When transitioning to a more eco-friendly and sustainable lifestyle, one often forgotten factor is ethical banking. While banks may not come to mind as environmental or health threats, the way they use the money you have deposited may surprise you. When you deposit money into a bank, it does not just sit there waiting for you to withdraw it. Instead, banks use your money to finance other economic activities.
Traditional Banking Practices
Traditional banks use your savings to finance industries like fracking, oil drilling, coal mining, and natural gas. It may be unnerving to learn your savings account is allowing environmentally degrading activity to happen in the first place. Between 2016 and 2019, banks spent 2.7 trillion dollars supporting these climate destructing activities (see the report here). Ethical banking, on the other hand, is intentional with how its funds are used. Ethical banks use your money to support environmentally conscious industries and local entrepreneurs.
Environmental degradation is not the only pitfall of most conventional banks. In 2019 alone, major banks spent over 61 million dollars on lobbying (see here). Furthermore, banks are often blamed for their predatory lending practices aimed at young borrowers who do not fully understand the terms of their loans. With private student loan interest rates sometimes as high as 11.75%, the ethics of big banking sometimes seem a bit fuzzy.
On the user’s end, banks make money from charging you fees for certain services. This includes overdraft fees, credit card interest payments, and loan interest payments. Whether these fees are fair is up for debate, but for many, these fees can add up quickly.
Ethical Banking with Aspiration Bank
One bank that actively counteracts the negative behavior of so many other financial institutions is Aspiration bank. This bank is only online with no physical branches, so all communications must happen via email or telephone.
Aspiration contains no fees for most services. It allows you to pay what you see fit for monthly fees, even if that is $0. Here are a few other great aspects of Aspiration:
Pros of Ethical Banking
- No oil pipeline or fossil fuel funding
- No political campaign contributions
- 10% of profits go to micro loans for in-need Americans
- Certified B Corporation
- Cash back when spending money at socially conscious businesses
- Carbon offsetting for gas purchases
- Debit cards made from recycled ocean plastic
- Free Allpoint ATM use
- Direct deposit available
- No monthly fees
- Rounding up purchases to the nearest dollar will contribute to planting trees
- Retirement and investment accounts are available that focus on investing in companies that focus on gender and ethnic diversity and environmental sustainability (see here )
But like all banks, the user experience is never perfect. Here are a few sacrifices you must make if you turn to Aspiration for your ethical banking needs:
Cons
- Slow service
- Opening an account and receiving a card can take several weeks, receiving money from referrals can take months, and customer service has no idea when I will receive my recycled ocean plastic debit card
- Earning 1.00% APY requires monthly spending of $1000
- Only 25 checks are free for new checking accounts
- No general cash back program for everyday purchases
- Customers cannot have both a joint and a personal Spend and Save account
- No credit card options
- No physical locations if you prefer to deposit money in person
Using a bank is an inevitability in an increasingly cashless and digital world. Voting with your dollars does not only need to happen as a consumer. It can start with where you store your money in the first place. For those who want an ethical banking option that is good for the world and good for their pocket, Aspiration Bank is a promising option.
If you would like to read more about how to save money in an environmentally friendly way, see here for an article on buying secondhand with Facebook Marketplace.
