{"items": [{"author": "Ari", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792", "anchor": "fb-891021927792", "service": "fb", "text": "For what kind of people would this be useful? How often do people's bank accounts fluctuate unpredictably between those extremes?", "timestamp": "1501452826"}, {"author": "Jess", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792&reply_comment_id=891026468692", "anchor": "fb-891021927792_891026468692", "service": "fb", "text": "→ Small businesses with streaky work.", "timestamp": "1501453615"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792&reply_comment_id=891029881852", "anchor": "fb-891021927792_891029881852", "service": "fb", "text": "→ My impression is you can't use a line of credit or an investment account as a bank account now, so the simplest aspect of the idea is just to make that possible.", "timestamp": "1501455707"}, {"author": "Ari", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792&reply_comment_id=891030380852", "anchor": "fb-891021927792_891030380852", "service": "fb", "text": "→ Jeff Kaufman Depending what \"use as a bank account\" means, this might run into legal trouble. I had the understanding that many bank-like things (writing and depositing checks, making ACH payments etc) require you to be legally a bank -- and that in turn means you need to be a regulated insured bank, and that severely restricts the kind of investments the bank can make.
This is a topic I don't have any special expertise in, but I have the impression that the Federal Reserve would take a dim view of \"bank accounts that invest in something with significant short-term risks like the stock market.\"", "timestamp": "1501456067"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792&reply_comment_id=891031219172", "anchor": "fb-891021927792_891031219172", "service": "fb", "text": "→ If you have substantial illiquid assets, \"bank account that invests in index funds\" is very reasonable.", "timestamp": "1501456402"}, {"author": "Ari", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792&reply_comment_id=891031748112", "anchor": "fb-891021927792_891031748112", "service": "fb", "text": "→ Jeff Kaufman I don't feel like that addressed my concern. Let's say I have 500 shares of FooCorp, current market value $5000, and also $1000 in cash. If I want to put those in a financial institution, the shares and the money have to be tracked separately -- be separate accounts -- since the shares can lose value, but the value of the cash is guaranteed by the government.
Here's another way to put it -- when I put money into your hybrid account, how much of the value is insured by the FDIC, and how much of the value in my account am I allowed to pull out on demand?", "timestamp": "1501456663"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891021927792&reply_comment_id=891031982642", "anchor": "fb-891021927792_891031982642", "service": "fb", "text": "→ The hybrid account should probably just use a standard index fund for assets, where all account holders use the same ETF.
You're allowed to pull as much out on demand as you want, until you hit the maximum size of your line of credit, which would be something like a fraction of the value of you collateral.
None of the value would be FDIC insured, just like stocks and ETFs aren't.", "timestamp": "1501456891"}, {"author": "Andrew", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082", "anchor": "fb-891028270082", "service": "fb", "text": "Policies that encourage people to save and which socialize sources of large unexpected debt (health care, etc) would be better. Otherwise, it's just another way for people to get into debt with the banksters with minimal thought.", "timestamp": "1501454603"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082&reply_comment_id=891029672272", "anchor": "fb-891028270082_891029672272", "service": "fb", "text": "→ I don't see how this conflicts with encouraging people to save: it works best for people with substantial illiquid assets to use as collateral.", "timestamp": "1501455580"}, {"author": "Andrew", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082&reply_comment_id=891029976662", "anchor": "fb-891028270082_891029976662", "service": "fb", "text": "→ You can get a HELOC right now and transfer $ when needed. It's not seamless, but going into debt with bankster filth shouldn't be seamless.", "timestamp": "1501455774"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082&reply_comment_id=891030131352", "anchor": "fb-891028270082_891030131352", "service": "fb", "text": "→ I have a HELOC. Manually tracking balances and moving the money around is annoying and easy to screw up. I'd much rather switch to this system if it existed (unless the fees were too high)", "timestamp": "1501455853"}, {"author": "Andrew", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082&reply_comment_id=891030151312", "anchor": "fb-891028270082_891030151312", "service": "fb", "text": "→ Going into debt SHOULD be annoying and require thought.", "timestamp": "1501455881"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082&reply_comment_id=891030550512", "anchor": "fb-891028270082_891030550512", "service": "fb", "text": "→ Disagree. I'm already in debt (though not on a net basis) and being in exactly as much debt as I need to right now would be a lot cheaper than needing to maintain a buffer. A larger buffer is more expensive, and a smaller one is more hassle and easier to screw up.", "timestamp": "1501456190"}, {"author": "Andrew", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891028270082&reply_comment_id=891030879852", "anchor": "fb-891028270082_891030879852", "service": "fb", "text": "→ You are you. Above average. The average American is a financial nincompoop (2008 \"fork-loser\" crisis proved that). But hey, let the average skell go for more debt. I'm salivating at the thought of picking up another foreclosed rental property at sheriff auction.", "timestamp": "1501456274"}, {"author": "Ryan", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891032890822", "anchor": "fb-891032890822", "service": "fb", "text": "Isn't that similar to just having a brokerage account, if it's not FDIC insured? There are brokerage accounts that allow for writing checks/debit cards, and if some of the funds aren't invested, that's like the bank account part. And some allow for borrowing against the account (margin, etc.), although the interest might be higher than a credit card.", "timestamp": "1501457468"}, {"author": "Andrew", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891032890822&reply_comment_id=891034163272", "anchor": "fb-891032890822_891034163272", "service": "fb", "text": "→ generally lower -- margin is 7.5% or so, cards are often > 10%", "timestamp": "1501458055"}, {"author": "Ryan", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891032890822&reply_comment_id=891034298002", "anchor": "fb-891032890822_891034298002", "service": "fb", "text": "→ I suppose that makes sense, since you're basically borrowing against yourself. Thanks!", "timestamp": "1501458102"}, {"author": "Brendan", "source_link": "https://plus.google.com/100334584094940516862", "anchor": "gp-1501460283082", "service": "gp", "text": "VanguardAdvantage accounts seem to be exactly what you're talking about: \nhttps://personal.vanguard.com/us/help/FAQVAAContent.jsp\n
\n
\nYou can write checks using your investments, and if you're approved for margin trading, you can borrow from that.", "timestamp": 1501460283}, {"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891050769992", "anchor": "fb-891050769992", "service": "fb", "text": "You can't just get those benefits for free.
Ultimately, the way the bank covers the costs of administering your checking account, the risks of extending you overdraft protection, the ATM network etc.. is by pocketing the difference between the interest rate the bank pays you and the interest rate on the open market.
I mean the only difference between what you describe and what actually happens with relatively standard checking accounts attached to investment accounts is that your description assumed you would get decent returns on positive money in the account but its hard to see how the bank would cover costs them absent a direct fee.", "timestamp": "1501464383"}, {"author": "Kathryn", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891056817872", "anchor": "fb-891056817872", "service": "fb", "text": "Our account at Putnam Co Bank in TN gives % interest for amounts under something like 30,000 and also has checking and debit card. They have been making changes in the last few years so some of this may have changed.", "timestamp": "1501466732"}, {"author": "Evan", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891062850782", "anchor": "fb-891062850782", "service": "fb", "text": "This doesn't cover the investment part, but there are plenty of credit cards where you can overpay and then draw down that money over time (many will just send you a check for the excess money, though)", "timestamp": "1501468755"}, {"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1501471246024", "service": "gp", "text": "+1 to all of the above - I believe it's pretty common for banks to offer overdraft protection onto HELOCs etc, and brokerages to offer it onto margin.\n
\n
\nI haven't heard of balance-based automated investing. I would guess that the overhead of frequent, tiny retail trades is cost prohibitive. Buy a latte, sell 0.02 VFINX?", "timestamp": 1501471246}, {"author": "Rick", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891095091172", "anchor": "fb-891095091172", "service": "fb", "text": "I have a regular checking account, an investment account and a line of credit. I can move money between them online in a matter of minutes, so I don't see how it would be all that much better to have it all be a single account.", "timestamp": "1501493216"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891095091172&reply_comment_id=891102636052", "anchor": "fb-891095091172_891102636052", "service": "fb", "text": "→ I have all three as well, but having it as a single account means you don't have to think about it. For example, last month Julia put ~$10k of work things on her credit card for the conference she's organizing, and filled with work for reimbursement, but forgot to warn me so I didn't have that much in the checking account when the card auto-payed. And in general I need to leave a buffer in the bank account to cover things, where it would be better if that was either invested or used to decrease how much was borrowed.", "timestamp": "1501501058"}, {"author": "Chris", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891302196132", "anchor": "fb-891302196132", "service": "fb", "text": "Isn't the investing more or less what banks are doing with your cash while it sits in your checking or savings account, but on their behalf rather than yours? I have trouble believing the bank would have a good incentive to offer something like this when they could just loan (i.e.: invest) that money out to someone else?
Also, my checking account has overdraft protection, so that's not too far off from the \"it becomes a line of credit\" thing, especially if you have your credit card payments on auto.
Please correct any of that if it's wrong...The idea sounds nice.", "timestamp": "1501596552"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891302196132&reply_comment_id=891310903682", "anchor": "fb-891302196132_891310903682", "service": "fb", "text": "→ * the bank is heavily restricted in what investments it can make with bank account money, which generally means the best rates you can get are still below inflation and way below what you'd get with index funds or something
* overdraft protection is just for temporary use and doesn't offer nearly as good terms as a line of credit", "timestamp": "1501599424"}, {"author": "Chris", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891302196132&reply_comment_id=891320664122", "anchor": "fb-891302196132_891320664122", "service": "fb", "text": "→ I agree with you that such an instrument would be a no brainer on the part of the consumer. But I still don't see how your answer explains the benefit to the bank:
* Money in an index fund is 100% inaccessible to a bank, whereas money in a bank account, however restricted they may be in using it, is still money they can leverage for their own benefit.
* Allowing an account to become a line of credit makes sense for them, but it's significantly riskier for them if that line of credit could suddenly become something *they* have to pay interest on (low balance), or something they suddenly have no interest in (a high balance in a fund).", "timestamp": "1501602902"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891302196132&reply_comment_id=891342749862", "anchor": "fb-891302196132_891342749862", "service": "fb", "text": "→ What you're saying seems like \"I don't see how offering this is better for the bank than what it currently offers\", and you may well be right! But if it's better for consumers and still profitable, then another company (new or existing) could step in.", "timestamp": "1501611560"}, {"author": "Chris", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891302196132&reply_comment_id=891347734872", "anchor": "fb-891302196132_891347734872", "service": "fb", "text": "→ Got it!", "timestamp": "1501614081"}, {"author": "Chris", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=891302196132&reply_comment_id=891348922492", "anchor": "fb-891302196132_891348922492", "service": "fb", "text": "→ I'd use it...", "timestamp": "1501614848"}, {"author": "Alexander", "source_link": "https://www.facebook.com/jefftk/posts/891021673302?comment_id=892997992742", "anchor": "fb-892997992742", "service": "fb", "text": "Overdraft lines of credit are very common in the UK (I think the most common type of consumer credit there): https://en.wikipedia.org/wiki/Overdraft#Overdrafts_in_the_UK", "timestamp": "1502319554"}]}