Learn How To Bank Like The Banks3 min read
Learn How To Bank Like The Banks
Banks are very good at building wealth…with your money. Learn how to bank like the banks.
The banking industry has taught you to keep your money separated. What does that mean? It means that the bank has you individualize all of your accounts and separate all of your money, never combining positive cash accounts with interest bearing loan accounts. Once you understand how this works, it becomes obvious why the bank is continuing to come out ahead.
In order to understand what is happening, we must have some understanding of basic banking and money principles. When money goes into a checking or savings account, known as deposit accounts, the bank makes interest on your money in the form of loans to other borrowers. The same event is happening when, we ourselves, take out a loan and begin paying the bank interest payments.
Here are two examples and the end result of how the bank builds wealth with your money:
Money Flow – Based on the money of account holders like you and me have deposited into the bank, the bank lends out $5000 to other borrowers in the form of credit cards. While we earn close to 0% on our money, the lender earns about 18% interest on those credit cards. That means the lender was able to earn $900 in interest annually based on our money while, once again, we earn close to zero.
Mortgage Structure – Let’s take a look at another example taking out a $300,000 mortgage with a 30-year term at 4.5%. Looking at the mortgage terms, 4.5% does not seem like it would add up to much. However, over the course of this 30-year term, we would pay over $247,000 just in interest payments! That actually represents over 82% of the loan amount you originally borrowed, just in interest. Total purchase price is now $547,000+.
End Result – By following this simple concept of holding billions of dollars in banking clients money on one side and then turning around and lending that money back to the same people with interest on the other side, the banking and lending industry is able to build tremendous wealth.
Think about it for a minute. The more we owe, the more interest they are able to collect and, vice versa, the less we owe the less interest they collect. So, if banks make money based off the total amount that we owe, there is one guaranteed way to reduce the total amount we owe immediately.
What if, instead of following the bank’s map of keeping your accounts separate, you could transfer or merge the money in your deposit accounts against your loan accounts literally decreasing the total amount owed immediately. By doing this, it would instantly bring down the amount you owe which reduces the amount of time and interest the bank has you scheduled to pay. The less money you owe, the less interest you will pay.
Submitted By Mike Amos
Founder and Active Contributor of millionairemindset.life