The 9 Top IBC Lies

Updated May 2026 · by John “Hutch” Hutchinson, ChFC®, CLU®, AEP®, EA

19 years designing client policies: 14 on my own family, from 3 true mutual companies

Infinite banking works — and most of what’s said to sell it is wrong. Promoters embellish, exaggerate, or straight out lie about IBC to nab a quick whole life sale, and every one of those lies leaves a client disappointed and stains a strategy that works if you work it correctly. Below are the nine biggest, each one corrected by someone who owns fourteen of these policies and will still tell you exactly where they break: you are not “paying yourself back the interest,” a 10/90 split is not automatically best, and your policy does not have to be non-direct recognition.

Timestamps:
0:57 – IBC Lie 1 – Pay Yourself Back the Interest
1:55 – IBC Lie 2 – IBC Is Not About Positive Arbitrage
2:55 – IBC Lie 3 – IUL Doesn’t Work With IBC
3:55 – IBC Lie 4 – IBC Loans Are Debt & Any Debt is Bad
4:56 – IBC Lie 5 – Refinance All Your Loans Through IBC
5:57 – IBC Lie 6 – The Death Benefit Doesn’t Matter
6:59 – IBC Lie 7 – Quantity Over Quality: 10/90 Policies Are Best
7:56 – IBC Lie 8 – Your IBC Policy Must Be Non-Direct Recognition
9:49 – IBC Lie 9 – Laddering Policies Helps Maximize IBC Capacity

Resources:
Free Live Webinar available weekly @ BankingTruths.com/webinar
Learn All About Direct vs. Non-Direct Recognition Loan Options @ BankingTruths.com/Direct
Watch a Current Comparison of IBC Whole Life Policies @ BankingTruths.com/Best
Visualize How Different IBC is from Premium Finance @ BankingTruths.com/Laddering
See How 10/90 Policies Perform vs. 2 Competitors in a case study @ BankingTruths.com/1090
Explore Cheap Convertible Term Policies @ BankingTruths.com/Term

Where are you with your infinite banking learning journey?

A lot of people think infinite banking is too good to be true, and that’s mostly because so many online promoters are out there saying things that genuinely are too good to be true. That’s why I named my company BankingTruths.com.

We learned a long time ago that we didn’t need to embellish, exaggerate or straight out lie — especially with responsible, intelligent people, because there’s already a vacuum in their lives for what this does, now and later.

Where people get into trouble is when they go looking for a magic bullet to replace irresponsible saving or spending patterns — a magic unicorn product that’s instantly amazing, awesome forever after, carries no downside risk, no exposure, and asks almost no responsibility of them. It’s simply not true.

Notice that both crowds get this strategy wrong — the critics who dismissed Nelson Nash’s book without ever reading it, and the purists who memorized it and stopped learning. The truth doesn’t belong to either camp. So here are the top nine IBC lies, so you can see what to look out for and decide whether this strategy is right for you.

IBC Lie #1: You’re Paying Yourself Back the Interest

You’re not. And that’s a good thing. Here’s something the people repeating this line never mention: Nelson Nash never actually wrote “pay yourself interest” in Becoming Your Own Banker. The most-quoted line in the entire movement doesn’t appear in the book — it’s a compression of adjacent shorthand like “recapture the interest.” And near the end of the book, Nash himself comes clean: the interest paid to the policy is not really interest on the loan — it’s additional premium. He told the truth in one paragraph after a hundred pages of tables reading otherwise. The tables shout; the correction whispers.

The comparison people actually have in mind is the 401(k) loan, where you borrow from your own account and pay your account back all the interest.

That sounds like a good thing. Here’s why it isn’t. To create the liquidity for a 401(k) loan, you have to sell investments — possibly at the lowest point, because the bottom is often exactly when you need to borrow.

You do pay yourself back all the interest, but it’s a single-use asset. The money is either invested or it’s lent out. It can’t be both.

Life insurance works differently, because you’re borrowing against the cash value rather than out of it. Your entire cash value balance keeps compounding while the loan is outstanding — it’s like the money never leaves the policy, because it never leaves the policy. The carrier is willing to lend to you precisely because they’re holding your cash value as collateral, which means you can earn compounding twice: once on the cash value, and again on whatever you do with the money you borrowed against it.

IBC Lie #2: Infinite Banking Isn’t About Positive Arbitrage

Yes it is. I think the reason certain online promoters say otherwise is that there’s no immediate, instant, one-dimensional arbitrage sitting inside a whole life policy the day you buy it.

Consumers left to their own devices only do what’s immediately in front of them. But doing infinite banking right means building a network of assets — and across a network you can get immediate positive arbitrage. It also means taking a long-term view of two different kinds of arbitrage: the rate spread between what the loan costs and what the money keeps earning, and tax arbitrage.

If you’re a higher earner, the tax arbitrage is arguably as important as the rate arbitrage, if not more so. Which is why sowing the seeds now is worthwhile even when there’s no instant rate spread to point at.

IBC Lie #3: IUL Can’t Work With Infinite Banking

Not true, and I say that as someone who has owned multiple indexed universal life policies for over ten years. Caps and floors have come down, the same way dividends have come down. You also give up some of the guarantees whole life offers, which means taking on a little more risk.

But IUL brings some things of its own: uncapped S&P options with certain companies, which open the door to positive arbitrage even if you’re in one of the capped options, plus locked loan rates that have been in the 5% to 6% range. I still prefer whole life as the foundational piece — I owned it before I owned any IUL — but I like those benefits.

I’ll also admit I underfunded some of those policies, and the brightest, shiniest objects I expected to be great turned out not to be. The solid companies kept their promises. The policies I underfunded are still alive and kicking, contrary to what you hear on the internet.

IBC Lie #4: IBC Loans Are Debt, and All Debt Is Bad

We agree on the first half: loads of consumer debt left unchecked is a recipe for financial disaster.

But if you were simultaneously building a safe, liquid asset that tracked that liability — one you could use to extinguish the debt at any moment — are you really in debt at all? And if you can earn compound interest on an increasing balance while paying simple interest on a flat or decreasing one, that’s a recipe for financial success. On top of that you’re earning compounding you wouldn’t otherwise be entitled to, because the alternative was spending the money and killing the compounding.

I’ll grant that I’ve seen other online promoters do some very artistic math on whiteboards and smart boards to prove there’s a magic bullet policy that hands you this instantly and forever after. There isn’t. Combined with a network of assets, though, you can create the phenomenon in your own life, and it pays off over the long haul.

IBC Lie #5: Refinance All of Your Debt Through Your Policies

We see two versions of this. The first is someone with irresponsible spending habits and a pile of consumer debt at high rates, who thinks buying a magic bullet policy first will help them manage the situation. Not true, and not a good idea. You’d essentially be financing the policy at those high rates, and it isn’t going to keep up.

What you should do instead is refinance through one of the bona fide debt services that will cut up a stack of your credit cards and get you a decent rate. Meanwhile we can help you rent coverage with a convertible term policy you can flip into IBC whole life whenever you’re ready.

The second version is the responsible saver who already has access to genuinely good rates — they could buy a car at 2.9% — but believes there’s something magic about borrowing against the policy at 5% instead. There isn’t. It’s all about the optionality: a network of assets and loan options, so you can always choose the best one available at the time.

IBC Lie #6: The Death Benefit Doesn’t Matter, Just Maximize Cash Value

We hear this constantly, and I understand it. If you do a good enough job with the cash value, you won’t need as much death benefit later on.

The part that gets missed is how a whole life policy designed for banking actually behaves. The cash value has to equal the death benefit on a guaranteed basis by the policy’s maturity age. Most of you won’t live that long, but you get the lion’s share of that convergence in your eighties, right through life expectancy.

So think of it this way. If there’s a reverse gravity pulling the cash value up toward the death benefit, do you want less of that pull or more of it? Probably more.

The same logic applies to the part most people actually like — the overfunding, the paid-up additions. PUAs are just miniature versions of the base policy, death benefit and all. So the PUA ratio, meaning how much death benefit each dollar of cash value brings with it, is what creates that upward pull on a guaranteed basis.

IBC Lie #7: Quantity of PUAs Beats Quality — 10/90 Policies Are Best

Simply not true. This is the argument for 10/90 policies, and we ran a very detailed case study on them.

Some whole life companies will let you pay a base policy of only 10%, which grows on its own but more slowly, against 90% in PUAs, where somewhere between 90% and 95% of the money goes straight to cash value. On paper that sounds great.

What we found is that the quality of the base and the PUAs matters more than the split. Those 10/90 designs weren’t growing as much as companies that only allow something like a 15/85 or a 20/80.

It’s like a restaurant. The quantity of ingredients matters. But maybe not as much as the quality of those ingredients.

IBC Lie #8: Your Policy Must Be Non-Direct Recognition

Here’s how you know that one’s not true. The man who wrote the original book, the late great Nelson Nash, used direct recognition policies in every single example in it. Both claims can’t be right.

There’s a second tell, and I use it in my detailed article on direct versus non-direct recognition — the full mechanics are more than fits here. Your agent is telling you two things that can’t both be true. One: he’s found a magic policy that lets you siphon immediate arbitrage out of the company and all its other policyholders, immediately and forever. Two: you’re a part owner of that company, and it’s one of the most financially solvent in the world.

Non-direct recognition simply means there’s no effect on the dividend paid on borrowed money. That sounds great on paper — until interest rates go up, the way they did in the 1980s, and the loan rate sits above the dividend rate. At that point you get no subsidy and no bump on your dividend, where a direct recognition policy would give you one.

Almost all of my own policies are direct recognition, and there’s a reason for that. When rates were low, I could get better terms from outside turn-key lines of credit. When rates rise, those outside lines stop being cheap — but when the carrier raises my loan rate above the dividend rate, they pull my dividend up on the borrowed money. That doesn’t happen with non-direct recognition.

And I have the receipts. My wife’s first Guardian policy is nineteen years old and carries the same 8% direct recognition loan rate as the examples in Nash’s own book — and when I borrowed $50,000 against it in year two and repaid it over five years, the borrowed-against version ended up roughly 4% ahead of where it would have sat untouched. The direct-recognition phenomenon is real; that’s exactly why the myth around it survives. Read the article before you buy into this one.

IBC Lie #9: Laddering Policies Maximizes Your Banking Capacity

Laddering means borrowing against one policy to fund a second, then borrowing against that one to fund a third. It’s not a good idea, and it’s actually counterintuitive to IBC. It’s really a version of premium finance, a strategy very high net-worth individuals use — so laddering is poor man’s premium finance, the homegrown version.

The difference matters. With infinite banking, I’m pumping my own money into the policy for better long-term growth and some tax arbitrage, and when I need my money I borrow against it for other things. With premium finance, I’m keeping my money for other things: I know I want the insurance long-term, I don’t have the cash to fund it, so I borrow to pay the premiums and try to earn long-term arbitrage off the policy.

Notice that premium finance leaves you with essentially no access to the policy — and the same is true when you’re borrowing against one policy to fund another to fund another. It’s like a set of Russian dolls. Every new policy makes you take a step back before you start taking leaps forward, and with traditional infinite banking that ramp-up can take a couple of years. Stack policies and you compound the ramp-up period along with everything else.

I’ve seen the same thing done with IUL: start a really big policy, lay in a bit, borrow that, pay some more. A lot of the time it’s just a ploy to sell more insurance. Be very clear-eyed about what access you actually have and what it takes to maintain all that homegrown premium finance. I don’t recommend it. If control is your goal, straight IBC is the better way to go.

You Got Through All Nine — So What’s Next?

You probably want to see some data now, and we have it for you even if you’re not ready to talk to a human yet. Go to BankingTruths.com/best for the latest iterations of whole life policies optimally designed for infinite banking — everything from the policy with the best early cash value to the one with the best long-term performance, plus a lot of companies in between. Each has its trade-offs.

Then there are the qualitative factors: flexibility, how and when you’ll use the loans, what happens at retirement, riders like chronic illness coverage. Watch the video to get the lay of the land, but book a meeting on our calendar if you want a consultative read on your own situation. Sometimes the right answer spans multiple family members, splitting the best of both worlds across policies on different bodies. That’s the kind of thing we help with.

We don’t hard sell, we don’t push and we don’t pressure. We lay out the toolkit, help you understand your options, and let you pick what fits your family. What I can tell you is that there’s no better time to do this than now, because you’re not getting any younger — and you’re probably not getting any healthier either.

And if you do have some health issues, we know which companies are more forgiving about which conditions, and we can route you to the right place. Book a meeting on our calendar and we’ll talk soon.

John “Hutch” Hutchinson, ChFC®, CLU®, AEP®, EA

Founder of BankingTruths.com · 19-year practitioner · 14 family banking policies across 3 companies · independent broker

John “Hutch” Hutchinson has no affiliation or association with The Infinite Banking Concept®, The Infinite Banking Institute, or Nelson Nash, nor his book Becoming Your Own Banker – Unlocking the Infinite Banking Concept; nor with Bank on Yourself, Pamela Yellen, or her book The Bank on Yourself Revolution. “The Infinite Banking Concept®” is a registered trademark of Infinite Banking Concepts Inc. “Bank On Yourself®” is a registered trademark of Hayward-Yellen 100 Limited Partnership.