Banks want you to have savings accounts - crypto is the real deal

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Almost everyone have savings account with their local bank through which the make savings and spend too. Savings account is mostly the entry level of the many banking services that local banks offer. Little wonder then that no matter how big your portfolio with your bank is, you will almost always be required to run a savings account. When the reason for this becomes obvious, you will understand why crypto is on a much higher level that savings in a local bank.

In this presentation, I want to look at the features of a standard savings account in local banks and why those features make it a powerful instrument for censorship and control in the hands of the bank.

The problems of savings account

By definition, a savings account is supposed to be a channel for keeping money which could be spent anytime and also earning some form of interest. Through the many avenues provided such a ATM or online, funds in a savings account could be withdrawn without prior notice to the bank. The bank is also obligated by design to reward holders of a savings account with some for of interest paid at the end of the fixed period like weekly or monthly.

The above is how a basic savings account is designed. But the major problem is that in practice, most banks turn savings accounts into a powerful tool of ownership control and censorship.

Consider how banks operate savings accounts which is entirely worrying:

1. Minimum account balance: This is the first way banks show who is in charge. They enforce a minimal account balance requirement, forcing owners to leave at least a portion of their savings that is not withdrawal. This feature is not usually clearly spelt out until the new user starts making deposits. So banks minimum account balance is as high as 20% of the funds in the account. Is that not crazy.

By enforcing a limit by which the funds in the account could be withdrawn, the bank shows who is in charge and leaves the customer with fewer opportunities in times of emergency. Additionally, if the customer decides to close down the account, some banks take a significant amount or all of the funds that have been left as the enforced minimum balance.

2. Withdrawal limits: Another terrible feature that most banks enforce on savings account is the daily, weekly or monthly withdrawal limit. So the banks will tell you how much of your savings you could have access to. Isn't that ridiculous? There are usually no limits to how deposits could bae made, but there are limits to withdrawal daily.

Some banks even take it further by still placing a limit on the amount of funds that could be withdrawn at each transaction. This forces customers to do many several small transactions at a time and allowing the bank to charge them each time.

Withdrawal limits were designed to stop money laundering and moving proceeds from crime. But this method does not work as bad actors in the system still support criminals to move money. At the end, the people that are at the receiving end are innocent customers that are going about their legitimate business.

3. Inflation: This is the worst thing that happens to savings accounts. And in a place like my country Nigeria, its beyond words. Inflation makes money loose value. So when you keep money in a savings account for a long time, its value continues to diminish because inflation makes it so.

Some goods in my country has had as high as 50% inflation rate in the last decade. Inflation happens everyday. The CBN continues to devalue the naira, making it loose so much value against the dollar. So keeping money in savings is another way to gradually through away something valuable over time. With nothing much being done to arrest inflation in my country and elsewhere, it is not really a great move to run savings account where you always save money long-term.

4. Bank charges: I think apart from the Neo banks, all other traditional banks in my country steal from customers in the name of transaction charges. I had one of the banks charge my savings account for receiving deposits. That is how terrible it could get to. Basically, every transaction attracts some form of transaction charge. Sometimes, there are hidden charges that you could not really account for.

If you leave money dormant in a savings account, over time, it will continue to reduce because banks continue to take money from there in form of network charges. That includes ATM maintenance fees and the rest. This is a problem of savings accounts which makes it a terrible idea to run.

5. Zero Interests: Savings accounts are supposed to accumulate interest right? At least that is what they will have us believe until you run an account. Most of the banks neither pays interests nor reward customers in any way. They instead steal from the funds that is supposed to accumulate some interest.

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The money we keep in savings accounts are used by banks for business. From the profit, they are supposed to reward savings accounts holders. But this does not happen and it is really a huge problem. I really do not want to keep money with the banks because of these and many other challenges.

Instead of Banks try Defi

Decentralized finance is the next big thing the finance space and the revolution has already begun. Defi brings about freedom, rewards, exclusive control and total ownership. Defy has all the features of a savings account and even more.

So instead of letting your money lie idle in a savings account, why not let your money work for you. That is the financial freedom we can only dream of when we open a savings account.

So what are the equivalent of savings account or even something better on defi?

• Web3 wallet: Instead of a savings account controlled by some intermediary, web3 wallets are completely owned and controlled by you. There are no minimum balances to keep, no huge and hidden transaction charges, and no minimum withdrawal limits. You own the funds and make all the decisions. No middlemen are needed to do your transactions. Web3 wallets are free, secure and universal, supporting cross-border transactions.

• Staking: If you really need to save money, then there is something called staking in defi. It is a way to lock up funds and earn some interest from it. It is designed as a smart contract which executes and pays interests directly into your wallet whether you are there or not. Many staking products are also flexible, allowing you to exit the smart contract at any time of choice. Better yet, staking products pay much more interests than any bank account would offer.

• Liquidity pools: Liquidity pools allow you to send digital assets which could be used to support swapping transactions. When you provide liquidity for a crypto pair, you allow your funds to be used when a token swap transaction is initiated. You get paid a percentage of the transaction fees charged on the swap.

Finally

There are many positive products that defi offer which are not just similar to bank savings account, but way better. You just have to explore the many defi options available online. For sure, savings accounts are like a trap by the banks to control your money. Defy is liberating.

Posted Using LeoFinance Alpha