Paul Meloan – Vested Interest

Ask yourself, “what do I need a bank for?” and “what am I willing to pay for it?”

I pride myself on never setting foot in a bank branch if I can help it.  I cannot remember the last time doing so brought a smile to my face or anything closer to improving my day.

Next time you drive through your community, look around and try to count the number of bank branches near you.  That number (whatever it is) is as high right now as it will ever be for the rest of our lives.

Around DC, it’s more fun to count the number of former Little Tavern locations.  But like Little Tavern, conventional banks are on their way to the dustbin of history.

Here is what I need a bank for:

1.  I receive payments from my business, my wife’s paycheck, and occasionally other parties.  The first two account for about 97.341% (approximately…..) of all deposits.

2. I still need some cash in my pocket, from time to time.

3. I have bills to pay, almost all of which are on a monthly cycle, but some occur on an ad-hoc basis.  Think things like out-of-pocket medical bills.

All of the above can now be done without ever physically entering a bank.  Which is good, because my primary bank (USAA) does not have a branch within 1000 miles of where I live and work.

All my payments from my business and my wife’s paycheck are deposited by the ACH system electronically.  Any physical check I receive is captured as an image by my Android phone running my bank’s app and credited immediately. When I need cash I hit any ATM, as my bank credits me back the foreign ATM fee charged by whoever owns the ATM I use.  When I pay a bill, I enter the info on my bank’s web site and they either transfer funds electronically or send a check.

My bank and others like it do this to attract deposits, for which they currently pay approximately nothing (0.2% annual interest) to hold.  Since I like all the conveniences I get, I am willing to accept their offer of “nothing” and like it for them to hold my funds.

Of course, they still make money by lending it.  If the going rate for a car loan is < 2% (and it is…..) then borrowing money at 0% and lending it at 2% does not leave a lot of wiggle room for things like overhead.  Branches are damned expensive, as are the people who work in them and things like ATMs.

The reality is that in our world of zero-interest accounts and cheap loans, the branch can no longer survive.

I won’t miss it a bit.

Paul Meloan is the co-founder and co-managing member of Aegis Wealth Management, LLC, in Bethesda, Maryland USA. Before Aegis Paul was a practicing attorney as well as working in the tax practice of Ernst & Young, LLP.

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