What You Need To Know About Public Banking

Depending on your situation, you might be interested in opening up a new bank account. Perhaps you want a place that charges fewer fees or one that has more financial products. Whatever the case, public banks are one possibility.

Consumers have hundreds of options when it comes to private banks. However, many of them fall short when it comes to their customers’ needs. People want consumer-focused institutions that are readily available and charge few to no extra fees. Some want a bank with ethical practices, while others have no access to financial institutions at all.

Two members of the House of Representatives, Rashida Tlaib (D-MI) and Alexandria Ocasio-Cortez (D-NY), recently proposed the Public Banking Act. This bill would create a grant program to promote the establishment of local and state-run banks. Although the legislation itself wouldn’t start new public banks, more public banks would develop and secure insurance from the FDIC.

What Is Public Banking?

Public banks would run as a nonprofit, charge no service fees, and have no minimum deposit requirements, increasing their availability to unbanked Americans. Because they wouldn’t be profit-driven like traditional banks, public banks would have the ability to offer more affordable interest rates for small business owners and public infrastructure initiatives and investing in the local area.

Local and state governments can make deposits at public banks as tax revenue and other forms of income and collaborate with local financial institutions to finance various projects.

How Public Banking Could Impact Your Finances

In most cases, public banks and traditional banks offer their customers the same benefits. Public banks offer several advantages, such as increased banking access for more people, community investment, and efficient processes to distribute government assistance.

Improving Access To Unbanked Communities

According to Money Under 30, 7.1 million families were unbanked in 2019, which means that no one in the family had a bank account. For most of these people, steep minimum deposit requirements kept them from getting a bank account, while others pointed out costly fees and distrust of private banks. When unbanked Americans face financial difficulties, they frequently depend on pawnshops or payday loans, which can trap them in a cycle of debt.

Public banks do not charge service or maintenance fees, and they have reasonable minimum deposit requirements (if any), which allows more people to use public banks. Not only that, but public banks would be another option for people with a bank account but who are unhappy with their financial institution or cannot secure a loan or other line of credit.

Local Investment

As a nonprofit organization, public banks do not prioritize making a profit. For this reason, they can provide loans with lower interest rates for small businesses and public works projects like affordable housing and green energy. These rates could even be available for student loans, making borrowing more affordable.

Efficiently Distribute Government Assistance

As we have seen during the COVID-19 pandemic, millions of people qualified for assistance and stimulus checks to stay afloat over the last year. Although the IRS was able to issue direct deposits to many people, others received physical checks that required a fee to cash, while many others never received their benefit.

Public banks would be a viable way to quickly and efficiently allocate government relief to the people while cutting out the middle man. They would allow more Americans to open a bank account and stop predatory providers from garnishing critical aid.


Public banks are also more environmentally focused than their traditional counterparts. According to the Rainforest Action Network, the country’s largest private banks invested more than $2.7 trillion in fossil fuels in the last five years.

Under the Public Banking Act, public banks would be barred from making fossil fuel investments. Instead, they would offer low-interest loans for green energy initiatives and other environmentally-conscious projects.

An Alternative To Traditional Banks

Public banks would not be a substitute for private banks. Rather, they would give dissatisfied consumers a much-needed alternative. Depending on the situation, public banks could collaborate with local institutions to streamline government assistance. Although public banking wouldn’t fix every problem for Americans, it does offer an ethical option.


  • Wack, Margaret. “Public Banking: Here’s What It Could Mean For Your Finances.” moneyunder30.Com, 22 Jan. 2021, www.moneyunder30.com/public-banking.
Ian Schindler