Infinite banking, as the term suggests, refers to the practice of banking on cash that is not tied up in any specific account, bank or credit card. In many cases, this means that the money will continue to accrue interest, even though it does not belong to you. This is a very bad idea because if the money was not tied up, then you could put the money to good use by investing it in something like stocks and bonds.
In this article, we will describe the simple concepts behind unlimited banking, why this practice is not the right way to grow wealth for the average individual (or slightly over-average person), and tell you about the big red flag that most people are unaware of. Plus, we will give you a few of the most important warning signs to watch for when someone is offering you on this idea.
Before we get into the nitty gritty of unlimited banking, let’s clarify what we mean when we say unlimited. Essentially, this means that you can deposit and withdraw money as many times as you want. If you are holding your money in savings, you could do this as much as you like, but you would not be allowed to spend more than the amount of money that you have. With this in mind, you may be asking yourself if you can really put unlimited money in savings account. The answer is yes, in theory you could.
Now, let us take a look at the possible pitfalls of unlimited banking and what you need to do if you happen to fall prey to such a practice. This is not the time to go into detail about how bad this practice is, but suffice it to say that it is very risky, and could lead you to losing all of your money overnight if you are careless.
The main problem with unlimited banking is that it is extremely easy to abuse it, as you can open and close a new checking or savings account whenever you want and still have plenty of money left in the bank. The second problem is that this practice could make you feel like you are the king of the world, and not in the position to check your finances at all times, which is definitely not the case.
The third problem is that with unlimited banking, you will never be able to see your bank balance at the end of the month, because you will be holding money that is tied up in different accounts. Another problem with infinite banking is that in order to use this system, you would have to get in a lot of debt, and use a large portion of your savings for your debts – not to mention that you would have to borrow money from other sources just to make ends meet.
There are a few warning signs to watch out for when you are discussing this idea. The most obvious is that if the person you are considering employing is pushing you to buy an account with no limit to your money, then that is the red flag you have to watch out for. This is because if you are under the impression that you can spend the money as you wish, then you are in for quite a big surprise. If they tell you that you will be able to save thousands of dollars, then don’t believe it.
You may also want to ask the person why he or she recommends the use of unlimited banking. Many experts in the business recommend that you stick with your current banking if you are not in dire financial straights.