Money Musings 💭 Banking while Black 💰
Access is a very important piece of the racial and gender gaps in personal finance. In the past and still today, BIPOC and womxn haven’t had access to the same financial products and resources that white men use and benefit from.
Racial discrimination is still common at banks and there is limited legal recourse because the 1964 Civil Rights Act does not include financial institutions.
It happens so often that “Banking While Black'' has become a commonly used phrase and hashtag. Bank employees call 911 on Black customers trying to cash a check, use racial slurs in meetings with Black customers and refuse Black customers service.
These are not isolated incidents and continue to happen in 2020.
If this happens when Black customers try to deposit checks or take money out of their bank accounts, imagine the discrimination that’s invovled in getting a mortgage or loan.
Credit-worthy Black and Latino homebuyers are denied mortgages more than twice as often as white homebuyers and are offered higher interest rates even when their credit profiles are better. 🤯
During the pandemic, we saw continued lack of access with the federally-backed forgivable loans for small businesses - the Paycheck Protection Program (PPP). Only a small percentage went to Black and Latino business owners, despite being the hardest hit populations in the pandemic.
Banks prioritized existing customers and often turned away (or ignored) others. Also, the PPP loans required 75% of funding to go to payroll expenses and smaller minority-owned businesses often have very few employees, yet they need funding to pay for other types of expenses.
Only 12% of the minority-owned businesses who applied for PPP funds received the funds they asked for. Compared with 61% of small businesses overall.
Because the Black community was not able to bank at traditional banking institutions and even to this day are not receiving equitable treatment, the Black Bank was created to serve the Black community.
Many Black-owned banks not only aim to serve the Black-community as customers, but are also working to close the racial wealth gap in other ways. They play an important role in fighting modern-day systemic racism and discrimination in the financial sector.
By switching to a Black-owned bank, you are not only supporting that mission, you are also taking a stand for financial inclusion and equality.
Once you’re ready to make the switch, the next logical question is, which Black-owned bank? I dug in and did the research on the best Black-owned banks and have outlined my findings for you here.
Before putting a bank on this list, I called them up and spoke (anonymously) with a customer service rep to confirm all the details I share.
This list is by no means exhaustive - there are currently 42 Black-owned banks in America, many with an amazing local presence. I’d love to hear about your experience working with any of these banks or ideas for others that are not yet on this list!
MONEY MOVE OF THE WEEK
Open an online savings account. If you know me, you know I love a good online savings account (aka a high yield savings account or HYSA). Here’s why. First and foremost, they keep your savings out of sight and out of mind (protected from yourself). There are a few unicorns out there who are able to save using the savings account attached to their checking (you know who you are!), but for most of us, it’s wayyy too easy to transfer that money over.
Online savings accounts are also free and earn interest. You can earn around 1%+ interest right now, which is 100x better than what most of us are getting from the savings account at our brick and mortar bank. I keep multiple accounts with different nicknames (like rainy day, travel, preschool tuition, etc.) so every dollar has a job.
YOU GOTTA SEE THIS
Define: INTEREST RATE - how much you earn or pay as a percentage of your total balance. When it comes to debt, your interest rate (also called the annual percentage rate or APR) is the amount you pay (in exchange for being lent the money). If you have $1,000 worth of credit card debt and your interest rate is 25%, you’ll pay around $250 this year in interest (in addition to the original $1,000 you owe). You’ll typically get charged interest on a monthly basis ($250 /12 for the current month).
When it comes to earning, interest works the same way. If you earn 1% on your online savings accounts, you are being paid 1% of your balance each year as payment for keeping your money with that bank. If you have $1,000 in savings, you earn $10 of interest in the first year.
Fun Fact: Compound interest is when our interest earns interest (i.e. interest on interest). It can apply to earning or paying interest. When it comes to investing, compound interest allows our money to grow exponentially. Let’s say you have $1,000 invested that earns 7% per year. In year 1 you earn $70 so in year 2, you can now invest a total of $1,070. In year two you earn $75 and can now invest a total of $1,145. This is what compound interest looks like in a chart:
Use it in a sentence: “One of the easiest ways to build wealth is to invest and let compound interest work its magic.” 💁♀️
If you are ready to learn how to invest so compound interest can work for you, check out our 3 month Savvy Investor Course. I’ll teach you everything you need to know to invest competently and confidently - no previous knowledge required.