Hey, anyone gotta light? Really with the curtains still? What other government services are there to
explain? Okay that answers some questions. Not the color I would have chosen but okay… I look like a tacky bank teller. Would you like some coffee? Pig’s talking. Anyone else hear that? Do you want out of this place? Yes, I’ve been in here for what
feels like decades. Explain my purpose and defeat your doppelganger. Your purpose? Like as a piggy- Banks? Really? That’s not even a government ser… Alright. But uh, what’s a doppelganger? KB Morgan, BetterCash. How can I meet your financial needs today? This video was brought to you by Curiosity
Stream and Nebula. Did you know that the dollar is completely
worthless? That’s right, it isn’t backed by anything,
it could collapse at any moment, which is why you should put your money into gold. Which I just happen to be selling. Not the actual gold though, I hold onto that
for safe keeping, you get a certificate that says I’m holding onto a specific amount
of gold for you and- why’d the music stop? What, you don’t trust me? Right so the dollar is worthless, but so is
gold if you think about it. The only reason it has any value is because
it’s nice to look at. Using it as a currency actually takes it out
of its useful application in electronics and other technologies. But that’s not why the dollar- I’m sorry-
So I have to bank battle an evil version of myself? Is that what’s going on here? [Frustrated Sigh]
What? Oh, okay it’s like the third- okay, I-. Can I start over? In the beginning, the dollar was worth a set
amount of gold, known as the Gold Standard. You could take your cash into a bank and exchange
it for physical gold. Every dollar was like a gold certificate backed
by the US government. People preferred using cash over gold since
it weighs significantly less and if a boat load of it sank in the Atlantic,
we could just print more. While the gold stayed safely in a vault. Banks would hold onto the actual valuable
asset, while people exchanged a secure representation of that asset in their everyday transactions. All that changed in 1971 when Nixon took the
dollar off the Gold Standard. Ever since then, the dollar has been a free-floating
fiat currency and is just worth a dollar. Now, it is the valuable asset that the banks
hold onto. Cash has become just as annoying and burdensome
to work with as gold and silver was a hundred years ago – and it’s just as insecure. If you drop it in a fountain or light it on
fire, it’s gone. Which is why most people today keep their
money in a bank and trade a digital representation of that currency. Typically, in the form of one of these. Generically, they’re known as payment cards,
but you probably know them better as debit, credit, or ATM cards. And the easiest way to get one is to open
a bank account. Otherwise you’d have to use cash or something,
which as we discussed earlier is kinda- Or you can buy a Moneycard from me! Don’t waste your time with a Visa prepaid
or Walmart store card! A KB Morgan BetterCash Moneycard is just as
good as the other guys’ and is accepted at just about any retailer. For a small $3 loading fee you can buy stuff
at the store or online just like everyone else while knowing that your money is safe
and secure. And if you ever need it out again, my ATM
fees are… competitive. Right so, if you want one of these without
paying an upfront loading fee, you’ll need to open a checking account at a bank or credit
union. Banks and Credit Unions are two sides of the
same coin. Credit Unions offer the same financial services
at slightly better rates; the only real difference is who owns the financial institution and
why. Banks are owned by a corporation for profit;
Credit Unions are owned by its members for their benefit. They grew in popularity after the Bank Panic
of 1907, when thousands of banks around the country failed and communities decided to
pool their money together. Like small financial co-ops or banking communes. Credit Unions typically serve a specific group
of people, whether they live in the same area, work in the same industry, or are part of
the same demographic group. You have to be someone to join a credit union;
whereas banks will serve anyone who walks in the door, as long as they have money. They’re both exclusive in their own way. For the sake of simplicity, whenever I talk
about banking, I’m referring to banks and credit unions, since they offer the same services
for slightly different reasons. Starting with the most basic service – a
checking account. This is what’s known as a transactional
account, a specific type of deposit account designed to keep your money available for
withdrawal or everyday purchases. The closest thing we have to a digital wallet. They’re called checking accounts because
you used to write actual checks. This is an instruction to the bank, telling
them who is getting the money, how much they’re getting, and what account to pull the money
from. But there is no guarantee that the amount
you wrote down actually exists in your account, if it doesn’t, the check will “bounce.” And intentionally writing bad checks is illegal. Because of that, many businesses and landlords
have shifted towards cashier’s checks, where they pull the money from your account and
write a guaranteed check in the bank’s name. Money orders serve a similar purpose but are
typically sold by retail stores. Since personal checks are falling out of fashion,
checking accounts usually come with a debit card, allowing you to shop online or in person
and withdraw your money at an ATM. There is no additional fee to use an ATM as
long as you’re using one of our ATMs. If you’re using an ATM at a gas station
or something, the fee can vary anywhere from two to five dollars and is the same whether
you’re withdrawing $20 or $200. In addition to our fee for not using one of
our ATMs. Having quick and easy access to your money
means that the bank can’t use your deposit as capital for loans. So, checking accounts don’t usually earn
interest. In exchange for having your money in our vault
and using our electronic debit system, we charge an Account Maintenance Fee which can
vary from from five to fifteen dollars a month depending on what features you-
You can skip all of this at BetterCash! You don’t need to pay a bank every month
to keep track of what you spend your money on, selling your data to who knows who. Until people start taking bitcoin seriously,
the only untraceable currency is cash. No monthly account service fee, no ATM or
overdraft fees, just bring me your paycheck and I will give you your cash. Minus a small fee of course, I have kids to
feed. I’ll cash anything up to $300 for just three
dollars and six dollars for anything above that – I know that might sound like a lot. But it’s still less than the five to fifteen
dollars you’d be paying at a bank, right? Okay maybe we can work with you on the fee. Only 42% of checking accounts are actually
free, if you have one, it’s probably a special account for students or veterans. Or more likely, they waived the fees because
you met some financial requirement. Opening an account starts with an initial
deposit, obviously, you can’t start an account with nothing. This can be as low as $25, but for a standard
non-interest-bearing checking account, our bank requires $100 – which is way better
than the national average. Once you’ve opened the account, to avoid
paying a monthly service fee, you’ll need to maintain a minimum balance of $500. Basically, that 500 dollars just sits there,
it’s only purpose is to prevent you from having to pay the service fee. Another option is direct deposit, as long
as you have a reliable income of at least $1000 a month, we’ll waive the fees. If none of those options work for you, we
can consider opening another account. This is known as cross-selling; since banks
exist to turn a profit, it’s in our best interest to provide you with as many products
as we can. And the most popular option, by far, is a
savings account. This is a deposit account that the banks can
use as capital for loans, so we don’t charge a fee – and as long as you keep it open,
your checking account fees will be waived too! There are some strings attached though. Since we loan that money out, you are legally
restricted to only six transactions a month and we provide an incentive for you to keep
your money in our bank. As long as it sits there, it will earn interest. Savings accounts also have an initial deposit
and minimum balance requirement, so again, let’s say you open an account with $500
to start. After a month, the interest will be added
to your balance. The national average interest rate on a savings
account is 0.06% APY, which stands for annual percentage yield. Divide that by twelve, and congratulations,
you’ve made 3 cents! You didn’t even have to do anything! There are other types of savings accounts,
like Jumbo or Money Market, that have much higher interest rates or dividends, but also
much higher minimum balances. And then there are timed savings accounts
known as Certificates of Deposit or CDs, which typically earn a higher interest rate for
a fixed period of time – you can’t withdraw it early without a penalty. 0.06% is the average of all of them. Which means for every high-yield online savings
account, there’s a brick and mortar bank that only offers 0.01%... like mine. Savings account? Sure… I’ll hold onto your money… Do not trust him with your money – he’s
not FDIC insured. During the Great Depression, after thousands
of banks closed their doors and millions of accounts vanished, the government decided
to prop up the people. If your bank goes under, your savings account
will still be there. The Federal Deposit Insurance Corporation
will back any deposit account up to $250,000 with the full faith and credit of the United
States government. The NCUA provides the same guarantee for Credit
Unions. The Great Depression was not the first mass
bank failure, in fact, they were pretty common back in the day. There was no regulation, banks were often
overleveraged. When you make a deposit into your savings
account, the bank typically sets aside a fraction of that in reserve and then loans out the rest. This is known as Fractional Reserve Banking. Of your $500 initial deposit, they save 10%
or $50, and loan out 450 to Bob. Bob deposits that 450 into his account at
another bank, 45 is set aside, and 405 is loaned out to Catherine. This process repeats infinitely – in fact,
your initial $500 deposit was probably the result of someone else’s loan. This is how banks “create” money. It’s also why, if everyone who has money
in a bank decided to withdraw it at the same time, the bank would run out of money. We call this a Bank Panic or a run on the
banks. Most of our money was made this way rather
than printing it, which requires a central bank to regulate the money supply. In the United States, we call it the Federal
Reserve System or simply, the Fed. Which is a system so complicated, people assume
it must be part of some giant conspiracy – we’re not going to get into how it’s structured,
but we are briefly going to talk about how it works. They control the money supply through three
mechanisms. The first mechanism is one we’ve already
discussed; the Fed can adjust the fractional reserve percentage. The lower the percentage, the more capital
banks have available to loan out and vice versa. They very rarely change this number, more
commonly, the Fed changes the interest rate on inter-bank loans; the lower the interest
rate, the more money can be loaned out, increasing the money supply. The third mechanism is the most controversial,
the buying and selling of government securities – commonly as Treasury bonds. When the government sells bonds, they are
taking money out of general circulation, when they buy them back, that money is reintroduced
into the economy. That third option was famously used to bail
out the banks during the 2008 Financial Crisis. Because again, the banks were overleveraged. It’s a common talking point that the stock
market crash of 1929 didn’t cause the Great Depression, it was the bank panics that followed. But that narrative leaves out the crucial
link between the two. Numbers vary, but only 3-10% of Americans
personally owned stock – but, back then, banks were allowed to use your savings account
as capital to invest in the stock market themselves. So indirectly, just about everyone with money
had something at stake. When the market crashed, it took thousands
of banks with it, which caused a run on thousands of other banks, wiping out everyone’s savings. So, the government decided to stop that from
happening again. In 1933, the Glass-Steagall Act separated
commercial banks, which typically did savings and loans, from investment banks, which dealt
with stocks and other brokerage services. Banks could not use deposit accounts to make
risky investments… until it was repealed in 1999. It took less than ten years for the banks
to end up with more risk than capital and require a bailout from the taxpayers. Granted that bailout turned a would-be Depression
into a less-severe Recession – but I’m still allowed to be mad about it. The one thing that differentiated 2008 from
1929 is that the banks weren’t invested in the stock market, they were mostly overleveraged
thanks to mortgage-backed securities and their derivatives. Like Credit Default Swaps and Synthetic Collateralized
Debt Obligations. Which are complicated investment vehicles
that are well above consumer-level banking services and not really in the scope of what
we’re talking about here. So, let’s discuss the underlying mortgage
instead. A mortgage is a home loan that typically lasts
30 years, during which, the bank owns the house and you are slowly paying it off. With an average interest rate of 3-4%. Car loans work in much the same way but only
last 5 years with a slightly higher interest rate of 4-5%. Your interest rate is determined by your credit
score. There are three credit reporting agencies
– Equifax, TransUnion, and Experian – that keep track of your financial history and determine
how likely you are to pay off a loan. And they each calculate it a little differently. Your score ranges between 300 and 850, the
higher the number, the more financially trustworthy you are. One of the biggest factors contributing to
your score is your payment history – have you been making payments on time? Next is your credit utilization – what good
is approving you for a loan if you never actually use it? How long have you been using credit? The length of your credit history gives these
agencies more data to work with and having no credit history is worse than having bad
credit history. How many new inquiries or lines of credit
have you taken out recently? If you’ve suddenly applied for 20 different
loans, that might seem suspicious. What types of loans have you taken out in
the past? If you’ve only ever had a credit card, that
doesn’t really translate into something you have to pay a fixed amount for, like a
car or home. The better your credit score, the lower your
interest rate. To put that another way – the more money
you have and the longer you’ve had that money, the cheaper buying a home will be. Car and home loans are what are known as Secured
Debt. This is where you have a tangible asset that
you’ve already purchased and if you fail to make payments, the bank can repossess or
foreclose on it. Unsecured debt can’t be repossessed. The most common type is a student loan, they
can’t take the knowledge and experience back out of your brain if you file for bankruptcy. Which is why they typically aren’t discharged. If you want a loan for something you haven’t
already bought, we call that a Line of Credit, which is similar to opening a tab at the bar. The most common form being a credit card. Debit cards are attached to a checking account,
every time you swipe your card at the store, it’s pulling actual money from your account. Credit cards work a little differently. Swiping your card runs up your tab at the
bank and they send you one bill at the end of the month; if you don’t pay it off in
full, it starts accumulating interest in the same way as any other loan. But at significantly higher interest rates,
usually 15-20%. As long as you pay it off on time, you won’t
have to worry about that and the longer you have the card, the better your credit score. Which means you can apply for a better card. Along with better interest rates, many banks
offer cards that come with rewards like travel miles, or redeemable points, or even cash back
on every purchase. Which is basically a discount on life by virtue
of your credit score. Think about it, the better your credit score,
the cheaper everything is for you, from a house to a car to toilet paper. It pays to be rich. But here’s a question for you – if you
have a credit card that gives you cash back on every purchase, and you always pay it off
on time to avoid any interest or fees… Who is paying for that added benefit? You might be tempted to say, “all of the
people who aren’t paying off their credit cards on time.” But that couldn’t be further from the truth. Every card, regardless of type or who issued
it has a processing fee attached to every transaction. If you go to a store with a debit card and
purchase something that costs exactly $50, the bank will deduct $50 from your account,
but the merchant will only receive $49.30. Where did that 70 cents go? To the company they made the electronic transaction
possible, known as a payment processor. Companies like Visa, Mastercard, Square, and
Venmo. That’s how most payment processors and credit
card companies make money, not through interest or fees. That goes to the bank or whoever issued your
card. How did they come up with 70 cents? Transaction fees are usually calculated with
an equation, for our example debit card, it’s 1.29% and a flat fee of five cents – here’s
what that looks like graphed out. But this is a debit card, there is no line
of credit involved here and it doesn’t have the same consumer protections. A typical credit card’s transaction fees
look more like this, at 2.64% and a 10-cent flat fee. For our $50 purchase, the merchant ends up
getting $48.58. Okay, but that’s a plain, vanilla credit
card, what happens if you’re using a 1.5% cashback on every purchase rewards card? How much does the store end up with? $48.25, a full dollar less than if you used
a debit card. The transaction fees on a rewards card come
out to 3.3% plus ten cents. So, who is paying for that 1.5% discount on
every purchase? While you could say in an abstract way,
we’re all paying for it through inflated prices... In a more concrete sense, it’s the merchant. The only difference between a regular card
and a rewards card is the transaction fee paid for by the merchant and they don’t
get to pick and choose which cards they accept. They can choose what companies they deal with
though. Visa and Mastercard cover everything from
debit to credit to rewards cards, they are by far the largest payment processors in the
US. So not accepting them would be a bad idea. But other companies like Discover and American
Express basically only offer rewards cards and therefore, have significantly higher transaction
fees. Which is why a lot of places just won’t
take them. So, most businesses have accepted that if
they place a $50 item on the shelf, they will actually receive a broad range of profit depending
on the payment method. Before you go thinking that cash is the best
option for the merchant, once you take into account the time handling it and the transportation
and security costs, it really isn’t. And apps on your phone are even worse. Making that same $50 purchase with an app like Square
or Paypal, the merchant gets just as much as if you were using a rewards card - $48.25. It’s a coincidence that $50 happens to be
where they cross over, the smaller the amount, the worse the apps get. Paypal’s fee is 2.9% with a 30-cent kicker. The best way to think about loans in general
is that you’re bringing future income into the present. Don’t ask yourself if you can afford a $300
monthly payment. Ask yourself if you will make enough to be
able to afford the full amount of that house with interest thirty years from now. If the answer is yes, it might be a good loan. When it comes to credit cards, it’s not
“can you afford this right now?” It’s “can you afford it at the end of
the month?” And if not, what is your tolerance for paying
interest? Everyone has emergency expenses and if you
have a credit card, that allows you to pay it off later or over time. If you don’t have a credit card, then…
uhm… You get to come talk to me. He’s right, loans are like bringing future
income into the present. But not all of us have thirty years to wait,
sometimes we just need to make it until next week. Or you know, next payday. Just under half of all banks do offer unsecured
short-term personal loans, but you have to be an existing customer and many states cap
the interest rate they can charge at 36% APR. Or twice that of a credit card. The thing is, that’s an annual percentage
rate and most of these short-term loans only last two weeks, since the average amount for
these loans is only $300, that means the bank will make a grand total of $4.15 on that loan. That’s not even worth the time it would
take to set it up. That’s where I come in with a Payday Loan. It’s completely different, you see, I don’t
charge interest, I charge a “loan renewal fee.” If I loan you $300, in two weeks, I want $350. If you can’t pay it off in full, that’s
fine, we’ll just charge you the $50 and roll the principal over to the next term. We’ll do this… I dunno, five times. Then we’ll start charging you $25 each term
to start paying down that original loan, so $75 every two weeks. I see you doing the math in your head, stop! The whole point is to incentivize you to pay
it off before the next pay day. If you don’t, and you let the whole process
finish to completion, you will have paid $1150 which is almost four times the original amount. But again, that’s not the point. You needed money quickly and I provided it,
and everything I just said is industry-standard. I didn’t make any of that up myself. You may have heard that payday lenders charge
400-500% interest, but that’s not true – that would be illegal. Instead, we charge fees. What?! And some of us have partnered with Indian
tribes, giving us sovereign immunity, so we don’t even have to obey state lending laws. That cannot be legal. Yeah well, it is, this is America. There are more Payday loan companies than
Starbucks and McDonald’s combined – every check-cashing, rent-a-center, cash-for-gold
pawn shop is also a payday lender. I think if we were all doing something illegal,
someone would have stopped us by now. And my customers love the service I provide,
25% of all of my loans have been renewed more than nine times and 75% of my income comes
from those people. I accept payment in a number of different
ways – cash, gold, debit, credit, paypal, patreon. You know, maybe if you had a better grasp
of finance you wouldn’t be in this situation in the first place. A topic you can learn more about by going
to curiositystream.com/knowingbetter. Curiositystream is a subscription streaming
service that offers thousands of documentaries and non-fiction titles that you can access
across multiple platforms. Check out The Ascent of Money, a series that
dives into the more technical aspects of banking, like real estate derivatives. Or maybe you want to see some of your favorite
Youtubers compete against each other in the Nebula original “Money.” Nebula is a streaming service built by fellow
youtubers to give us sovereign immunity from the algorithm. All of my content is hosted there ad-free
and people who watch this video on Nebula are currently seeing an entirely different
skit that doesn’t involve a sponsor. Sign up for both by clicking the link below. They’re currently running a sale where you
can get both Curiositystream and Nebula for only $14.79 a year. See, you’re already being more financially
responsible. Who am I kidding, we both know I’ll see
you back here in a few weeks. The real reason you end up talking to a guy
like that is because you’re poor. It’s expensive to be poor. If you can’t afford to maintain a checking
account, your job can’t pay you via direct deposit, they have to give you a physical
check. Which you then have to pay a fee to
get cashed. If you only make federal minimum wage, that’s
less than $300 dollars a week, meaning that you get charged 1% of your income. Just to get access to the money you’ve already
earned. If you want to use a payment card like everyone
else, so you can shop online and avoid carrying cash… That’s another fee, on top of everything
else. And cash isn’t very secure, it can be lost,
stolen, damaged, or- -seized. Banks don’t like serving low-income, high-crime
areas. They’ve been closing these branches at an
alarming rate, creating what are known as Banking Deserts – areas where there are no bank
branches within a ten-mile radius. You might be asking, who even needs a physical
bank anymore? Everything is online. And the answer is most people – 86% of account
holders use in-person services every year and 35% visit a branch at least once a month. Even if there is a branch, they’re exclusive
in other ways. People either don’t have enough money to
maintain a minimum balance or they don’t have the proper ID to open an account in the
first place. Not everyone has a government-issued ID. At least according to an FDIC survey of banks
and bank customers. 25% of US households are unbanked or underbanked. That is why people end up going to those shady
“Mr. Money Instacash” places next to the liquor store with bars on their windows. Or cashing their checks at Walmart. Even people who can afford a bank account
have to jump through a dozen hoops to avoid paying fees. What we really need is affordable access to
basic financial services. If only there was a business capable of doing
that with a presence in literally every zip- -code. Even in towns with a population of one. Reopening up Postal Banking would provide
access to these services to everyone, just like they did until the late 60s, they did
it before. France, Britain, Japan, almost every other
country still does it. The only financial service the US Postal Service
currently provides are money orders, which makes sense, it’s a more secure version
of stuffing cash in an envelope and mailing it. But they used to offer savings accounts too. Imagine if everyone had a guaranteed deposit
account, at low or no cost, where they could get paid via direct deposit and have access
to that money from just about anywhere. All of a sudden, all of America would be better
off. Doing so might even turn those low-income,
high-crime areas into potential bank customers as they become more financially secure. It’s almost like crime and poverty are linked
and access to services through the Post Office is a potential solution. Wait… is that what all of this has been
about? You are free from this place. Nicole, it’s 4:30am and I just awoke from
the most bizarre dream… I think it all started with shoes… Sorry this video took so long to make, as
you can imagine there were a lot of moving parts. If you’d like to start paying down your
payday loan, head on over to patreon.com/knowingbetter. Or, for a one-time lump-sum payment, paypal.me/knowingbetter. Don’t forget to credit that subscribe button,
or the join button if you’d like to be part of our banking commune. Check out the merch at knowingbetter.tv, follow
me on Twitter and Facebook, and join us on the subreddit.
Super excited to watch this! KB videos are like a favorite documentary series of mine.
Little interesting background detail about the Discover Card since it was mentioned in the video.
When it was first created in 1985, it was a subsidiary of Sears. It wasn't accepted at a lot of retail locations because retailers viewed it as a Trojan horse for Sears to profit off of other retailers.
Think of it like this. You own Macy's, a direct competitor of Sears. A customer comes in and purchases something from your store using their Discover Card. Cool you made a sale, but now Sears is going to be getting a cut of the sale from the card's transaction fees. On top of that, the customer is going to pay interest on the purchase eventually pulling in more revenue for Sears. So you made a sale, but a huge competitor is now generating revenue from a sale made in your store.
This was a big reason why Discover Card wasn't widely accepted at retail locations until the late 90s when it was spun off into its own company and no longer a subsidiary of Sears.
So good.
I think KB would be a great resource for high school teachers. If I were a teacher - I would show KB often.
The main reason the original US Postal Savings System was canceled in 1967 is that it fell into disuse. Prior to the FDIC, it was quite popular because it was already "backed by the full faith and credit of US government," and therefore considered more trustworthy than the banks. Following the FDIC's creation and subsequent economic recovery following WWII, the postal bank began to be seen as redundant and irrelevant.
So the real issue won't be getting a postal banking service established (a framework for doing so already exists), but getting actual postal customers to use it. "If you build it, they will come" just doesn't work here.
I feel like the video should have spent more time covering these topics since the goal of the video was clearly to promote this idea.
Ehhh, most online banks are free, and no fee. The issue is more that not all people are aware of this, and not all people have good Internet access.
I mean, sure, postal banking would help, but really, just teaching basic financial literacy in school would help more.
I don't want to sound dumb but what's with the curtains? Is it a reference to something?
Excellent job as always KB! Can’t wait to watch it again with my wife. She also loves your vids, and especially your add drops! Have anymore cameos from other channels planned?
I'm going to watch this and edit the comment when I'm done and have actual input.
crosses fingers let's see if the Rothschilds get a shout out
Edit: Throwing shade at JP Morgan always makes my day. Great video 10/10 based and loominatti pilled...
I have a problem with his distinguishing buying and selling government securities with setting interest rates, the rates are set by the yield on government securities so you can make a distinction between the two but they are effectively the same thing.
With the exemption of that this Econ & Fin major endorses this video.
Also, I would second the ascent of money as a documentary had to watch for history of economic thought class.