Money Rehab with Nicole Lapin - What is Your Money Doing While You're Sleeping? It's Up to No Good.

Episode Date: August 25, 2021

Each year Americans spend more than $33 billion on banking and financial firm fees. Do you know how your bank is using that money? In today’s episode, Nicole gives you the good news, and the bad news.

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money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never do it. You think the whole world revolves around you and your money.

Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. We've talked a lot about the importance of having a bank account.

It is much more convenient to carry around a debit or credit card than it would be to walk around with all your cash all the time. If that was your jam, you'd probably need a bigger bag. And don't we all have too much baggage already? I digress. Banks offer us a safe place to keep our money and the opportunity to let that money grow. But how well do big banks deliver on that promise? Well, let's think back to the Wells Fargo fake account scandal. For some people, their money wasn't entirely safe. It was being shuffled around to other accounts without their consent. I will say that is the exception, though, to the rule.

Nothing like that has ever happened to me or anyone I know. Overall, I am pro-bank, but banks need to be doing better. Of course, we know that banks don't offer accounts out of the goodness and kindness of their hearts. They do make money and they make that money off us. Think about it. If you have $10,000 in your savings account, you're probably earning an APY of 0.01%. APY is, dictionary alert, annual percentage yield. It's the interest that you get in a savings account. So an APY of 0.01% or one basis point means that after one year, you will have earned $1 from your bank. $1. So generous of them. Thanks, guys. But if you have $10,000 of credit card debt with the same bank, your APR is probably around 18%.

Another little dictionary alert, APR is the annual percentage rate, and that is the interest rate used against you with credit cards. So after one year, your bank has made $1,800 off your interest fees. has made $1,800 off your interest fees. Or if you use your bank to take out a mortgage, you're probably getting charged 4%, which is a ton of dough over the course of a 30-year mortgage. So why is it that your bank earns 4% from you and you only earn 0.01% from them? There's no likable answer. In my eyes, it all comes down to greed. The difference between the interest rates your bank charges you for your loan and the interest rate your bank pays you for your savings account is called the spread. And as you can see, in most

cases, that spread isn't spread so thin. These whopping interest rates should be enough to satisfy big banks, but it's not. There are more fees. For example, if you have less than a certain amount in your bank account, you'll get charged a fee or you'll get hit with a fee when you use an ATM or a fee might get tacked on to a certain debit or credit card transaction. You can see how this quickly adds up in fee land. Each year, Americans spend more than $33 billion on banking and financial firm fees. If you belong to a big bank, you're part of this number. Your bank is probably making a couple hundred dollars off you at least every year. Must be nice, right? What are these big bank execs doing with your money, though? Lining their pockets? Sending their kids to private school?

Well, maybe, but that's not all. The fact is you probably don't have a clue how big banks are using your hard-earned money, but you have a right to know. That is your money that you worked so hard for. So let's follow the money trail. Of the $33 billion that banks make off their customers, they turn around and spend $100 million of that on lobbying and campaign contributions. And what sort of lobbying efforts are we talking about? Are they campaigning to get more stimulus checks and more perks for bank customers? That would be nice, but they are not. Some banks use their money to fund fossil fuels, which contribute directly to global warming. In 2020, according to a report, Banking on Climate Chaos 2021, JPMorgan Chase put $51 billion into fossil fuel financing. And Bank of America threw

down $42 billion. And if you saw the latest IPCC report, you know that the fossil fuel industry doesn't deserve another dime. Hold on to your wallets, boys and girls. Money Rehab will be right back. Now for some more Money Rehab. Other banks use your money to fund private prisons. In 2019, a study from the Public Accountability Initiative showed that Wall Street banks currently have credit arrangements of $2.692 billion with the two largest private prison complexes. This figure includes $1.7 billion in lines of credit and $992 million in term loans.

Through these agreements, the companies regularly tap the bank as sources of credit to support their operations and expansion. This upholds and strengthens the prison industrial complex that disproportionately affects people of color. So this is an issue of justice on many, many levels. Some banks use their money to support the firearms industry. to support the firearms industry. So sorry not sorry to drag them again, but Wells Fargo,

who has been called the NRA's bank, has lent nearly a half a billion dollars in credit to gun makers since 2012. Bank of America sent the gun manufacturer Remington $43 million in what they called a bailout to pull the company out of bankruptcy. Remington firearms have been used in a number of mass shootings, including the Sandy Hook shooting. This one particularly boils my blood. There have been so many grassroots movements trying to get people to boycott gun manufacturers with the whole purpose of hurting the company's bottom line and Bank of America just bails them out with your money while you're sleeping? Consumers get messages across to companies through their buying behavior. The way to apply pressure to get companies to change is by boycotting the company's products. Companies have to pay attention if these boycotts start hurting their bottom line.

But if they get bailed out, there's no reason for these gun companies to listen or even come back to the table to talk about gun control. It's wrong. It's just wrong. Here's a particularly rude one. Big banks also use that chunk of change to lobby for legislation that gives them more power over you, their customers. This means that every time you pay a monthly maintenance fee or an ATM fee, a portion of that money, your money, is being used to lobby for permission to charge you higher fees and even to take down the signs on ATMs warning you of the fees in the first place. Is this how you would have spent your money if you had the choice? Would you take 4% of your mortgage and give it to the NRA, no questions

asked? When I followed this money trail, I was absolutely shocked. It feels so naive to me now, but when I pictured banks, I pictured my money sitting tight in little bundles behind big old vaults with big copper dials. But to learn that these vaults are empty because that money had already been spent by a private prison conglomerate? When I found out the hard truth about big banks, I knew I had to put my money where my mouth is and step up to make some real change. to put my money where my mouth is and step up to make some real change. So for all of you who posted a picture on Instagram on Earth Day and wrote a poetic caption about how much you love Mother Earth, and for all of you who added a rainbow border around your Facebook photo after the pulse shooting, here are three things you can do if you want to put your money where your mouth is. Number one, follow your money trail and do some

research on your bank. Dig into how your bank is spending their money, what campaign contributions they're making, what they're investing in, or hopefully what pledges they're making to make the world safer and fair. Number two, take thee to Twitter, friends. If the truth about big banks is breaking news to you, then it will probably be breaking news to your friends too. Share this episode, spread the awareness, tell your friends the truth about how their money is being used. Number three, sign up for an account with Aspiration Financial, LLC, member SIPC, the digital banking alternative. If you guys have been a Lapin fan since day one, you might remember me talking about this app way back in 2017 when I was on the Steve Harvey show and I did a segment on my favorite

financial apps. Aspiration never uses your money to fund fossil fuels or coal. With Aspiration, you can actually plant a tree with every purchase and get cash back when you spend with environmentally friendly partners. And I teamed up with Aspiration to create a special treat for you guys. If you sign up for an Aspiration account at Aspiration.com slash money rehab, you'll get my latest book, Becoming Superwoman, with up to $200 when you spend $1,000 in the first 60 days. My book, Saving the Planet, win, win. For today's tip, you can take straight to the bank.

A good one, hopefully. Call your bank to negotiate your APR rate down today. Do it now. By lowering your APR, not only are you keeping more of your own money in your pocket, but you're also keeping your money away from big banks. And because of the track record of irresponsible and unethical spending, the less money big banks have to invest, the better. So what are you waiting for? Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer,

Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.