The Free Locker

Amar Pandit , CFA , CFP

I received a lot of appreciation for this week’s post “What an Amazing Business?” If you have not read it already, I would encourage you to check it out. I also thought of doing an interesting Nano as an extension to that post.

Without wasting more words, let me ask you a question.

Can you imagine a bank giving you a FREE Locker ever?

I have not come across any. Yes, if you are Crowned as a Gold or Diamond customer, then you might have a shot at it. However, even most Gold/Premier customers do not get it FREE. Have you ever thought why the kind bank does not give it FREE?

Because this does not generate money for them. In short, they cannot touch the contents inside the locker.

BUT, why do they then pay you for depositing your money in an account for a certain period of time? Is not this the equivalent of keeping your money in a safety box (I mean think of your bank account as a Safe Locker). Shouldn’t you be paying the bank to keep your money safe?

Why do they pay you then?

They pay you because they can do whatever with it now. They pay you so that they have access to it now. They can lend, they can invest, they can literally whatever.

Therefore, there is not only a FREE Account, but you are paid for it. On the other hand, there is never a FREE Locker. One way or the other, you have to pay for it.

P.S. By the way, the bank charging you money to keep your money safe in your account is not an alien concept. This is called the Negative Interest Rate. I will write about this shortly.