How to Switch to More Sustainable Banks

For many of us who are eco-conscious, making the right consumer decisions is a responsibility we can’t let go of. 

Whether it’s the eggs we buy, the soap we bathe with, or the mode of transport we use, we always look for the most environmentally-friendly option. But how many of us look beyond these things and scrutinize the essential services that make our lives tick, like the banking services we rely on?

If you haven’t thought of this before, now is probably a good time to do so. Banks, with their vast pools of capital, are some of the most powerful institutions on the planet. They have the resources to fund entire industries and help families buy new homes.

At Aspiration, we take this responsibility very seriously. We’re a sustainable financial services company that helps individuals manage their money ethically. 

We saw how big banks were playing with their customers’ money, investing it in harmful industries like fossil fuels, without notifying any of them. We wanted to create change in the financial sector and built Aspiration just to do that.

In this article, we show you how to investigate your bank’s investment practices and switch to a more sustainable bank because if you’re like us, you want to put your money where your values are. 

How ethical is your bank?

Have you ever checked what your bank does with your money?

They use the money you’ve deposited with them to build revenue. Banks lend your money to profitable businesses and investments that give them great returns on interest rates.

They do this because banks, like all other businesses, seek profits. Large U.S. banks such as JPMorgan Chase earn upwards of $100 billion in net revenue per year. How, and why, they earn so much was up for speculation until researchers began poking around for answers.

They found that many of the largest banks in the world invest in destructive but highly profitable industries. Between 2016 and 2019, top U.S. banks including Wells Fargo, Citibank, and JPMorgan Chase had invested nearly $800 billion in fossil fuel companies, expanding the growth of fossil fuel extraction just right after the Paris Agreement was signed. 

And, that’s not all. These banks have also profited from the private prison industry, the tobacco industry, and even the weapons industry. Public pressure and government scrutiny have done a lot to curb the unethical practices of large banks, but the damage is still apparent.

The money we put into our bank accounts might be helping to fund these harmful industries. But, there’s hope. Switching to a more sustainable bank can help divert your money away toward more ethical causes. 

Should you make the switch to a more sustainable bank? 

If you’re concerned about how your money is being used, it might be time to consider switching to a more sustainable bank. 

As ethical consumers, it’s our responsibility to prevent our money from going to unethical companies. Putting our money in an ethical bank may not seem like we’re funding destructive industries directly, but that’s exactly what we’re doing if our bank lends our deposits to oil companies, weapons manufacturers, and tobacco giants. 

So, what are the alternatives? Neobanks and sustainable banks have clear, legally-binding policies that prevent them from investing in industries that harm human lives and the planet. They use your deposits to fund clean energy projects, sustainable community development initiatives, and carbon offsets 

These banks are so mission-driven that they wouldn’t think about using your money for anything unethical. Putting our money in a big bank is like giving bankers more toys to play with. But, saving money with sustainable banks keeps us focused on the issues that matter to us most

Plus, neobanks and sustainable banks offer higher APYs and more transparency than traditional banks do. Aspiration, for example, offers an APY of up to 1.00% on your savings with no hidden fees. They also give back generously to nonprofits and community organizations that are working to create positive change for the planet. 

Aligning your bank with your values can boost your savings and help the environment.

Is it easy to switch to a green bank?

Switching to a green bank is relatively easy. You just need to find the green bank of your choice and follow a straightforward step-by-step process to switch banks

Green banks offer similar products and services as traditional banks, so you won’t have any problem switching your personal or business savings and checking accounts to them. It takes only about 10 minutes max to open a new account, and the instructions are easy to follow. 

When choosing a green bank to switch to, you should first decide what banking features are most important to you. Are you looking for a bank with local branches? Do you want a high-interest savings account? Do you need access to a portfolio of financial products such as mortgages, credit cards, and auto loans?

Also, consider the impact you want to achieve through your green bank. Some green neobanks like Aspiration allow you to automatically offset your carbon footprint whenever you purchase gas for your car. Others invest in sustainable clean energy technologies that you can contribute to. 

Once you’ve found a green bank you want to switch to, you can start divesting from your old bank. 

How to divest from your existing bank to a more sustainable one

Here’s what to do when you’re ready to make the switch. 

Call your bank to ask about their investments

As a customer, you have the right to call your bank and ask about its investments. They’re not legally entitled to disclose their operations, but it’s worth asking who their biggest borrowers are and what environmental and social policies they’ve committed to.

Their responses will help you decide if it’s time to move on. 

Open your new sustainable bank account

Then open a new savings or checking account with your new sustainable bank. Make sure you open the account at least a few weeks before you plan to close your old bank account. This will give you enough time to complete the necessary paperwork, get your debit card ready, and set up your online accounts.

Get account switching help from your new sustainable bank

Some sustainable banks may offer account switching services to help make the transition smooth. They may help handle the transfer of automatic payments or at the very least, provide you with a switch kit that contains a routing number for your direct deposit forms. 

Transfer your income and monthly expenses

After you’ve set up your new sustainable bank account, it’s time to transfer your income and monthly expenses. Make a list of all the bills that you pay automatically from your old bank account. 

For your salary, contact your employer and provide HR and Finance with your new bank account details. And for monthly subscriptions and utility bills, change your bank account details online or by telephone. 

Take extra care to transfer all of your automatic payments to your new account first before closing your old account to prevent any penalties.

Call your bank to let them know that you are divesting

Now comes the part where you break up with your old bank. Call your bank and let them know that you’re moving to a new bank because your values don’t align with their investment policies. Tell them explicitly that you’re moving because the bank is not doing enough to protect the planet

Ask what the account closure procedure will be and if there are any fees or paperwork that will need to be processed. 

Plan a day to complete the switch

Switching to a new bank requires moving all of your money, direct deposits, and bill payments. You don’t want to leave anything behind accidentally so it’s important to plan a day for this.

After you’ve called your bank, choose a date where you have no automatic payments to complete the switch. Transfer each group of payments and savings one at a time, and write them down so you have a record of what you’ve done. 

Empty and close your old bank account

At last, it’s time to close your old bank account. Some people wait 2-3 months after they’ve transferred most of their funds to close their old bank account. They keep a small amount of money in the account during this time in case they’ve missed an automatic payment or two. 

When it’s clear that no more services are ‘pulling’ money from your account, you can close it completely and switch to using your sustainable bank account in peace. 

Potential complications you might encounter when divesting from your old bank

Although divesting from your old bank might be a straightforward process, it’s not immune to potential complications. Switching banks requires your old and new banks to communicate. Your old bank may also bring up fees and policies that you didn’t anticipate.

Get yourself prepared by reading up on these potential complications.

The closure may negatively affect your credit card score

If you’re divesting from a credit card account with your old bank, make sure that your credit utilization ratio is low before closing the account.

Rushing to close a credit card account as you’re maxing out your credit allowance can hurt your credit score and history. This can negatively affect your future applications for a mortgage, insurance, or even a job.  

Only close your credit card account after you’ve paid all your balances first to reduce your credit utilization ratio and boost your credit score

You could be faced with missed payments and bounced checks

There’s always the chance that the long processing times of transferring payments and money between your accounts could result in missed payments and bounced checks

During this period, a monthly utility payment might not get updated with your bank account information or a mortgage payment might pull money from the new account when funds have not yet arrived.

If these happen, you could be faced with unnecessary, and costly, fines. That’s why it’s important to take an inventory of all your payments and transactions to reduce the risk of fines as much as possible. 

You could be hit with account closure fees

Your old bank may have fees for closing accounts or transferring balances.

Make sure to check for this information in advance to prevent any nasty surprises. Most banks do not charge fees but some do if you’re closing an account early, like within 180 days of opening the account. 

You could also be hit with fees if you close an account before clearing any overdrawn funds. Some banks may even reopen your bank account if a transaction occurs after you’ve closed it. 

Switch to Aspiration for cleaner investments

Aspiration is a sustainable financial services company that does not invest in any fossil fuels or harmful industries. We are a B Corp certified bank that puts the health of the planet at the forefront of all our business practices.

We offer up to 1.00% APY on our savings, more than what most other banks provide. We also allow investments in clean, sustainable investments (read more here), which you can join with a $10 minimum investment. Join Aspiration today and make your money work for the planet.

* Photo by Joseph Barrientos on Unsplash

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