WHY YOU MIGHT NEED A "HYBRID" BANK



Chase, Wells Fargo, CitiBank, Bank of America, and around here, Woodforest Bank; what do we know about these “bricks and sticks” banks who own locations on most of the best corners in our community? They hold your money and pay you next to nothing, and then they lend your money to your neighbor and charge him or her a lot more in interest than what they are paying you and me. They make money on YOUR money and the financial term for this is called arbitrage. In my world banks are a necessary evil, and I use them just like everyone else…. Don’t go looking for coffee cans of cash in the Goodwin backyard. My Australian Shepard might have something for you back there, but you won’t find any of my cash buried in coffee cans…. It’s in the markets, other investments, and yes in banks.

Yesterday I met with a couple of bankers who offer a “hybrid” banking solution that is in fact FDIC insured. Because “hybrid” banks have fewer locations and do much of their business online they can pay you and me around 100 basis points more on our cash on hand than what a traditional “bricks and sticks” bank might pay. For example, if you have 50K of cash reserves that you keep close to home for emergencies etc., the “hybrid” FDIC banking solution could land you about 500 more bucks per year than what your current bank is paying you. If this extra money you netted were earning market rates or return over the next twenty years you could be ahead of the game by a whopping $30,000.00 and that’s not chump change.

A “hybrid” bank may not be as close to home for you as your current bank, and I only know of one here in The Woodlands, Texas. You can use the Woodlands or any other local location like you would use any other bank and/or you are free to set up your account online. These accounts work like any other bank FDIC insured account, and the “hybrid” banks offer CD’s as well which are also FDIC insured. The hybrid bank that I interviewed does not do traditional checking so if that aspect is important to you a hybrid bank may not be for you.

Being smart with money means being efficient in all aspects of spending, savings and investing. Just this past week I started saving over $75 dollars per month by simply calling my internet provider and cable TV company and asking them for a better deal. We shop our auto and home insurance periodically because it pays us to do so. I buy most of our gas and consumer goods at Costco because we cannot beat the savings anywhere else and it adds up to hundreds of dollars of savings per year. I have said it before and I will say it again; there is no amount of money or income that someone can’t blow through.

Being wise and diligent in the small things will lead to you having much more retirement income when you will likely need it the most. If you have cash reserves that need a little more yield than your current bank, then give us a call and we will connect you to an FDIC insured “hybrid” bank. Being smart with your money is always a cool thing to do!


This material is for general information and education purposes only.  Information is based on data gathered from what we believe are reliable sources.  It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.  It should also not be construed as advice meeting the particular investment needs of nay investor.