I'm Not Interested in Your Interest! - Saving Accounts 101

For those who are unaware, banks are collapsing!

In recent weeks, the collapse of Silicon Valley Bank (SVB), Standard Bank, and now First Republic Bank surprised those who follow financial news. On the other hand, if financial news is the least of your worries, then this information may not feel relevant, but it truly is!

To summarize, the bank collapses were due to a mixture of over-exposure to cryptocurrencies and “bank runs”.

Bank runs happen when the bank’s clients go running, both figuratively or physically at times, to remove all of their cash from the bank all at once. This then causes a huge issue for the bank since it may not have enough cash to give to all of its clients at the same time.

The bank collapses of 2023 have caused somewhat of a frenzy for people who fear having their money frozen in a bank in times of financial emergency. Alas, as your Finance Sis, I do think it is important that we perk up our ears whenever the masses come together and collectively ask:

“Where should I keep my money saved?”

This question is not a new one for us Muslims since we have come to have a natural apprehension towards US-based bank institutions because Riba (interest) is baked into most of their dealings.

When it comes to savings though, most of us have grown up with the general understanding that banks are secure places to keep our funds. Or at least more secure than under a mattress.

For this reason, I embarked on a search for Islamic Finance institutions that offer interest-free savings accounts.

[Cue dramatic entry music]

The first thing I must clarify is that the majority of banks in the United States are Federal Deposit Insurance Corporation (FDIC) insured. This means that the money you deposit into the bank is covered up to $250,000 in case of a bank failure. Always double-check to make sure that this is the case for your bank institution.

Therefore, I say do not worry unless you have more than that in one bank account. If so, I suggest you diversify your bank account holdings…. and contact me immediately about this H.A.W.A Fund I am organizing! ;P

What I have found in terms of institutions with interest-free savings accounts so far isn’t the most promising. For the most part, many of the Islamic finance institutions in the U.S. are halal home financing organizations. This is great if you are considering purchasing a home and don’t want to do it with a conventional mortgage. (More to come on this topic later)

However, when it comes to actual savings accounts that are interest-free, the options seem to be ambiguous. I even thought I had a lead with some institutions that appeared to be Islamic banks, but it turned out their services were region based.

Not to mention when I asked the client services person on the phone if they offered 0% interest savings accounts, they said that checking accounts are always an option. The way I laughed aloud and hung up on that call, I truly deserve a prize for patience.

Though the search thus far for a U.S.-based Islamic Bank has been rough, I can’t leave you without any course of action. This is why I have come up with some solutions listed below that should help any Muslim who is sharing in my struggle:

1. Call up your bank and request a savings account that gives 0% interest. I have tried this method with my bank and they said that the interest received is as low as 0.05% which they claim rounds up to zero. That is not good enough!

2. Donate any interest accrued on your savings account to charity. If the savings account accumulates any interest, sometimes this can be as little as $0.50, make sure to donate that amount to "purify" your money.

3. Save in a Susu or Community-style savings practice. This method allows a trusted group of people to come together and pool an equal set amount of money on a weekly or monthly basis. Every week or so, one individual takes this pot of money to use towards their personal savings goal. (More to come on this later)

4. Save it in a different checking account. At the end of the day, it does actually serve the purpose of holding your cash in an account that is FDIC insured. Just make sure this is not your day-to-day expense account.

I’ve taken the liberty to list out just a few great organizations that take donations below:

• A Continuous Charity - an organization servicing interest-free loans to university students.

• Daisy Grant Cares - An organization owned by a wonderful NJ-based woman who provides home-cooked meals to feed the homeless, organizes community givebacks, and more!

• Islamic Relief USA - A non-profit organization providing humanitarian aid and disaster relief to needy people.

• Islamic Society of North America (ISNA) - A non-profit organization that supports the Muslim community in North America through education, advocacy, and service.

Insha'Allah, I will continue my search for the Islamic Banks out there and keep you up to date with my findings. As Muslims, it's in our best interest to strive to avoid Riba in our financial dealings as much as possible.

If anyone has any suggestions for institutions they trust, please feel free to reach out!