How Banks Make Money Off You—And How to Flip the Script to Build Wealth
Let’s be real: banks are not your friends. They profit when you overspend, under-save, and let inflation eat your money. But here’s the twist—you can flip the script and start using the system to your advantage. Let’s break down how banks win and how you can win too.
Banks Profit When You Overspend
Ever wonder why banks make it so easy to get a credit card? It’s not out of kindness. Banks love it when you spend money you don’t have—especially if you only pay the minimum balance.
Why? Because they’re raking in interest rates as high as 25%. On a $6,000 credit card balance, that’s over $1,500 in interest a year—going straight into the bank’s pocket. They also push larger mortgages and car loans because their cut grows with your debt. Bottom line: when you spend foolishly, you pay them to get richer.
How Fractional Reserve Banking Really Works
Banks only keep a fraction of your deposit and lend out the rest. So when you deposit $100, the bank can lend out $90, and that $90 gets redeposited at another bank and lent out again. This amplifies the money supply, helping banks profit multiple times off a single deposit.
This system works—until it doesn’t. A massive bank run (everyone pulling their money at once) could collapse the whole thing. That’s why FDIC insurance exists, covering up to $250,000 per account. It’s not perfect, but it’s your only safety net in a fragile system.
Saving Money Can Make You Poorer
Traditional savings accounts pay around 0.41% interest, while inflation might be running over 4% per year—sometimes much higher. That means your cash is losing value every day it sits idle.
Example: $100 in a bank might grow to $105 in five years, but the cost of the same $100 item will rise to $123. You’re effectively $18 poorer just for playing it safe. Yes, you need savings for emergencies—but once you’ve got your cushion, start investing.
Become an Owner: Invest in Banks, Don’t Feed Them
Instead of paying banks interest, how about earning their profits? Banks like JPMorgan Chase and Bank of America pay dividends between 2.4% and 4.9% annually. That’s actual cash in your pocket just for owning their stock.
As a shareholder, you also benefit when stock prices go up. It’s a smarter way to engage with the system—you profit when the banks profit. While every investment carries risk, you’re flipping the game: from a consumer losing money to an owner making money.
Why Financial Education Matters More Than Ever
The current system favors investors, not savers. But schools rarely teach you how to invest, buy assets, or build wealth. So most people stay stuck in the employee-consumer loop, making banks and corporations richer.
To break out, you need to:
- Learn how money really works
- Understand where to invest strategically
- Stop throwing money at liabilities like luxury goods and high-interest debt
Knowledge really is power here.
Credit Cards: Stop Owing and Start Owning
The average American carries $6,000 in credit card debt, often at 25% APR. That’s insane. But instead of just paying it off, take the next step: invest in credit card companies.
These companies generate billions off consumer interest. If you own their stock, you get a piece of those profits through dividends and capital growth. You stop being a victim and start becoming a stakeholder.
Start Here: Market Briefs Makes It Easy
If all of this feels overwhelming, start by subscribing to the Market Briefs newsletter. It’s a free, daily update on the economy, markets, crypto, and real estate—written in plain English.
Plus, you get a free investing master class just for signing up. It’s financial education on your schedule, helping you stay ahead of the system instead of falling victim to it.
Final Thought: You Can Beat the System by Owning It
The system is designed to enrich the people who own it. Don’t just be a consumer. Don’t just be a borrower. Become an owner.
- Own bank stocks
- Own dividend-paying companies
- Own your financial future
That’s how you flip the game—and start building real wealth.
Jaspreet Singh is not a licensed financial advisor. He is a licensed attorney, but he is not providing you with legal advice in this article. This article, the topics discussed, and ideas presented are Jaspreet’s opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence
