Sunday 24th of January 2021

What Your Bank Isn’t Telling You

Think your bank is shooting straight with you? Think again. Banks are notorious for misrepresenting or omitting the truth about their practices and philosophies. Here are ten things you need to know, but your bank will never tell you.

  1. Branches don’t exist to serve you; they exist to sell you. Even with the advent of Internet banking and the proliferation of ATMs, the number of branches has grown steadily since the late nineties. This is because a branch is like the company’s sales floor. Everyone in it is trained to sell you their products and encouraged to do so.
  2. Fees only go one way: up. The economy is lagging, and the mortgage crisis has hit the financial industry hard. Consequently, banks are looking for novel ways to make up the revenue. You can expect punitive fees, such as the overdraft fee or the fee for using competitors’ ATMs, to increase.
  3. Interest rates change all the time. You never really can be certain what interest rate banks will charge you on your credit card. Companies can change the terms of your agreement at any time to raise rates whenever they like.
  4. College students are a cash cow. Banks market heavily to college students. More than 120 universities have arranged for student IDs to double as debit cards, which basically brings the issuing company automatic business. Credit cards are also heavily marketed on college campuses.
  5. The courts can’t help you with many loans. Most loan agreements now prohibit you from suing the bank if a dispute arises. You have to instead pursue arbitration.
  6. Foreign travel is a gold mine for us. If you withdraw money in a foreign country, you will face a foreign-transaction fee as well as a fee for using another bank’s ATM. Credit card use abroad can cost you up to 3% of the purchase price of the item.
  7. Despite all the fine print, we don’t disclose a whole lot. Most consumer-advocate groups say that many companies don’t comply with the law when it comes to fully disclosing and explaining their terms and conditions.
  8. You may be better off with another bank. The standard savings account has a 0.5% APY, but you might be able to find up to 3% by looking around even in this low-rate climate.
  9. With banks, smaller may be better. The top ten banks now control 50% of the entire market. Big banks offer convenience, but big banks also mean big fees and service charges. This accounts for 54% of their revenue, compared to 28% for smaller institutions.
  10. The account information online might not be accurate. Banks use special algorithms to determine your account balance, and this could differ considerably from the number you see online.