If you’ve ever had an experience where your bank was less than truthful with you, you’re not alone. Sudden jumps (credit) or drops (savings) in interest rates, undisclosed bank fees, and unexplained details of bank accounts are far too common these days. The cold hard fact is that the bank is a business first and foremost and would tend to look after its own interests before looking out for yours.
And be careful: What you don’t know could hurt you. Here are 8 things that you may need to know about your bank – but shouldn’t wait to hear from them. It could be a long wait.
1. “Our balance sheet isn’t looking too good.”
For all the supposed transparency about banks receiving bailout money and undergoing stress tests, most people still actually can’t make heads or tails of what a bank’s real financial standing is. While all customers are on the safe side as long as they stay within the $250,000 FDIC limit, it still pays to learn how your bank is doing. It will help you keep tabs of what possible changes your bank might undergo in the future which could affect you such as a bank merger.
2. “Your bounced checks are good business for us.”
Many of us own up to forgetting about a check that we may have issued at some point. We are fully prepared to face the consequences for it, usually an overdraft fee of $35 on the average, and that’s fine. But then the banks found an effective source of penalty income by changing the order in which checks are honored from largest to smallest amounts.
What this means is that if you wrote out six $5 checks and one $100 check and the balance in your account is only $100, the bank would pay off the $100 check first and penalize you an overdraft fee for each of your six $5 checks. That would sum up to a hefty $175 in total charges for just a shortfall of $30! This neat little trick has allowed the banking industry to generate about $17.5 billion a year in overdraft-related fees since 2006, a bump up from $10.3 billion in 2004.
3. “We could raise fees without telling you.”
Banks are doing well from fee-based income these days. Between 1998 and 2007 bank ATM charges doubled. But that’s not all. Aside from the usual fees, a whole lot of other fees are being charged to customers: paper fees for retrieving your used checks and paper statements, courtesy overdraft fees for bounce protection, point-of-sales fees which are charged if you use a PIN for your debit purchases instead of signing for them, and last-minute bill pay fees which allow you to pay your bills on time (even at the last minute), but for a service fee which could turn out to be as costly as paying late.
4. “We could change rates without telling you.”
You may think you’re enjoying a certain rate on your credit card but in actuality you’re paying for much more. Pay a day late even once and chances are, you’ll end up paying more than 30% in interest. Even responsible card holders who never make late payments and always pay full balances still saw a dramatic rise in their rates. Banks are actually allowed to do that for now, but hopefully not for much longer.
5. “There’s really no such thing as a free checking.”
If a free checking sounds like a too-good-to-be-true deal, that’s because it probably is. While a “free account” is typically required to have zero minimum balance requirement and no maintenance or activity fees, it doesn’t mean other fees can’t be charged. Free checking can slap high penalty fees. Or banks can issue a debit card together with a free checking and – surprise! – charge a fee every time the debit card is swiped.
6. “You could always try other banks…”
The law of inertia in effect on customers is doing banks a lot of good. Unless they have a really bad experience with their bank, most clients tend to stay on despite low interest rates, for the simple reason that it would take too much effort to find another bank. The truth is, you could probably find a higher rate in other banks if you shop around. If not, then at least you have the peace of mind knowing that things can’t get any better for you.
7. “Keeping you happy is not a priority; luring in new clients is.”
Not a week goes by when no bank is launching a promotion of sorts to get new customers to bank with them. The incentives for transferring could range from cash credits, rewards points, or electronic items. Once you’re in though, you’d best fend for yourself.
8. “That 0% credit card balance transfer rate isn’t as good as it sounds.”
Here’s what the fine print you failed to read could say:
- You’re paying for a steep card balance transfer fee.
- Forget to pay or pay late and your 0% interest could automatically change to 25% to 35%.
- A 0% interest is usually applicable for only one year. If you fail to pay up within that period and the banks are counting on that, your rate could also jack up to record highs.
- The 0% interest may not apply on new purchases.