What If Banks Start Charging to Hold Our Money?

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According to MSN Money, after the release of the Federal Open Market Committee meeting minutes from October, "What drew the attention of U.S. bank executives…was talk about reducing the interest rate the Federal Reserve pays for overnight deposits."

It went on to say that, "According to The Financial Times, representatives of two of America's top five banks said that if such a reduction were to take place, banks might actually start charging customers to hold their money."

I personally find the thought of a bank charging to hold my money rather disturbing. And I can think of a number of things to do with our money other than pay someone to hold it for us.

Pay off a mortgage or other debt

Taking excess cash and putting it toward a mortgage is kind of another way to put money into the bank, the bank being a home. While it might not be quite as secure as an actual bank since real estate values can go up and down and at times be volatile, getting a 3 to 5 percent return by way of paying down a mortgage as opposed to paying a bank to hold it would certainly be a more attractive saving option.

In the past, our family has saved thousands of dollars in mortgage interest costs by making extra monthly payments both by way of a bi-weekly mortgage plan as well as simply by transferring extra cash from our bank account to our mortgage account.

Pre-paying certain bills

Sometimes companies will offer incentives for prepayment. Whether by way of a reduction on a current bill or reducing a future billing, pre-paying could be a great way to stash some extra cash while continuing to put money to work. I still remember that in college paying for a full year of rent up front would get me a free month's rent, which was a savings of over $500 or an annual return on my investment of about 12.5 percent.

Even more simple tactics like pre-buying holiday and birthday gifts, stocking up on long-term bulk food products, or making similar purchases that you might not need now, but will need eventually can put money to use in places other than the bank.


When I say "invest", it doesn't necessarily mean in the stock market. While that may certainly be an option, it doesn't have to be the only option. Things like bonds, commodities, real estate, land, and similar investment opportunities might all be ways to keep money earning outside of a bank.

I personally have held government savings bonds for years, and while they might not carry the level of excitement that stocks might or the beauty of precious metals, I find that they are stable methods of earning steady returns that are better than having to pay to have my money in banks.

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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

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