Who Holds The Power? The Consumer Or The Bank?

Most people have a bank account but how many of us really understand what the banks do with our money? How many of us feel that we have complete control of our finances?

What exactly do banks do with our money?

Have you ever stopped and wondered what happens to the money you have handed over to be deposited into your account? Or where the money the bank has loaned you comes from?

When you deposit money into your account this is then added to a huge pool of money which contains everything the bank is holding on behalf of all its customers. When you borrow from the bank, this is where the money comes from.

So how do banks make a profit?

The banks make a profit from the interest they charge on overdrafts, loans, and credit cards. They also make a profit from the various fees they charge clients for going overdrawn, late payments, going over your credit limit, accounts with additional bonuses, etc.

Why should I care?

The majority of the countries’ finances are just electronic figures on a computer screen held by the banks. Actual cash (both in circulation and held by the banks) makes up a very small percentage of the countries overall finances. How well a bank does, does not only affect your personal finances because the banking industry essentially keeps the country afloat.

When a bank fails, this has a knock on effect as the bank does not physically have enough money to cover what all of the banks customers has deposited.

Is there anything else I can do to take control of my finances?

Taking control of your finances does not have to be as overwhelming as it may sound.

• Budget – this is probably the most important step, without a budget you will not have a clear picture of your outgoings and income
• Plan – once you have a budget you can start planning, the overall goal will be to improve your income and reduce your outgoings
• Pay off what you owe – using your budget you can prioritise what you owe and work towards becoming debt free
• Start saving – once you start having disposable income you can then begin to start putting money away, you can save up for that dream holiday or for your families future
• Keep going – keeping on top of your finances is a long term commitment

So what can I do about the banks?

You could be forgiven for feeling like you have no control over the money held by the banks. It can appear that ordinary people are powerless against large corporations. However, this is not always the case.

A bank relies on it’s customers to continue to deposits their money. The bank may hold your money, but you have full control of where your money is held. If you are not happy with your bank then you can always switch.

You may not be able to directly control the banking system but you do have control over your money.