Banks want you to enjoy the advantages of paying with credit, debit, check and cash”because it will make you more likely to lose track of your money.
Banks are businesses, big businesses at that, and they count on you losing track of your balances and spending during the month. They actually love you to go (slightly) over your change limits so they can tack on that over-limit fee. This little slight-of-hand can be controlled with a little effort on your part.
This is How The Bank Make Their Money
There are a few different ways that banks make the money that they need to operate. The first is though overdraft/overlimit fees. Many people have to deal with this kind of fee because they lose track of what they are spending. They might forget that they have used a credit card and then write a check that will bounce after they have ran a credit card. When this happens the bank can charge money on the account and they make that money for their business.
The banks have a whole menu of other fees for their loans. Mortgages most times have application fees, points, late fees, early payment fees – yes, they charge you if you want to give them their money back faster then originally agreed – besides the “regular” interest that you normally pay for the loan. It is no wonder banks make so much money. Remember the recent crisis had nothing to do with the banks normal operations, it was caused by the banks going into very risky areas of loans and financial instruments they should never have dealt with in the normal course of business. Many of these instruments made money only for the employees, by getting inflated an bonus, who push them, not the bank, and therefore not the owners (stockholders) of the bank.
Why They Want You to Use All These Methods.
Even with conventional accounts such as checking the banks almost encourage you to spend more than you have as a balance. They market many different programs to handle your overdrafts and will gladly convert these mistakes on your part to money making accounts for themselves. If you have only a conventional checking account most times they will pay a check that is over your balance and then charge you $25-35 for the privilege. Keep in mind this benevolence on their part costs them absolutely nothing to do. They get their money back and a fee also. Just think if they cover your $50 overdraft – they get their $50 back (actually it never left since the money comes from other depositors accounts) and a 50% fee for their trouble. That is called loansharking on the street. Lend $50 for a couple of days, get $75 back – not a bad way to make money.
The banks have also taken to charge fees to actually get many of their cards. American Express for instance has yearly fees on their cards of up to $2500. This for their Centurion Card which they justify with the extra services offered with the card. Think of it this way – you pay a fee to have the privilege of charging things on the card and paying them back monthly. Remember when you charge on their card AMEX withholds about 3.2% from the amount that actually goes to the vendor you purchased from. This means they get 3.2% per month, or 38.4% per year, on their credit card money. As to the extra services of travel consultants, etc., now you are paying for using their travel service (they make a commission), and charging again on their card – they again make a fee. Not a bad racket!!
Banks are in business and looking for money just like everyone else that is in business. They may just not tell you everything that you want to and need to know. If you are not sure about what the fees are going to be, take a look at the paperwork that you get when your account. This will lay out all of the fees that you may be charged and the other things that you may need to know when opening your accounts. That way you will know what is going on and not be out of the loop.
Related posts:
- The 6 Dirty Secrets About Debt Consolidation The Banks Dont Want You To Know.
- Online Credit Card Services – The Secret The Banks Hope You Dont Find Out About
- Australian Banks That Offer Best Credit Card Deals
- The Australian Banks Providing With Best Credit Card Deal
- Criteria of Australian Banks For Credit Cards
