Bank Scams 101
“Welcome to First International Bank sir. So you have your minimum requirement to open a savings account and checking account with us? Please sign here. Now enter a pin number for your debit card. Would you also like to sign up now for overdraft protection? As a valued customer we allow you a $1,000 allowance to be over on your checking account. You can also sign up for our 5 year CD, which starts at a $10,000 minimum and give you 0.75% interest. Make sure however, to maintain a $5,000 minimum in savings and $5,000 minimum in checking, otherwise there is a balance fee against your CD, plus a minimum balance charge on both checking and savings. If you make more than 2 withdrawals from savings in any one quarter, there is a quarterly fee. Would you also like to purchase checks now, with our complimentary check log. If you upgrade right now we can give you monthly money orders for only $20.00. That’s a $5.00 savings monthly. Lastly, we’re going to run your credit right quick to make sure you qualify for the debit card and credit card that comes free with a checking account.”
Some of you might be laughing at that scenario, but it is very very real. Millions of Americans have this experience daily with banks. With the advent of the internet and increased security that has come on board, banking online with an online banker has made the above scenario obsolete. Brick and mortar banks know that they exist, yet they still stick to the above scenario day in and day out. Offering low interest returns on savings account and charging outrageous fees on top of fees is their bread and butter. Each year banks make billions on just the overdraft charges alone. Banks also make you think that the checking account is a burden on them and that’s why it earns no interest, when in fact the checking account is how most banks earn their money.
Fees and Avoiding Overdraft Fees
Banks will often smoothly opt you into a credit limit on your checking account. This means, you can go in the red on your checking account before a complete stop or denial is placed on the account. This credit limit comes at a hefty price called overdraft charges. This is the most lucrative invention the banks have ever come up with. While loans may make some money, they run the risk of going into default and no return is received by the bank. However, overdraft fees are a sure thing and cost the bank nearly no risk. It should be illegal to opt you into this credit limit without your express consent, but… there you have it.
I’m sure you’ve read the laundry list of how to’s on how to avoid overdraft fees but the single most sure way to avoid them is to OPT OUT. This means you would opt out of having a credit limit placed on your checking account completely. Normally this requires filling out a form with your signature, in writing. This means you no longer receive overdraft fees at all, but your card will be declined should you go over. Also, should you write checks the normal bounced check fee still applies. If your bank does not offer an opt out option, take your business elsewhere and do not bank with them for anything.
While keeping a checkbook log is admirable, keeping your own personal buffer is the only way to adequately maintain a checking account that does not go delinquent. Balancing your checkbook, however does add the benefit of catching the bank should they make a mistake in calculations.
Another unspoken fee is the merchant fee at the point of sale. If you run your debit card as debit, the merchant sometimes charges you for the debit transaction. He may have a sign posted somewhere that tells you about it. Make it a habit to run your debit card as a credit card instead. This not only avoids the merchant fee, but it put the transaction in chronological order in your bank. As a side note, running your card as a credit card has the added benefit during a return of merchandise, of going back on your card, which makes bookkeeping all that much more easy.
You can, at least open a savings account with a brokerage firm or a credit union which do not charge anywhere near the fees that these horrible national name brand banks do.
Banks are completely at liberty these days to offer whatever interest rates they want. If they want to offer under 1% return on a savings account with $50,000 in it, no one will say anything. However, it is on you to discover the bank that offers 5%. They are still out there. I would that you gave your business to them, instead of giving your business to someone that does a good marketing job and creates great brand recognition, i.e. Bank of ScrewAmerica.
There is no excuse for your to save one dime with a bank that does not offer you at least 5%. Even with 5% you’re still below the inflation rate.
If you’re trying to save with a bank and incur even 1 fee from the bank, I would advise removing your money from that bank. If, however, you go to several other banks with the same result, you would be better served to simply buy a safe and keep your money at home. Even 1 fee can knock out and entire 5 year interest rate return on a savings account, depending on the size of the account. If you admit to yourself that you are not responsible enough to have a savings account, which does not incur any fees, then I do recommend purchasing a safe.
[click on the picture to purchase a home safe]