and why is it so important?
In today’s world, many of us become more aware every day of the consequences of how we spend our money. Our consumer dollars often go to impossibly large companies which monopolize their industry, and it seems like we have little to no say in how they use that capital. Profits are used for practices that contradict our values- whether that’s the degradation of our environment or our civil rights. However, in many instances, more socially responsible options exist, even if they do sometimes end up being costlier. It’s just that some of us would rather pay the cost ourselves rather than forcing our earth and society to.
While we are becoming more conscious of how our consumer dollars are being used, we should also be aware of the effect of our saved dollars. Ideally, banks and credit unions use our deposits to make loans, and these loans can have a big impact. At Better Banking Options, we look for institutions which make small business loans and mortgage loans to low- and moderate-income families, as these are wealth-building, community-building loans which help people forge generational wealth. There are also banking options which support more specific environmental and other social causes.
So what does an ethical Better Banking Option look like?
They put people above maximum profit.
Although banks are for-profit institutions (credit unions are non-profits), ethical banks don’t take advantage of their customers to make a quick buck. Ethical banking institutions often make an effort to build relationships with their customers so as to better understand their needs. They don’t just talk the talk; their banking practices should reflect their commitment to their customers. Look for banks and credit unions with favorable reputations in their neighborhood, and who work with local groups to create community.
They work to have a positive impact on the communities they work in.
Ethical banking institutions don’t just exist to provide basic banking services, although they should do this effectively as well. Often, they were created to fill a gap in the market, providing alternative loans or working with populations underserved by traditional banks. Their purpose is to do something more than most banks—to do their best, in one way or another, to transform their communities into better places to live and work for everyone. Look for banks and credit unions with a clear mission or goal, and make sure that mission is one you support. Additionally, make sure their lending portfolio reflects this mission.
They are transparent in their practices.
Regardless of how effective they are in their mission, ethical banks and credit unions should be transparent in their banking practices and work to provide as much information as they can about how your deposits are being used. This is particularly important as banking regulations loosen and institutions are required to report less to government agencies. Look for banks and credit unions which provide impact reports, statistics and other important info to their customers, and don’t be afraid to reach out and ask employees questions about their lending and other banking practices.
Ultimately, ethical banking looks different for everyone because everyone’s code of ethics is unique. The most universal advice we can give on banking ethically is to be intentional about your banking practices. Banking plays an incredibly important role in our economy, essentially functioning as the conduits which keep capital moving. Simply moving your money from the mega banks may be enough. Learn more about just how unethical these banks are here.
When you take the time to move your money to a Better Banking Option, you can help contribute to a more ethical and equitable society. If you choose a bank which aligns with your values, you can know that your deposits are doing more than just sitting in an account; they’re being put to work to make your world a better place to live. Everyone should be thinking more about where they bank. It’s a simple, one-time change you can make in your finances which will help them better reflect your vision of a better world.