learned to invest so that my money could work a lot harder (and more efficiently) for me.

Also, thankfully, online banks started emerging, offering interest rates significantly higher than the typical brick and mortar bank.

This meant I could now transfer my emergency fund (or any money I did not plan to invest) to an institution that respected me enough to pay me more than pennies.

SAVING MONEYPhoto credit: @yaryincharge

Most online banks today will pay anywhere from 1.90% to 2.10% interest, or even higher. This is notable when compared to 0.01%.

Make sure you aren’t leaving money on the table by keeping your savings in a bank that uses your money to make millions but isn’t returning the favor.

I understand banks have a lot of expenses, and their duty is to keep our money safe. However, paying pennies to their customers is just plain disrespect.

And if you’re wondering – The reason why Online Banks can pay interest rates that are higher than the norm is that they don’t have overhead expenses. All the work is done electronically, and they can afford to return the bulk of the money they are saving back to the consumer.

When it comes to your emergency fund and your savings, I encourage you to have that money growing for you at an online bank.

One of my favorites is CIT Bank (*not associated with Citibank).

You might remember I mentioned them a lot this year in several blog posts.

CIT bank Saving Builder Program is currently paying 2.10% on their savings, which is HUGE!

To put this into perspective, let’s use the same example as above:

Under these circumstances, if I saved $150 per month over one year at an APR of 2.10%, I’d end up with $1,820.61 by the end of the year.

I don’t know about you but and extra $20.61 in my account without having to do anything, looks a lot better than 0.98 cents.

And remember, this is a VERY simplified example. The more you save, the more your account grows and compounds over time.

As a result of the Federal Reserve lowering interest rates, many online banks have also been reducing what they pay in recent months. In comparison, CIT bank Saving Builder program has remained notably higher.

Here’s what you need to do to qualify for the 2.10% interest rate:

  1. Open an account here
  2. Make an initial deposit of $100
  3. Make ongoing deposits of $100 per month subsequently after that (*I would recommend putting this on autopilot so that you are guaranteed to receive the highest interest rate each month).

That’s it!

Check out full details, including how your money is secured with CIT and frequently asked questions here.

Tell me – how do YOU feel about online banking? Do you currently have an emergency fund?

Cheers to Health & Wealth!



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5 thoughts on “Is Your Bank Returning The Favor?

    1. Girl$ on The Money

      I see your point but don’t see it as a “new” problem at all. To be honest, anything that can possibly happen to an online bank, can happen to a regular brick and mortar bank! Any kind of business can be in danger of security issues. What can give us peace of mind with banks is that most (if not all) are FDIC insured. And so, our money is protected up to $250,000 per financial institution:

    1. Girl$ on The Money

      I agree! Very strange how most banks get away with that. I think they use certain tactics to attract customers such as “convenience” (having branches everywhere) or other methods so that most people don’t realize what these banks are “really” doing behind the scenes. Hence, why I am a fan of online banking!

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