Inside Even

Balance hacking

Almost all American households have a bank account (FDIC, 2015).

But for a lot of the (mainly low-income) people I’ve talked to in research for Even, it seems like that one account doesn’t do enough.

It seems that way because people do a lot of fiddling with their accounts. Rather than use them as they were designed to be used, they find innovative ways to get their accounts to work in the ways they need. They hack them.

By hacking up some empty boxes that were lying around the office, I’m going to illustrate 3 types of hacking we frequently see.

1. Paying bills early

There’s a (small) financial benefit to not paying your bills till they’re due. But a lot of people in Even’s market deliberately pass up that benefit.

Instead, they pay all their upcoming bills as soon as they receive their pay from work. In doing so they short-circuit the checking account’s typical function as a safe place to hold money in between receiving it and disbursing it.

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2. Different accounts for different expenses

As a new bank customer, you typically receive one checking account and/or one savings account. A single account, at least from the bank’s perspective, seems meant to be a multipurpose tool. But many Even customers take advantage of the option to set up multiple additional checking accounts linked to the account where they get paid, and then transfer money into those different accounts for different purposes.

For instance, some people use the account where they receive paychecks as their general-purpose account, and set up additional checking accounts to hold the money for different categories of bills. Others keep their main checking account as their “bills account” and transfer all the “leftover” or “fun” money to a separate “spending account.”

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3. In-N-Out savings accounts

A savings account is for savings. But not for everyone. Instead, some of my research participants use their savings accounts as temporary holding areas for money they know they’ll spend by the end of the pay cycle.

What a person like this does is get paid, usually go ahead and pay bills, then transfer some of what’s left over to their savings account. Then, toward the end of the pay cycle, when their checking account is almost drained, they transfer back the money they “saved” earlier, to give themselves enough to make it through till payday.

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The point of balance hacking

All three of the above are methods of manipulating balance.

  • Paying bills early gets all non-spending money out of the account in order to force the new balance to reflect what’s left for “everything else”
  • Different accounts for different expenses transfers money into multiple linked accounts in order to generate balances of money on hand for each key expense
  • In-N-Out saving temporarily makes the checking balance look lower than it “really” is—causing the account-owner to spend less than they otherwise would, since they’re anchored on an artificially-low number.

Balance hacking takes some amount of set-up work and/or ongoing maintenance. It’s definitely not as easy as putting your bills on autopay, always spending from the same account, or letting all your money hang out in one account for a whole pay period.

The fact that people go to considerable trouble to hack their balances means they get a significant amount of value from a balance that reflects how much money they actually have.

But in our opinion, as cool and crafty as all that hacking is, people have better things to do with their time.

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References

Federal Deposit Insurance Corporation. (2015.) FDIC national survey of unbanked and underbanked households. Retrieved from https://www.fdic.gov/householdsurvey/2015/2015report.pdf

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