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Ask the Bitches: "Is it safe to keep my money in the bank?"

Ask the Bitches Pandemic Lightning Round: “Is It Safe to Keep My Money in the Bank?”

Welcome to the Ask the Bitches Pandemic Lightning Round! We’re working around the clock to answer your questions about coronavirus, the impact of quarantine, and the recession of 2020.

Today, we meditate upon the subject of social trust. How safe is it to keep relying on our usual systems and financial institutions?

Of course by “meditate” I mean watch YouTube clips of It’s a Wonderful Life.

We’ll be coming at you fast this week, answering as many urgent questions as we can. If you appreciate the extra effort, we would love a small donation on our Patreon. Thank you!

The question

“I’m worried the coronavirus will cause enough economic fuckery that it will trigger a massive recession and banks will close due to not having workers. Is it worth it to remove the money in my account? It’s only $400, but it’s all the money I have.”

If all you have is $400, that’s not much to lose. It likely means this question asker is riding very close to insolvency and truly can’t afford to lose that $400 buffer. So I don’t blame them for freaking out!

The answer

The bank runs of yesteryear

That said, taking cash out of the bank is neither smart nor helpful at this time.

If there’s a “run on the bank” (i.e., when everyone rushes to withdraw cash from their accounts), the banks could run low on cash. And that would be bad for a whole number of reasons. Take it away, Jimmy Stewart!

Bank runs are macroeconomic stampedes. They are senseless, unstrategic expressions of misguided self-preservation. And I don’t have to explain why stampedes are bad because you’ve all seen The Lion King.

Now, fear can be a very helpful emotion. It’s sensible to be afraid of things that can hurt you. But panic is never, ever helpful. Panic hurts you, and it hurts other people by making them panic too. We’re social animals, just like those bastard rectangle-eyed wildebeest who murdered Mufasa. (Okay, maybe “murdered” is too strong a word. “Manslaughtered”? “Recklessly endangered”?) When someone in our social group is acting terrified, we instinctually assume that they’re doing it for rational reasons, and we match their reaction. That’s how panic spreads.

The semi-cashless economy of today

Fortunately, after the 2008 Recession banks got a lot more cautious about having cash on hand. So if there is a run on the banks, it’s unlikely to cause widespread chaos and panic as it once did.

This is also true because cash has never felt less essential. With apps like PayPal and Venmo, it’s never been easier to shuffle money back and forth without the hassle of getting cash (and the risk of carrying it).

For once, we’re living through a crisis that wasn’t caused or exacerbated by big banks acting like greedy dumbasses. The COVID-19 pandemic is disrupting three things, chiefly: supply, demand, and social trust. No industry is wholly unaffected by the coronavirus, but banks aren’t high on the list of industries in turmoil.

Another question

We also got this related question:

“Should I pull my emergency fund out of my savings and keep it in my house as cash given current circumstances?”

Another answer

While it’s always a good idea to have a little bit of cash on hand, the short answer is “no.” Bank accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC)! Even if your bank royally fucks up and runs themselves into the ground with bad investments (it happens), the money you had there is still safe and still yours.

Your bank also offers you a lot more protection. If someone takes money fraudulently from your bank account, your bank can work with you to track suspicious charges and have them reversed.

This isn’t the case with cash.

Is that money stuffed in your mattress insured? Probably not. Cash that’s lost, stolen, or destroyed is just gone, my man! Which means that a checking or savings account is generally the safest place to keep your cash.

Bottom line: keep your emergency fund tucked safely away in the bank. Here’s more on emergency funds:

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4 thoughts to “Ask the Bitches Pandemic Lightning Round: “Is It Safe to Keep My Money in the Bank?””

  1. I work at a credit union and we are already seeing (mostly older) people come try to withdraw tens of thousands of dollars in cash and it is SO FRUSTRATING! We had to impose limits just to ensure we still have enough on hand to serve our regular needs. Some folks are thinking this means there’s a big collapse on the horizon and panicking, and I have to tell them no, my dude, there’s just a lot of people panic withdrawing because they forgot that the FDIC and NCUA exist. Your money is so much safer here than in your mattress. I can’t protect it if I don’t have it! (Plus, just think about it for a minute. If you were a financial institution would you keep everyone’s total deposits sitting in a huge cash pile of liability or would you only keep on hand what you need? If there’s a cash shortage it’s not that we don’t have your money it’s that we’re just waiting on the physical cash to come in!)

  2. I work for a bank, and–yes! All of the above! FDIC insurance; some businesses don’t take cash at the moment (and wouldn’t you rather only touch your card than hand cash back and forth which has been through so many hands?); and the fact that withdrawing everything can be damaging to the economy. That said, we’re not seeing as big of withdrawals as happened in previous recessions. My bank is mid-sized and we’re going strong.

    Banks will not shut down. They are considered an essential service since people can’t eat if they don’t have access to their money.

    Most banks have closed their lobbies in my state, but you can make appointments if what you have to do MUST happen in person. For everything else, we disinfect our ATMs and Drive-Ups constantly throughout the day to make them safe to use. We allow up to 2 people into our lobby at a time, and maintain social distancing during all interactions. We also have furloughed–yes, with full pay!–all at-risk employees and anyone who comes into contact or MIGHT have had contact with Covid. Full pay is the incentive: we don’t want anyone who might be carrying Covid to come in to work. We are splitting our large departments between our HQ buildings so that even if it spreads among coworkers, we won’t lose a whole division.

    1. Oh! And we’re also increasing limits on deposits and withdrawals made through ATMs and Mobile Capture. We want to make money accessible to people while allowing you to stay home. 🙂

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