11 Shady Things Big Banks Don't Want You To Know

The banking environment has changed drastically over the past century, marked by a steady march of consolidation. NPR reports that in 1920, the United States was home to almost 30,000 banks. Before the rise of national financial institutions, Americans largely preferred local banks. At the time, specific legislation in some states limited banks to a single building, effectively restricting operations across multiple locations. These local banks had their finger on the pulse of local economies, resulting in more efficient management of credit and loans. However, the hyperfocus also created siloed risk, which made the banks vulnerable to local economic crises. This exposure was most recently on display with the fall of Silicon Valley Bank, the second-largest bank insolvency in American history. Washington Mutual's collapse in the midst of the 2008 Global Financial Crisis takes the number one spot, according to the University of Washington's School of Law.

These high-profile collapses were a primary catalyst for the shift in power from atomized regional banks to the colossal national financial institutions that dominate the banking sector today. According to Statista, the number of banks in the U.S. more than halved between 2000 and 2024. Roughly 25 years ago, Americans could choose from 8,315 separate banking institutions. By 2024, that figure had collapsed to 3,928. This rapid consolidation doesn't only mean a limited range of banking options, but it also puts the country's expansive capital in the hands of a few large banks. WalletHub reports that the five largest financial institutions in the U.S. hold 56.95% of the total assets spread across the 50 largest banks. While these massive banks offer convenience and a strong reputation, they don't shy away from some questionable practices to pad their bottom line. Here are 11 shady things banks don't want you to know.

At first blush, savings accounts appear as the safest possible place to hold your money. After all, the Federal Deposit Insurance Corporation (FDIC) backs up every American's checking and savings accounts to the tune of $250,000. If your bank were to go under, the government would cover this amount. With the median savings account in the U.S. holding about $8,000, according to Bankrate, this federally backed insurance is more than sufficient. On top of this official protection, banks also offer interest to encourage people to keep their money in savings accounts. Despite these attractive perks, your cash is most likely losing value when tied up in a bank account — something the big banks don't want you to realize.

Even though the dollar figure in your bank account remains the same, the purchasing power is diminished by annual inflation. As the Federal Reserve explains, "inflation is the increase in the prices of goods and services over time." This doesn't literally translate into the devaluing of the dollar. More accurately, it reduces what a dollar can purchase relative to rising living costs. The Fed attempts to manage an inflation rate of 2% annually, but the rate has averaged 3.8% per year between 1960 and 2025, per WorldData. With the average savings account interest hovering around 0.6%, as reported by Bankrate, the typical bank doesn't provide enough return to offset this annual loss of purchasing power.

Big banks have been on a steady streak of acquiring smaller, regional banks. The Federal Reserve Partnership for Progress reports that the banking sector has witnessed over 10,000 mergers since 1980, worth over $7 trillion in assets. However, the digital age has brought about a highly competitive niche market of digital banks, which compete with their larger, more established counterparts by offering more compelling perks. Instead of operating various brick-and-mortar satellites across the country, online banks are fully digital. What customers lose from in-person interactions is countered by a slew of advantages, including reduced fees, loftier interest rates, and modest or zero balance minimums, according to SoFi.

Digital banks have more leverage to offer customers more financial advantages due to their lower operating costs. As Bankrate points out, many banks offering the highest yields are completely online. For example, the most rewarding high-yield savings account with an annual return of 4.21% is from the fully digital Axos Bank. This far exceeds the average yield of 0.6%. Importantly, these digital banks still come with the same FDIC insurance offered by traditional physical banks. Before making the switch, it's crucial to understand how online-only banks work. Bankers won't get the face-to-face experience of brick-and-mortar banks, so the trade-off needs to make financial sense.

Overdraft penalties are one of the main ways banking fees are costing you. Looking at more than 100 financial institutions, NerdWallet estimates the typical overdraft fee is around $17. Crucially, this figure includes banks that have done away with these penalties altogether. When focusing solely on those that charge overdraft, the standard penalty soars to $27. These overdraft fees occur when an account holder withdraws more money than is available in their account, even if sufficient money is held in a separate account. Usually, these overdraft programs are tucked away in the fine print of a banking agreement that most people glaze over completely. A single overdraft charge may not be enough to cause a financial headache, but big banks often structure the charges in a way that can spiral out of control.

These double-digit charges can snowball into three-figure territory on consecutive overdrafts before you realize your account is in the negative. Some banks even charge an ongoing fee for a balance in the red, even if you don't continue withdrawing. The sheer scale of this hidden profit generation for banks is on full display in their annual overdraft earnings. The Financial Health Network estimates that banks scooped up $12.1 billion in 2024 from non-sufficient funds and overdraft charges on customers. That's up from $11.8 billion in 2023. These fees are regressive in nature as the most vulnerable bankers tend to pay a disproportionate amount. Electro IQ estimates that 7% of bankers pay 75% of total overdraft fees each year.

Big banks talk a big game about loyalty, but the facts don't really suggest that long-time customers are rewarded for their prolonged business. Large financial institutions have a profit motive to keep account holders, borrowers, and other forms of customers for as long as possible. Bankrate indicates that these communication strategies are highly effective, with the average person sticking with the same bank for between 17 and 19 years. Tellingly, the main reason depositors reported for remaining at their bank was pure convenience, not because of any ongoing perks, rewards, or advantages.

According to U.S. News & World Report, Bank of America, Citibank, J.P. Morgan, U.S. Bank, and Wells Fargo — the five largest in the country — don't offer any incentives for seasoned customers, no matter how long they've maintained their accounts. In 2025, the Consumer Financial Protection Bureau (CFPB) launched a formal lawsuit against Capital One for allegedly freezing interest rates on existing savings accounts for millions of customers, allowing it to avoid paying about $2 billion in interest to existing customers.

Furthermore, research from the National Bureau of Economic Research showed that traditional banks tend to raise yields on savings accounts at a slower pace than online banks when the Fed increases interest rates, effectively passing less of their profits onto loyal customers. Ironically, big banks are more likely to offer rewards and perks to encourage new clients to join, although these are often strategically time-limited. While it's true you should always shop around for a new bank, those early benefits may not continue in the long-run.

Most people are well aware that their money doesn't literally remain sitting in their bank account, but the sheer scale of this behind-the-scenes deployment and the real-world limitations placed on account holders are often overlooked. Big banks earn the majority of their income by loaning out their customers' deposits to people who need capital. Effectively, big banks offer nominal interest rates on savings accounts only to lend that money to borrowers at much higher rates. The interest rate differential, between what the bank offers depositors and what they charge borrowers, is the primary profit engine. That's the dirty little secret of the entire industry: your money is helping to drive the bank's largest source of income, yet you only get a tiny sliver of the real return.

According to W. W. Norton & Company, banks deploy between 75% and 85% of their clients' deposits. This leaves only 15% or 20% of the money actually on hand. This common practice has tangible implications for account holders. Big banks heavily limit withdrawals and transfers to protect their limited funds on reserve from creating a bank run. U.S. News & World Report indicates that the average ATM withdrawal limit is between $300 and $1,500, while Modern Treasury estimates the standard ceiling for ACH transfers is $25,000 daily. The typical person may not run up against these restrictions under normal circumstances, but this limited access to your money can quickly become an issue in emergency situations.

Depositors using an institution's savings and checking accounts are not only providing the bank with the capital to generate profits through loans. These customers also often take the role of the borrower, assuming various loans at high interest rates. It's not necessarily that big banks are actively seeking to keep people trapped in an endless debt spiral, but the system certainly incentivizes banks to encourage customers to take on loans. Usually, these borrowing rates far exceed the baseline cost of money officially set by the effective federal funds rate (EFFR). According to the Federal Reserve Bank of New York, the EFFR currently hovers between 3.5% and 3.75%. Yet, the Federal Reserve data on average borrowing rates for various big banking products shows the discrepancy between official and commercial rates.

New car loans are among the lowest yet still reach between 7% and 8%. Personal loans stretch to between 11% and 12%. Credit cards reach an even more exorbitant rate of 21% to 22%. It's crucial to note that there is a difference between good debt and bad debt. Taking on debt is a viable way to build credit, buy a home, and make other essential financial moves. Yet, with household debt hitting an all-time high of $18.8 trillion in 2025, as reported by the New York Fed, the increasingly central role borrowing plays in the larger economy is alarming. Capital One suggests that a staggering 58% of Americans don't think they will ever get out of debt.

Consumers are perhaps more cognizant than ever about the companies that are collecting and selling personal data. An alarming report by Privado AI suggests that 75 of the 100 websites with the highest amount of online traffic in the U.S. allowed third-party entities to access the personal data of visitors without their express consent. Furthermore, the Electronic Privacy Information Center reports that billions of pieces of consumer information are sold, bought, and shared among thousands of third-party data providers without much government involvement. Americans tend to assume this lack of federal restrictions for the open sale of sensitive information doesn't extend to the banking sector. Unfortunately, sharing your private data is another shady thing that big banks don't want you to know.

Banks enjoy broad discretion when it comes to sourcing, handling, and sharing account holder data. Some of the personal identifying information gathered by banks includes credit scores, account balances, and annual income. These more sensitive pieces of data are needed to gauge creditworthiness, prevent impersonation, and generate banking reports, according to the U.S. Government Accountability Office (GAO). However, big banks also track the online behavior of users, such as their network addresses, device models, and activity on browsers and social media sites. To be sure, this information isn't typically tied to an individual's name, but many users still find the practice invasive and inappropriate. Importantly, GAO indicates that account holders can refuse the sharing of some of their personal information, but they must do so proactively.

Credit cards are the most frequently used forms of payment in the U.S. The Federal Reserve's Diary of Consumer Payment Choice for 2025 found that Americans use credit cards for about 35% of transactions, leading debit and cash payments, which accounted for 30% and 14% of transactions, respectively. The Federal Reserve further indicates that 81% of American adults have at least one credit card, a figure that has risen by 5% over the past 10 years. This broad use and rapidly growing adoption of credit cards is largely owed to their wide acceptance, short-term lending convenience, and ability to build credit. Still, banks may not want you to realize how much money they earn through customers who only make minimum payments. In fact, it's one of the most common credit card mistakes to avoid.

On its face, the misnomer of a minimum payment makes it seem benign. After all, you're avoiding late payment penalties, so what's the harm if you eventually pay down the full amount? Generally speaking, the longer you wait to pay off your full balance, the more expensive it becomes. Banks start levying interest penalties on your outstanding balance immediately and automatically increase these rates until the full amount is settled. U.S. Bank reports that minimum payments often represent only 1% to 4% of what's owed overall. Additionally, your future payments go toward paying off the interest before the revolving balance, creating a debt loop cycle that can take a long time to recover from when not managed properly.

When customers sign up for a bank, there's a general sense of control over their account. Sure, the interest rates, withdrawal limits, and other financial obligations remain out of your hands, but the decision to keep your account open rests solely with you, right? Well, not exactly. The CFPB indicates that banks can dissolve accounts for various reasons. Some justifications, such as fraud or insufficient funds to cover fees or penalties, are reasonable. Yet, banks can shutter accounts simply for their inactivity. What's worse, many states don't even require financial institutions to notify account holders, leaving many people to discover their accounts and credit availability are nonexistent in vulnerable financial times. Unfortunately, there's an alarming trend of banks seemingly closing accounts with little reason whatsoever.

J.P. Morgan's closure of Donald Trump's accounts in 2021 became one of the most high-profile cases of debanking, but it's not as uncommon as you may think. The Office of the Comptroller of the Currency (OCC) is currently investigating almost 100,000 reports of involuntary account closures. Crucially, the federal government is specifically examining possible instances of debanking for unjustified reasons, not those that fall under the legitimate purview of banks. Nine of the largest banks in the U.S., such as J.P. Morgan, Bank of America, Citibank, and Wells Fargo, are involved in the inquiry. The U.S. Senate Committee on Banking, Housing, and Urban Affairs has explicitly stated that "debanking is a serious problem affecting at least thousands of consumers."

Unsurprisingly, the banking system is rife with fraud. The latest published data by the Federal Trade Commission (FTC) indicates that Americans were scammed out of $12.5 billion in 2024. That represents a quarter increase in the total dollar amount defrauded from the public. Crucially, the tally of fraud reports didn't meaningfully fluctuate between 2023 and 2024. Instead, a higher percentage of targeted individuals lost money in those fraud schemes. More specifically, the number of people falling victim to financial scams surged from 27% to 38% within only a year, indicating an increasing vulnerability. 

Official data from 2025 has yet to be published, but in a testimony in front of the Joint Economic Committee, the FTC reported that the public lost $15.9 billion to financial fraud last year. The agency also reported that imposter scams were the most commonly reported scam, a trend that's been consistent since 2020. In the published 2024 report, the FTC indicated that these impersonation scams generated $2.95 billion in losses. To be sure, these imposter schemes involve criminals pretending to represent a bank in order to obtain personal information needed to access funds. What the banks don't want you to know is that the FDIC doesn't offer protection against these scams. You also can't expect banks to protect you from impersonation scams.

As mentioned before, FDIC insurance backs up consumer deposits up to $250,000, far more than the average person keeps in the bank. This extensive protection can lead some people to assume that this federal protection extends to safe deposit boxes. Regrettably, this is yet another shady thing that banks don't want you to know. The FDIC's Chief of the Community Outreach Section, Luke W. Reynolds, plainly explains that "cash that's not in a deposit account isn't protected by FDIC insurance." Technically speaking, this government-backed insurance policy only pertains to deposit accounts, such as a savings or checking account.

Furthermore, the agency reports that most big banks don't provide customers with any insurance coverage for valuable items stored in these security deposit boxes, which effectively leaves the lock and key as the sole means of protection. While it's possible to obtain a private insurance policy to cover the stored contents, the harsh reality is that safe deposit boxes aren't insured at banks. The silver lining to this glaring financial blind spot is that big banks are winding down this service due to declining demand. Hard figures are difficult to come by, but the Wall Street Journal published an estimate by Safe Deposit Box Insurance Coverage co-founder Jerry Pluard, who reported that about 32 million safe deposit boxes remained in the entire U.S.