4 Things Your Bank Would Rather Not Discuss
Consumer banks have been in the news a lot lately, namely due to their bad bets on mortgages as well as overall mismanagement. Certainly, it would be inaccurate to say this about all banks, but many of the larger banks have been preying on consumers for a long time, while simultaneously advertising that they “really care” about them. Below are some big red flags to watch out for when you bank comes calling to offer them.
1.) Debt Cancellation – While not regulated as credit insurance, this usually overpriced product serves the same purpose. It makes your payment in the event of your unemployment, or in some cases, will pay off the balance. Usually sold as a “point of sale” type product as part of customer service calls. If you truly feel you need this type of insurance, it makes more sense to shop for a much cheaper disability product, or a term life product.
2.) Overdraft Lines of Credit – Before you fall for the slogans that banks use about “piece of mind” and “protection from overdraft fees” read the fine print. Many large banks drastically liberalized their overdraft policies, allowing checks to be paid, debit transactions to be authorized, on accounts without enough money to cover. Make no mistake, this was a profit strategy. The idea was to hammer consumers with high fees for overdrafts that shouldn’t have been authorized in the first place, then offer a “line of credit” to finance these overdrafts. Basically, it is another revolving loan on your account with interest rates anywhere between 16%-29%. For now, monitor your balance closely and don’t count on the bank to watch for you. The new administration has targeted this type of practice for reform, but never underestimate the banking lobby in stonewalling new regulations.
3.) Monthly Fees – It’s easy to tell the type of consumer a bank wants by looking at their fees. It pays, big time, to shop banks for fees depending on your needs. If you are living check to check, like many people, do not go with a bank that requires a minimum bal, out of network ATM fees or per transaction fees. In most major markets, you can find reputable banks that have low fee banking options.
4.) Teller Charges – From a bank’s profitability standpoint, unless you have at least 5 figures in your accounts with them, they do NOT want to ever hear from you. Along these lines, banks create their fee structure based on what types of customers they want. If you need or want to go to a teller, make sure that you aren’t paying for the privelege. Some banks will charge in excess of 3 dollars per transactions for this.
Read those brochures you get about fees, paying careful attention to overdraft, per check, teller and min mum bal requirements. Its a pain to read the fine print, but it can be worth over 300 dollars per year for the typical account holder.
To avoid fees completely and go back to a more customer-centric approach to banking, try checking out a credit union They generally have better rates, lower fees and are focused on their members, not profitability, as their primary mission. They also perform almost all of the same services as banks. Most Americans qualify to become a member, and it is usually free. Why haven’t you heard more about them? Because they don’t spend their profits advertising in mass media.
Neal Coxworth is an entrepreneur and a 17 year veteran of the consumer credit industry with experience in originating, underwriting and processing mortgage, student and consumer credit loans. http://www.lifeloansfreeinfo.com/ – Click here to get the full scoop on what you need to know about debt.
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