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Banking

What Are Socially Responsible Banks and How Do They Work?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Socially responsible banks are financial institutions that allow their customers to manage their money while supporting a cause that matters to them. If you’d like to make a difference in the world, one way to start is with your bank account.

Working to fight climate change? A 2019 study found that banks worldwide had poured $1.9 trillion into financing fossil fuels since the Paris Climate Accord was adopted in 2015. Looking to support local businesses? A 2017 analysis found that most major banks grant less than one small business loan per branch each year. If fighting climate change and supporting local businesses are values that are important to you, you might want to understand what your bank is doing to help on either front.

Before you consider changing to a socially responsible bank, it’s worth understanding exactly how these institutions work, how to find them and how they can help your wallet. Here’s everything you need to know about socially responsible banks.

What are socially responsible banks?

Traditional banks aim to maximize profits for their shareholders. Socially responsible banks are values-based institutions that are focused on lending to ethically minded businesses and individuals — in addition to turning a profit.

Here’s what that looks like in practice. Nearly all banks use the money in their customers’ checking and savings accounts to grant loans and make investments. Usually, consumers have zero control over who receives that money.

Socially responsible banks ensure that the money in your accounts is lent to specific ethical, environmental or politically minded groups.

There are countless ways to make your money count. There are banks focused on funding clean energy, combating poverty, funding minority-owned businesses, donating to political parties, supporting religious groups and more.

If there’s a cause you care about, there’s probably a financial institution that can help you support it.

“It’s really about figuring out what’s important to you as a consumer, and then finding a bank that matches your values,” Becca Hoeft, the chief brand officer for the Sunrise Banks, a socially responsible financial group based in Minnesota, said.

The benefits of choosing a socially responsible bank

Every bank has its pros and cons, but switching to a socially responsible institution could have a major impact on your daily life and your wallet. Here are a few of the biggest advantages.

Your money will support the causes you believe in

This is the most obvious advantage, as you can pick a bank that will invest your dollars into something you truly care about. It’s an experience that allows everyday people to enact major changes, according to Morgan Simon, a financial expert and author of Real Impact: The New Economics of Social Change.

“Even if we are not particularly wealthy, we’re all connected to these webs of wealth, and we’re able to influence it,” Simon said. “We may only get to vote every four years, but you can vote every day with your dollar.”

You may get higher rates and lower fees

Socially responsible banking isn’t just about values, though. Many institutions also offer ways to save money, including lower fees and higher interest rates than some of the big banks.

For example, Wells Fargo, and Citi offer less than 0.05% annual percentage yield on standard checking accounts, and all three charge between a $10 to $15 monthly fee. Meanwhile, many of the major socially responsible banks offer free checking accounts, and some provide up to 1% APY.

Still, that’s not true for every single bank, and it’s worth comparing rates and fees for both checking and savings accounts before making a decision.

It may help you spend more responsibly

Socially responsible banks will also help you spend money more wisely — and, if you want, more ethically. Offers differ between banks, but here are a few examples:

  • New York-based Amalgamated Bank will match half of the interest you earn from deposits, then donate it to the charity of your choosing.
  • Aspiration, based in California, will track all of your spending with an “impact measurement” that tells you how much your purchases affect the environment and other factors.
  • Sunrise Banks allows you to dedicate your account funds specifically toward developments in your local community.

You’ll connect with people who share your values

Because socially responsible banks are based on interests and beliefs, they’re also a chance to connect with people who share your values. Hoeft noted that this can be one of the biggest benefits of working with an ethically focused institution.

“Banking is pretty boring,” Hoeft said. “It’s not a sexy business. But when you look at these banks who are trying to make a difference because they see a problem — there’s a sense of community that occurs.”

How to find a socially responsible bank

So how do you know which banks are for real? There are a number of affiliations that tell you whether a financial institution is worth considering — and help you understand their principles.

  • Community Development Financial Institutions (CDFI): For Simon, this is where anyone looking for a socially responsible bank should start their search. CDFIs are institutions that focus specifically on revitalizing low-income communities around the United States. Each bank must meet a set of standards to become eligible, including maintaining corporate accountability and commitment to financial development in its community.
  • B Corporations: These are businesses around the world that meet a specific set of values laid out by the “B Corp Declaration of Independence.” Companies that receive this certification must value social and environmental advocacy, as well as public transparency. The group’s website even has a directory where you can search for B Corps that match your interests.
  • The Global Alliance for Banking on Values (GABV): There are only 55 GABV members worldwide, and just eight in the U.S. That’s because in order to join, a bank’s values must meet the alliance’s set of key principles — including its “triple bottom line” approach, which emphasizes human welfare and the environment in addition to profit.
  • The Paris Climate Agreement: Some environmentally focused banks, including Sunrise and Amalgamated, have also committed to abide by the 2015 Paris Agreement. The central goal of the agreement aims to limit the rise in global temperatures by promoting green energy and reducing the use of fossil fuels.

What are some popular socially responsible banks?

  • Amalgamated Bank: One of the largest and best-known socially responsible banks, Amalgamated has more than $4.5 billion in total assets. The New York-based financial group is majority-owned by a workers union but also prioritizes a range of other issues such as women’s rights, immigrants’ rights and the environment.
  • Aspiration Bank: Based in California but focused specifically on online banking, Aspiration describes its mission as helping customers “make money while making the world a better place.” In practice, that means fossil fuel-free bank accounts, donating 10% of its invested money to charity and offering bonus rewards for customers who shop at socially conscious companies.
  • Southern Bancorp: With more than 80,000 customers, Southern Bancorp is one of the South’s largest socially responsible banks. The company is both a GABV member and an CDFI-certified institution, and its contributions are focused mainly on rural community development.
  • Thrivent: A not-for-profit financial service provider with a Christian focus, Thrivent is an option for those looking to bank ethically while also supporting their religious values. It’s also a massive organization: Thrivent has more than 2 million members and in 2018, the group made the Fortune 500 list.
  • Sunrise Banks: Hoeft described Sunrise’s mission as “empowering financial wellness for everyone,” and the bank works toward that in a number of ways. The company is a certified B Corporation and part of the GABV, in addition to aligning its investments with the Paris Climate Agreement.

The bottom line: Should I use a socially responsible bank?

There are plenty of ways to make an impact with your money, but socially responsible banks can be an easy and empowering option to express your values. Still, it’s worth exploring all of your options — both ethical and financial — before committing to a new bank.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Banking

Mega Millions Annuity or Cash: Which Should You Take?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

There’s exactly a one in 302,575,350 chance that you’re going to win the Mega Millions jackpot. Those aren’t great odds: In fact, you’re about 80 times more likely to be attacked by a shark, and about 19 times more likely to give birth to identical quadruplets.

But hey, someone has to win right? And when that lucky person does hit the jackpot, they’ve got a big question on their hands: Do you take the Mega Millions annuity or stick with the lump sum payout?

And whether you’re the person with that lucky one in 302,575,350 ticket, or just curious about how the system works, it’s worth knowing the difference between the two payout options — because they change a lot about how you get your winnings.

With that in mind, here’s everything you need to know about the Mega Millions annuity, the lump sum option, and which one you should choose if you hit the jackpot.

Mega Millions annuity: How it works

Unlike the lump sum option — in which you get all of your money at once — the Mega Millions annuity spreads your winnings into annual, gradually increasing payments. Similar to the Powerball annuity option, the Mega Millions system is spread out over 29 yearly installments, in addition to one immediate payout you get when you cash in your ticket.

That’s 30 payments in total. It may seem like a long time to wait for your money, but, according to the lottery, this system is designed to “protect winners’ lifestyle and purchasing power in periods of inflation.” Also, since payments grow by 5% every year, your will increase a lot over time.

So what does the annuity option actually look like? Let’s look at an example. Say you won a $100 million jackpot, and you live in Virginia — a state with a pretty average tax rate. Here’s how some of your payments would look:

  • Your initial payment, which you get as soon as you cash in your ticket, would be $1,083,703 after taxes.
  • Your first yearly payment (your second payment in total, but the first of your annual installments) would be $1,137,888 after taxes.
  • By year 14, you’d eclipse $2 million, earning an annual payment of $2,043,484 after taxes.
  • By year 22, you’d exceed $3 million, getting $3,019,157 after taxes.
  • Your final installment would total $4,460,670, more than four times your original payment.

After taxes, this scenario would leave you with a total of $72,000,000. Your taxes will obviously vary based on your state though, so to explore more options — and see a more thorough, year-by-year breakdown — check out this online calculator.

Mega Millions lump sum: How it works

The lump sum, also known as the cash option, is a little more straightforward. It involves a single, one-time payment that you receive right after you cash in your winning ticket.

There are a few details worth nothing, though. First, the jackpot amount you see advertised on billboards and lottery machines is not the lump sum payout. Those numbers show you what you’d get over 29 years with the annuity option — in reality, the cash option is always less.

Robert Pagliarini, president of Pacifica Wealth Advisors and a financial planner who specializes in sudden wealth events, says that the lump sum normally pays around 60% of the advertised jackpot.

And that’s not including the government’s share. The good news with the cash option is that you only have to pay taxes on your winnings once, but Pagliarini warns that it’s still something winners need to take into account.

For example, in that same situation from before — the one where you’re a Virginia resident who wins a $100 million jackpot — your lump sum payment would be $43,920,000 after taxes.

Mega Millions annuity vs. cash: Which should I choose?

Yes, taking the annuity will eventually amount to more money, but both options have some major advantages. Here are some of the biggest benefits of each.

Mega Millions annuity advantages

Pagliarini says he “preaches” this option to clients for a number of reasons — and not just because it’s a bigger jackpot. Another draw is that the annuity option gives winners room for mistakes, which could be crucial for people who are suddenly coming into a large sum of money.

“What we find is that some people make some fairly bad decisions when they get such a large amount of money,” Pagliarini said. “[The annuity] allows someone to screw up with their money and get a do-over — not just one do-over, but 29 do-overs.”

Pagliarini also said he believes the annuity option makes it easier for winners to deal with taxes, as they’ll lose a small amount every year versus one big tax hit with the lump sum. He said cash option winners may “anchor” — or mentally attach themselves — to the total jackpot amount, setting themselves up for disappointment when they lose millions in taxes at once.

Mega Millions lump sum advantages

The most obvious advantage here is simple: You get all of your money at once. That sort of quick, immediate payout is great in a lot of situations — if you’re older, have some immediate spending needs or just want your money now — but Pagliarini points out another big selling point.

To him, it’s all about investment. Taking the cash option gives you a lot of money to work with, and, if you use it wisely, you could find yourself in an even better financial situation than if you took the annuity. Pagliarini suggests that lump sum winners put a big percentage of their jackpot into stocks or real estate as soon as they receive it.

“In fact, if you were to take that money and invest it in a diversified portfolio,” Pagliarini advised, “you most likely would actually end up with more money than if you had taken the annuity.”

But despite these advantages, Pagliarini almost always tells people to take the annuity. He warns that if you do choose the cash option, you should immediately surround yourself with a large team — of tax lawyers, accounts and financial advisors — to help you manage that massive payday.

“The pressures [of winning a jackpot] are so intense that it’s really easy to make bad decisions,” Pagliarini said. “So it’s really important to have someone helping to make decisions on your behalf.”

Mega Millions FAQ

What happens to an annuity if the winner dies?

If someone who’s chosen the annuity dies, the lottery will continue with annual payments exactly as scheduled, making them out to the winner’s selected beneficiary or beneficiaries.

How do I claim my Mega Millions prize?

Jackpot winners must claim their jackpot in person at their state’s lotto headquarters. The time frame for this process varies by state — you can have between 90 days to one year to claim your jackpot, depending on where you live — and you must redeem your ticket in the state where it was purchased.

Can I remain anonymous if I win Mega Millions?

This one also depends on your location. Only 12 states currently offer anonymity to jackpot winners, and some of those offers come with restrictions. For example West Virginia requires winners to donate 5% to the State Lottery Fund in order to remain anonymous. You can find a list of each state’s Mega Millions anonymity rules here.

Are there Mega Millions scams I need to know about?

Yes. The lottery warns that you should beware of unsolicited messages via phone, email and social media, as well as anyone who asks you to provide bank info or send them money before redeeming your jackpot. Mega Millions offers plenty of tips for avoiding scammers, including making sure any call you receive is actually coming from the lottery and being suspicious of anyone saying you must keep your win confidential. They also warn that you should avoid anyone saying they work for Mega Millions — remember, Mega Millions is a game, not the name of an organization.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Banking

How to Cancel a Lost Money Order

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Money orders might sound like an old-school way to make payments, but people still use them every day. And for good reasons: When it comes to sending small amounts — usually less than $1,000 — money orders can be a convenient way to deliver funds.

Money orders are prepaid, meaning you don’t need a bank account to send them and you never have to worry about a check bouncing on your recipient. They’re also great for international payments and times when you don’t want to share your bank information.

But they’re also just a thin piece of paper, which makes them pretty easy to lose. The fact that money orders are paid in advance only makes that threat worse — for any fraudster able to impersonate your recipient, they’re basically free money.

That’s why it’s important to cancel a money order the second you realize it’s been lost. Here’s everything you need to know about the cancellation process.

Step-by-step guide to cancel a lost money order

Cancelling a money order can be simple and straightforward, as long as you remember a few key steps. Here’s an easy guide:

  1. Contact the issuer: Once you realize your money order is missing, you should immediately inform the institution that issued it. Be sure to give them as much info as you can, including the date and location of purchase.
  2. Fill out a request form: This will officially start the cancellation process. Cancellation request forms should be available wherever you got the money order, or online at your issuer’s website. Including a copy of your original receipt is important here, as it holds key info about the payment.
  3. Submit your request: Submit the form to your issuer, along with the cancellation fee. As you’ll see in the table below, these fees vary by institution.
  4. Refund vs. reissue: If your money order was not cashed by someone else, your issuer will give you the option to either get a refund or reissue the payment. Since cancellation can take up to two months, it may be too late to make the payment you needed the order for. In that case, a refund is the best option.

Fees to cancel a lost money order

Cancellation fees vary by issuer, which is something to consider when deciding where to fill out your money order. The list below isn’t comprehensive, but it includes many of the most popular issuers. If you don’t see your preferred bank or institution below, you can contact them directly about fees.

Fees for cancelling a money order

Institution

Fees

Western Union

$15 (with receipt)/$30 (without receipt)

Walmart (MoneyGram)

$18

U.S. Postal Service

$6.15

Wells Fargo

$31

Chase

$0 (Service only available in person)

What happens when a lost money order has been cashed?

Unfortunately, the issuer can’t repay you if someone else cashed your lost money order. Your best bet here is to inform law enforcement — recipients have to present a valid form of ID to cash a money order, meaning anyone cashing your money order illegally may also be committing identity theft.

The issuer should be able to give you info about the identity of the person who cashed your money order, or at the very least when and where the order was cashed. Be sure to follow up with them and get these details to the authorities.

Tips to protect your money order

Dealing with the aftermath of a lost money is a headache — and one that can be avoided. A few precautions go a long way, and these easy tips will make the process a lot safer:

  • Know your recipient: Because the money is guaranteed in advance, money orders are an easy target for scammers. Never send a money order to someone you’re not familiar with.
  • Include your recipient’s name: Never leave the recipient field blank. Be sure you know exactly who you’re sending the money to beforehand, and include that person’s name on the order when it’s issued.
  • Check your status: Most issuers offer online tracking services, so you can see when your money order has been deposited.
  • Be speedy: If you can, send your money order as soon as you get it. That way, you’ll cut down on the amount of time it can be lost or stolen.
  • Consider your alternatives: Are there other payment forms that would be safer? Helpful alternatives include a wire transfer, a personal check or an online payment service. If you’re considering sending money online, here are some of the best services available.

The bottom line

Overall, money orders can be a fast and easy option for making a payment, but only in certain situations.

If you’re without a checking account, sending money international or paying a recipient who won’t accept checks, it’s definitely an option to consider. Still, it’s worth knowing the downsides of relying on a thin sheet of prepaid cash.

Being aware of these risks, and taking steps to prevent them, will make the entire process a lot more convenient.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here