Infinite Banking: What Is It and How Does It Work? (2023)

Banking / Banks

By Cynthia Bowman October 1, 2021
  • How It Works
  • How To Set Up Infinite Banking
  • Advantages
  • Disadvantages
  • Alternatives

Infinite Banking: What Is It and How Does It Work? (2)

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Infinite banking is a concept that lets you become your own bank by leveraging the value of a dividend-paying permanent life insurance policy. Developed by economist Nelson Nash in the 1980s, infinite banking gives you the freedom to access your policy’s cash value by borrowing from yourself — and paying yourself back — at any time. Imagine never having to worry about a credit check, high-interest payments or having to apply for a car or student loan ever again — this could be a reality via infinite banking.

(Video) The Infinite Banking Concept explained

Being your own banker can be a useful tool on your path to financial freedom. Take a closer look at how the Infinite Banking Concept, or IBC, works.

How Does Infinite Banking Work?

The Infinite Banking Concept revolves around a whole life insurance policy. Whole life insurance, versus the more common term life insurance, is a permanent life insurance policy. This means the policy is guaranteed for a lifetime as long as the premiums are paid on time. In comparison, a term life insurance policy only lasts for a certain time period, such as 20 years. or up to a certain age, such as 65.

A Better Way to Bank

Premiums for a whole life insurance policy are higher than for a term life policy. Here are the three components of where your monthly premium payments go:

  • Fees and operational costs
  • The portion that covers the death benefit
  • The cash value portion held in a savings-type account

Part of each premium payment is funneled into the cash value savings portion. This is a unique feature of a whole life insurance policy because you can borrow against this growing, tax-deferred cash value portion to fund major life expenses such as buying a home or paying for college. It’s the cash value of your life insurance policy that will enable you to become your own banker when you follow the principles of infinite banking.

How To Set Up Infinite Banking

If the concept of funding yourself appeals to you, there are some steps to consider to get started. Here’s how to set up an infinite banking system using a whole life policy:

1. Start Young, While Premiums Are Lower

Like all life insurance products, premiums are lower when you’re younger. Because your premium is locked in for the life of the whole life policy, the earlier you get in, the better.

(Video) What Exactly Is The Infinite Banking Concept A Complete Explanation

2. Choose a Reputable Insurer

Infinite banking is a lifelong process, so make sure you choose from reputable life insurance companies you’re confident will be around for the long haul.

3. Choose a Non-Direct Recognition Policy

Whole life insurance policies pay you dividends on your investment. But if you’re borrowing against their value, the insurer might only pay dividends on what’s in the account. A non-direct recognition policy pays you dividends on the full cash value, even if you’ve borrowed against it.

4. Choose a Policy With A Cash Value Rider that Benefits Your Loved Ones

In most policies, the life insurance company will absorb the cash value upon your death, and your beneficiary will be paid the policy’s death benefit. To avoid losing the cash value you’ve built over a lifetime, add a rider on your policy that gives the beneficiary both the cash value and face value.

5. Add a Paid-Up Addition Rider

Paying just your monthly premiums, it could take you a decade or more to build a significant cash value you can borrow against. Adding the paid-up-addition, or PUA, insurance rider to your policy will let you pay more into your cash value so you can grow it faster.

6. Go Ahead and Borrow

When you’re ready to borrow, your loan will come from the cash value of your policy, which is used as collateral. Just call up your insurer and request funding. Unlike a traditional loan, there’s no need to explain why you need the money, and the loan won’t affect your credit. The loan isn’t recognized by the IRS as income, so it’s tax-free.

A Better Way to Bank

(Video) Infinite Banking for Canadians: What is it? How does it work?

7. Pay Yourself Back

You will be charged interest, although it’s likely to be lower than interest on a bank loan. Although there are no required monthly payments, you are expected to repay the loan. Take as long as you’d like to pay it back — but be aware that borrowing reduces the death benefit until it’s repaid in full.

Advantages of Infinite Banking

On average, 34% of Americans’ monthly income goes toward paying off debt, according to Northwest Mutual’s Planning & Progress Study. IBC focuses on how to redirect that money back to yourself through privatized banking.

Here are the advantages of infinite banking:

  • You may borrow for anything you’d like, with no explanations.
  • There are no credit checks required to borrow.
  • Dividends, loans and withdrawals are tax-free.
  • The policy’s cash value continues to increase over the policy’s lifetime, even while you’re borrowing.
  • You can contribute additional money towards your policy value.
  • You can lend money from the cash value to family or loved ones.
  • Interest rates are generally lower than for a traditional loan.
  • Pay yourself back at your own pace.
  • You’re creating a financial source by funding your own future loans while building an inheritance for your beneficiaries in the form of a policy death benefit.

Disadvantages of Infinite Banking

Infinite banking requires a long-term strategy and plenty of discipline. The insurer won’t set regularly scheduled payments on your behalf but will expect the loan to be repaid. It’s up to you to be financially responsible when you’re your own banker. This carries some disadvantages:

  • Monthly premiums can be high.
  • Unless you make advance arrangements, the life insurance company will absorb the cash value upon your death and the beneficiary will receive the policy’s death benefit.
  • If you don’t pay the loan back, the amount will be deducted from the death benefit.
  • Qualifying for a new whole life insurance policy may be difficult for older individuals or those with poor health.
  • The amount paid towards a permanent life insurance policy and the cash value balance could grow more over time in other investments such as an index fund.

Does Infinite Banking Work for the Average Person?

Infinite banking might not work for the average person because it requires serious commitment and enough earnings and cash flow to afford the high monthly premiums. A large amount of money has to be contributed to the insurance policy before borrowing against it makes sense.

Alternatives to Infinite Banking

This concept doesn’t work for everyone, but there are alternatives for borrowing at favorable rates and watching your savings grow over time. The key is consistency and financial discipline. Here are some alternatives:

Traditional Banks

Most commercial banks offer a variety of savings and loan products that fit their customers’ needs. Learn more at GOBankingRates’ Annual Best Banks Rankings.

(Video) Why Infinite Banking is a SCAM!

Credit Unions

Credit unions are nonprofit institutions that reinvest all earnings back into their products. They offer competitive loan and savings rates that are often more favorable than a traditional bank’s.

High-Yield Savings Accounts

Several online banks offer high-yield savings accounts that could offer you a higher interest rate than a savings account through a traditional bank. Read more about high-yield accounts to learn how to access their benefits.

The Infinite Banking Concept in a Nutshell

IBC could be a powerful personal finance tool for higher-net-worth individuals who could benefit from tax savings and want the freedom to borrow money quickly. An individual can borrow from their whole life insurance policy without a credit check or lengthy underwriting process. Although it’s a great resource for funding major expenses like a college education or real estate, covering these types of loans requires a large investment into the policy’s cash value over time.


For infinite banking to work, a quality permanent life insurance policy and a long-term financial plan are needed. Start early — even if you don’t think you need to borrow until years later, the younger you buy whole life insurance, the cheaper it is. Getting coverage early also gives you more time to build cash value before you hit major milestones such as buying a house or paying for a dependent’s college education.

This article has been updated with additional reporting since its original publication.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


What is the difference between velocity banking and Infinite Banking? ›

The main difference lays in places used to store cash. In Velocity Banking, the money is stored in the home equity. In Infinite Banking, the money is stored in the cash value of the life insurance policy.

What is infinite banking UK? ›

The Infinite Banking Concept is your strategy to privatize finance, warehouse capital, and create a family bank. You can use this strategy for yourself to finance a business, investments, or real estate purchases. You can use this strategy to finance your child's college education.

Is infinite banking possible in Canada? ›

Infinite banking concept originated in the United States and, you might be asking yourself “does infinite banking work in Canada?” The answer is yes, however, know that in Canada policy loans are taxable above the adjusted cost base (ACB).

How much money do you need to infinite bank? ›

For many people on a shoe string budget the infinite banking concept can be cost prohibitive. Although there is no set minimum monthly payment, in order to truly follow this concept and see its fruit you would need to try and put around 10% of your income into your policy, or at least $300 a month.

How do I get started with Infinite banking? ›

How Do I Start Infinite Banking?
  1. Start Young, While Premiums Are Lower. ...
  2. Choose a Reputable Insurer. ...
  3. Choose a Non-direct Recognition Policy. ...
  4. Choose a Policy With a Cash Value Rider That Benefits Your Loved Ones. ...
  5. Add a Paid-Up Addition Rider. ...
  6. Go Ahead and Borrow. ...
  7. Pay Yourself Back.
17 Oct 2022

Can Infinite banking make you rich? ›

Infinite Banking/Bank on Yourself is not a scam, but the way it is sold frequently feels scammy. It is not a magic way to build wealth but may help you earn a little higher rate of return on your invested cash in the long run and provide a bit of asset protection you probably don't need.

Who should use Infinite banking? ›

In general, infinite banking works best when the person banking on themselves has extremely strong cash flow. Whole life insurance policies can cost several hundred dollars per month (between five to fifteen times as much as term life insurance policies).

What is the bank that rich people use? ›

Citigroup (Private Bank)

Citibank's private banking unit is Citibank Private Bank. It's one of the top banks for rich people and only the wealthy may use its services.

What is wrong with the infinite banking concept? ›

Some cons are: It takes time to build up a sufficient cash value (or nest egg) before you can “bank with yourself” Some people may not be able to afford whole life insurance premiums. There is an opportunity cost as some other assets could outperform the guaranteed interest + dividends of your policy.

What product does the Infinite banking concept use? ›

But the Infinite Banking concept works best when the banker—you—utilizes properly structured whole life insurance as your bank. Using whole life insurance as a financial tool for building wealth wasn't a new concept in the 1980s.

What type of life insurance does infinite bank use? ›

Infinite banking is not without its drawbacks, however. An individual must qualify for a whole life insurance policy. And even if the individual qualifies, the financial burden that often comes with paying for the policy can be weighty.

How do millionaires put money in bank? ›

Millionaires bank differently than the rest of us. Any bank accounts they have are handled by a private banker who probably also manages their wealth. There is no standing in line at the teller's window. Studies indicate that millionaires may have, on average, as much as 25% of their money in cash.

What is the most amount of money you can keep in a bank? ›

Minimum balances aside, how much money can you have in a checking account? There is no maximum limit, but your checking account balance is only FDIC insured up to $250,000. However, as we'll cover shortly, it makes sense to put extra cash somewhere it will earn interest.

What happens if I go over 250000 in one bank? ›

The bottom line. Any individual or entity that has more than $250,000 in deposits at an FDIC-insured bank should see to it that all monies are federally insured. It's not only diligent savers and high-net-worth individuals who might need extra FDIC coverage.

What are the benefits of infinite banking? ›

Utilizing the infinite banking concept rather than traditional banks provides competitive safe growth rates, tax-sheltering, various protection benefits, and most importantly the continuous compounding of their liquid assets even while they're being borrowed.

What is a 7702 account? ›

A 7702 plan refers to a cash-value life insurance policy, which is a life insurance policy that has a cash value beyond the death benefit. When you pay premiums into these kinds of policies, some of the premium goes to the death benefit and some of the premium goes to the policy's cash value.

How can I borrow against my own money? ›

Passbook loans — sometimes called pledge savings loans — are a type of secured loan that uses your savings account balance as collateral. These loans are offered by financial institutions, like banks and credit unions, and can be a convenient way to borrow money while rebuilding your credit.

Can you use life insurance like a bank? ›

Mutually owned life insurance companies use a policy owner's death benefit as collateral for policy loans. This allows you to receive a cash flow, or infinitely bank, instead of relying on a central bank for loans.

How do billionaires keep their money in the bank? ›

Securities. Another common place where billionaires keep their money is in securities. Securities are financial investments and instruments with some value that can be traded, oftentimes on public markets. Common types of securities include bonds, stocks and funds (mutual and exchange-traded).

How much money in your bank account is considered rich? ›

How much do you need in your bank account to be considered wealthy? According to the 2022 Modern Wealth Survey conducted by Charles Schwab, the average net worth of an American to be considered wealthy is $2.2 million.

Does life insurance give you money? ›

Life insurance is a contract between you and an insurance company. Essentially, in exchange for your premium payments, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death. Your beneficiaries can use the money for whatever purpose they choose.

Why do rich people have multiple bank accounts? ›

The trick is to divide the money into several accounts since the deposit protection always applies per account. So if you are very wealthy, or plan to become so, you should sooner or later spread your money over several bank accounts.

How do I set up my own bank? ›

How to Start a Bank: The Complete 7 Step Guide (2022)
  1. Step 1: Know the Business. ...
  2. Step 2: Write a business plan. ...
  3. Step 3: Raise capital. ...
  4. Step 4: Get a charter. ...
  5. Step 5: Apply for FDIC approval. ...
  6. Step 6: Check for any other necessary permits. ...
  7. Step 7: Get customers.
1 Jun 2022

What bank does Bill Gates use? ›

Cascade Investment
FounderBill Gates
HeadquartersKirkland, Washington , United States
Key peopleBill Gates (Chairman) Michael Larson (CIO)
5 more rows

Where do you put a large sum of money? ›

Savings accounts are a safe, reliable place for a lump sum of money. Your funds will not only be safe from daily spending, but your deposits will be guaranteed by the Federal Deposit Insurance Corporation (FDIC) for bank accounts or the National Credit Union Administration (NCUA) for credit union accounts.

Where do wealthy people keep their cash? ›

Mutual funds and stocks are the most common options that some millionaires and billionaires go through first. Once they're in a stable position, they often buy property to diversify their portfolio and increase their wealth through real estate investment.

When banks run out of money and close? ›

Systemic banking crisis

A bank run is the sudden withdrawal of deposits of just one bank. A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time, as a cascading failure.

How long has infinite banking existed? ›

Infinite banking is a concept created in the 1980s by the late economist R. Nelson Nash that centers around individuals becoming their own bankers.

Can you become your own bank? ›

You would just borrow from yourself and continue paying yourself back over time — thus becoming “your own bank”. Needing the money to buy an engagement ring, a new car or house, or a child's education — you can borrow for anything using this policy. No more paying interest to the banks anymore.

How soon can you borrow from a whole life insurance policy? ›

How Soon Can You Borrow Against a Life Insurance Policy? You can borrow from a life insurance policy as soon as there is enough cash value built up to take a loan in the amount you need.

How long do you pay into whole life insurance? ›

Most whole life policies endow at age 100. When a policyholder outlives the policy, the insurance company may pay the full cash value to the policyholder (which in this case equals the coverage amount) and close the policy. Others grant an extension to the policyholder who continues paying premiums until they pass.

What is metaverse for banks? ›

Banking has officially entered the metaverse, giving consumers the opportunity to purchase crypto and use services without leaving the digital realm. Decentraland launched the first ATM in the metaverse on its platform in August.

Can you lose money in universal life insurance? ›

Variable Universal Life Insurance: The cash value of a variable universal life insurance policy can grow more quickly than that of other permanent life insurance policies, depending on the performance of the subaccount. Policyholders can lose money to subaccount performance.

What life insurance do millionaires use? ›

Lincoln Financial is our top recommendation for high-net-worth individuals buying term life insurance. Lincoln offers some of the highest death benefits compared to other companies on the Policygenius marketplace. You can buy up to $60 million in coverage from Lincoln if your income and assets justify it.

What happens if I outlive my universal life insurance? ›

The plan matures, and the death benefit (possibly including any remaining cash value) goes to his or her beneficiaries. Second, the policyholder outlives the coverage and doesn't file for an extension. If this occurs, the death benefit expires, and the cash value goes to the policyholder.

Is velocity banking a good idea? ›

Yes, velocity banking can help increase your home equity. But that's not savings, and you might not always be able to access it. The problem here is that for money to truly count as savings, it must have maximum liquidity and safety.

Is velocity banking risky? ›

Velocity banking is legit. However, it is risky. For example, you'll be paying interest in two or more locations and you'll need to keep a close eye on this. If you get the cash flow wrong and don't pay what you owe to where you owe it and on time, it could end up being an expensive mistake.

Is infinite banking a good idea? ›

Infinite Banking/Bank on Yourself is not a scam, but the way it is sold frequently feels scammy. It is not a magic way to build wealth but may help you earn a little higher rate of return on your invested cash in the long run and provide a bit of asset protection you probably don't need.

What are the cons of velocity banking? ›

Velocity Banking Cons

Accessing a line of credit can lead to more debt. Essentially, it's a slippery slope. If you have an income change like a job loss due to the pandemic, this can go sideways quickly as you tap into the line of credit to fund your life… Having access to your equity can increase purchasing.

How do I do velocity banking? ›

Using the velocity banking strategy, you use your HELOC as your checking account. Once open the HELOC, draw almost the entire amount, leaving enough for emergencies if you don't have an emergency fund. Take the draw and put it toward your debt and monthly bills, including your mortgage.

Who is rocket mortgage biggest competitor? ›'s top 5 competitors in August 2022 are:,,,, and more. According to Similarweb data of monthly visits,'s top competitor in September 2022 is with 2.3M visits.

Does velocity bank use Zelle? ›

It's easy — Zelle® is already available within Velocity Credit Union's mobile banking app and online banking!

Is virtual banking safe? ›

Yes, online banks are safe. As long as an online bank is insured by the Federal Deposit Insurance Corp., it will offer the same coverage as the FDIC-insured bank down the street. FDIC covers up to $250,000 per account for each individual customer.

What is accelerated banking? ›

Accelerated payment occurs when a borrower speeds up the repayment of a loan. This can be done by: Shortening the amortization period, which increases the amount of each regular payment. Making payments more frequently—for example, weekly or bi-weekly instead of once a month.

What is Velocity payment? ›

What is it? Velocity Pay® is a general purpose reloadable Visa® prepaid card. Velocity Pay® is a safer, more convenient way to take charge of your finances and can be used anywhere Visa® debit cards are accepted.

What bank do millionaire use? ›

Bank of America, Citibank, Union Bank, and HSBC, among others, have created accounts that come with special perquisites for the ultra-rich, such as personal bankers, waived fees, and the option of placing trades. The ultra rich are considered to be those with more than $30 million in assets.

What bank do millionaires use the most? ›

The Most Popular Banks for Millionaires
  1. JP Morgan Chase (Private Bank) This bank is one of the oldest and most well-known banks in the United States. ...
  2. Bank of America (Private Bank) ...
  3. Citigroup (Private Bank) ...
  4. Wells Fargo (Private Bank) ...
  5. HSBC (Private Banking)
3 Jun 2022

Who should use Infinite banking? ›

In general, infinite banking works best when the person banking on themselves has extremely strong cash flow. Whole life insurance policies can cost several hundred dollars per month (between five to fifteen times as much as term life insurance policies).

What is wrong with the infinite banking concept? ›

Some cons are: It takes time to build up a sufficient cash value (or nest egg) before you can “bank with yourself” Some people may not be able to afford whole life insurance premiums. There is an opportunity cost as some other assets could outperform the guaranteed interest + dividends of your policy.

What are the disadvantages of virtual banking? ›

Like all things in life, internet banking also has a few disadvantages:
  • No Cashless Deposit Option. There is no provision for cash deposits. ...
  • Internet Requirement. Your access to Internet banking services can be hindered in the absence of a stable internet connection. ...
  • Internet Fraud.
1 Feb 2022

What is a velocity mortgage? ›

Velocity is the only Mortgage Operating Platform that pulls all your systems into one place, automates your processes, and gives you more time to do the things you love to do.


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