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Hybrid Bank Account

July 30th, 2017
money, ideas  [html]
I've been thinking about a new kind of bank account that would combine the properties of a bank account, investment account, and line of credit in order to be a lot more convenient. The idea is, depending on how much money was in it, it would take on one of these forms:

  • With a negative balance, it's a line of credit.
  • With a low positive balance, it's a bank account.
  • With a high positive balance, the money is invested.

The negative balance portion only works up to the point of what you can get approved for a line of credit on, which will generally depend on how much you have in illiquid assets to use as collateral. And most people will probably only use two of the states: probably you either have a balance that trends between low and high, or between low and negative. Still, this automates something I've been doing manually, where I move money around between different kinds of accounts, and reduces hassle.

If you wanted to run this, you should be able to charge some fees because you save people that hassle, plus you save people money in two ways:

  • It can be hard to predict when charges will hit your bank account, so managing this manually generally requires leaving a buffer to be sure everything will be accepted. You save users money by letting them 'invest' that buffer, either directly or in the form of having less debt.

  • When managing this manually sometimes you screw up and have a charge hit your account that you're not prepared for, and get charged a fee. This system avoids that.

This is a heavily regulated industry, though, so I don't know if this would be allowed?

(It's possible you don't need to have the intermediate "cash" state, and can just switch between investment and debt at $0?)

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