Banks are often seen as a secure way to store your money and manage your spending. But your bank account is more than just a repository for your money; it can pave your way towards achieving financial growth. Banks now have multiple tools and resources that you can maximize to your benefit, but only if you take the time to research them and use them adequately.
The new decade has brought many changes to the world of banking, from an increased focus on digital products for consumers to surging demand for transparency amidst repeated security breaches in the banking industry. As a result, consumers and businesses are demanding better, heating up the competition, and putting the right kind of pressure on banks to deliver.
Whether you’re a small business owner, investor, or simply a savvy professional who wants to leverage their cash for something more, it’s time to take a closer look at your bank as a means to move capital to your advantage. Of course, most people don’t use their bank to its full advantage, but those who do are grateful for it.
With the current state of our economy, banks’ role has increased to include supporting small businesses and emerging markets to rise successfully despite the current crisis. Here are a few banking perks you might want to utilize:
Credit is King, not Cash
Using credit offers convenience and security. In fact, a report by the U.S. Consumer Payment Study done by TSYS in 2018 shows that 70% of customers prefer to use cards over cash, breaking it down to about 26% favouring the use of credit for their purchases. In addition, most credit users enjoy the benefit of being able to keep track of their money easily, as well as the added protection from possible identity theft.
Learning to use credit to your advantage also allows you to build a strong credit score, thereby increasing your investment opportunities that are otherwise limited with cash.
Higher credit scores also mean you get more significant savings in better deals and lower interest rates. Although arguably, using credit won’t give you savings instantly, its long-term benefits could mean you can save hundreds, or even thousands, on car loans, mortgages, insurances, and personal loans.
Invest Your Cash On a High Return and Borrow Against It at Prime % Rate
Most banks offer higher interest rates based on the cash balance in your bank account. This allows you to earn more money, especially with banks that provide a high-yield savings account. High-yield savings accounts can help you earn up to 25% more than the national average, which means the more you save, the more you earn and can leverage when borrowing money.
Borrowing money from the bank and investing in assets that get higher returns will help you increase your wealth. Of course, what you invest in will depend on your financial needs and capability, but there’s no reason not to think big, even when working with a smaller bank. Debt doesn’t have to be a burden if used correctly, especially if you have your savings working for you too.
Banking on Leverage
Leverage means using borrowed funds to increase returns from a particular investment or project. In this way, companies can use debt instead of issuing more stocks to raise funds for new projects and investments. This helps to increase returns for individual shareholders and the company as a whole, which makes it advantageous if you are operating a small business. It is more widely used in banking than any other industry, with a 50% average leverage ratio.
Most banks offer a 95:5 debt to equity ratio, allowing investors to either increase their purchasing power in the market or finance assets to increase shareholder value. Banking on leverage will enable you to earn more income than your assets can provide you.
Utilize Bank Loans
Besides offering low and affordable interest rates, bank loans also provide you flexibility in how you choose to spend your borrowed money – whether you decide to purchase new equipment, invest in a new business, or enter a new market. You also maintain control over your assets as long as you maintain a good relationship with your bank. According to Bankrate, the average personal loan rate as of September 2021 is at 10.46% and can decrease up to 6-8% if you maintain a good credit score.
While you always have the option to go to a third-party lender, there are several unique advantages of bank loans. You can typically receive favourable loan terms if you have other financial products with the bank and can integrate the loan management within your current banking information suite. Coupled with lower rates, you can make the most of your bank loan for your business or personal finances in ways not possible with third-party lenders.
Your bank can offer products that will help you increase your wealth, use your leverage to grow, and give you the advice and resources to start or expand a business, but only if you use it wisely. If you’re ready to start earning more with the cash you already have, here’s what you need to do:
- Contact your bank about credit card options that can help you build credit without high-interest payments
- Talk about high return savings accounts and the choices you have to use that savings to your advantage
- Ask about loan options for yourself or your business that can help you invest in high-return assets or grow your portfolio
- Find out what digital and security products you have available to you to make your banking easier and safer in 2022
Viera Walia Capital is here to help you make the best financial decisions for your future. To learn more about ways you can leverage your financial assets to build wealth, visit our resource center.