Financial Feminist – 101. What Banks Don’t Want You to Know with Vrinda Gupta

Intro

In this episode of the “Financial Feminist” podcast, Vrinda Gupta, CEO of Seekwin Banking, joins as a guest to discuss the banking industry and how banks take advantage of a lack of education on fees. She highlights the disproportionate impact of avoidable fees on women and minorities and offers insights on how to navigate the banking system to protect oneself and make the financial system work in your favor.

Main Takeaways

Banks and Avoidable Fees

• Banks use the “free product” model and disproportionately affect women and minorities with avoidable fees.
• Women and minorities pay 18% more in avoidable banking fees than men.
• Inequities in banking start with the first bank account, with hidden fees and fine print to consider.
• Understanding banking fees and ways to grow your money can help protect yourself and make the financial system work in your favor.
• Be aware of fees and find a bank that is right for you, don’t conclude that all banks are terrible.

Building Credit and Banking Solutions

• Optimizing existing credit behaviors is a better way to build credit than opening new lines of credit.
• Sequin Card is a debit card that builds credit and solves the problem of opening a new line of credit.
• Sequin Card offers a checking account that earns interest on every dollar and helps pay off debt and build credit.
• Putting money in a bank account is important for safety and making your money work for you.
• Supporting institutions and fintechs that understand and address these issues is important.

Discrimination and Credit Scoring

• Credit scoring has implicit biases and historically discriminates against certain populations.
• Factors that go into lending can bias against certain demographics, despite regulations against discrimination.
• Affirmative action in credit underwriting is a debated topic in the credit world.
• Gender and racial biases still exist in credit scoring systems, even with blind algorithms.
• Black-owned banks were 12% more likely to lend to black business owners, while other banks were less likely to give loans to minorities.

Smart Banking and Negotiation

• Negotiating with banks to reverse fees is possible and can be powerful.
• Protect yourself by checking your bank account statements every week.
• Negotiate with your bank to waive fees or lower interest rates.
• Asking to waive fees can often result in success, even for business accounts.
• Customers can make their banking work for them by being strategic about where they hold their money and understanding fees.

Summary

Banks and Avoidable Fees

Banks operate on the “free product” model but disproportionately affect women and minorities with avoidable fees. Women and minorities pay 18% more in avoidable banking fees than men. From the first bank account, hidden fees and fine print create inequities in banking. To protect oneself, it is important to understand banking fees and find a bank that aligns with your needs and values.

Building Credit and Banking Solutions

Instead of opening new lines of credit, optimizing existing credit behaviors is a better way to build credit. Seekwin Banking’s Sequin Card offers a debit card that builds credit and a checking account that earns interest on every dollar, helping pay off debt and build credit. By putting money in a bank account, individuals can ensure safety and make their money work for them. Supporting institutions and fintechs that address banking disparities is crucial.

Discrimination and Credit Scoring

Credit scoring systems have implicit biases that discriminate against certain populations, such as women, black folks, and the Hispanic community. Despite regulations against discrimination, factors that go into lending can still bias against certain demographics. Affirmative action in credit underwriting is a debated topic in the credit world. Black-owned banks have shown a higher likelihood of lending to black business owners, highlighting the need for more inclusive lending practices.

Smart Banking and Negotiation

Smart banking involves negotiating with banks to reverse fees or lower interest rates. Regularly checking bank account statements can protect individuals from hidden fees. Asking banks to waive fees can often lead to success, even for business accounts. Customers can strategically choose where to hold their money and understand fees to make their banking work for them. Negotiating credit line increases can reduce credit utilization and improve financial flexibility.

Conclusion

The banking industry has historically profited off of women and minorities, but there are ways to navigate the system and protect oneself. By understanding banking fees, building credit smartly, and advocating for fair treatment, individuals can make the financial system work in their favor. Supporting institutions that address banking disparities and promoting financial literacy are important steps towards a more equitable banking system.