Wait, so in the US you get charged to have a basic bank account? Why? You’re giving the bank money to invest, why would you pay them to do that?
Freedom:
The price of freedom is eternal banking feesor something like that...
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If my mortgage interest rate is only 1% above historical average inflation and fixed for 30 years, I’m ok with an origination fee.
What bothers me is that banks who originate the loan don’t have to hold on to it even for a little while. So yeah, the “they” that gets the origination fee is different than the “they” that gets the interest, even though those two parties have totally different incentives. Specifically, the former has an incentive to make and hide lots of bad loans.
Yes, it is, but the current alternatives are all worse. Check-cashing places and re-loadable debit cards have even higher fees, for example.
Just to be clear, most credit unions are “NOT-FOR-profit”, not non-profit. In many cases, the distinction is just semantics, but for credit unions, there are some specific implications and differences. Among other things, they MAY turn a profit, but that profit should be used to make services better for it’s members, such as furnishing better loan rates or dividends.
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I can’t speak for the US specifically, but in general banks have relatively little interest in checking accounts as such. The textbook story is that they invest your deposits and make their money that way. However most of us mere mortals have such low balances that it is hardly worth the fuss for the bank.
Instead for the bank a checking account is mostly about getting a foot in the door and selling you other stuff - mostly various forms of credit or investments. If you convince the bank that you are a good mark - pardon, have a decent income and credit rating - then you improve your chances that they are interested enough in having you as a customer to consider giving you something for free.
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Couldn’t agree more. The OP said:
This is probably more of a reflection of the total dysfunction of banking, where low interest rates and hidden inflation, as well as high fees, conspire to bleed out savers…
…and I came to point out that .75%, which is a savings account interest rate I saw advertised recently, does not qualify as “low” to me. For me, that qualifies as “nonexistent”. The interest rates being given, when banks are able to borrow for nearly 0%, is absolutely a racket.
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US post offices used to offer these kinds of services, but lobbying by the banking industry got that shut down. Now there is pressure to reverse that.
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@Michael_Best: I heard on PRI’s “Marketplace” yesterday that their profit margin is 50% on average.
However most of us mere mortals have such low balances that it is hardly worth the fuss for the bank.
Banks don’t take individual balances and invest them separately, they combine their customer accounts seamlessly. In other words, hundreds/thousands/millions of “low balance” accounts are digitally combined in any form the banks see fit for their (nefarious or otherwise) investment schemes. Banks charging these people to profit off of their own money is basically a scam.
In the past, there would at least have been some paperwork to contend with that would cut slightly into the investment profit, but that’s very negligible in today’s digital world.
The fees that banks charge people when they keep low balances is basically legalized extortion to compel people to give them more money to invest. Unless you keep pennies in your account (which almost no one does consistently and will still garner the bank slight profit via penalties), your account is quite profitable for banks when it’s combined with others. . Of course, banks want the public to think otherwise and use coercion to compel people to put more money into their accounts. The banks then make higher profits off these unwitting “investors” who get a fairly negligible return on said investment (or even pay fees for the “privilege”) while the banks get the lion’s share from the investments.
Unless you keep your bank account extremely low, the banks will make far more money off your account than they spend to maintain your account and offer services. With direct deposit, etc. most customers never even set foot into banks anymore except to set up an account and close it. Administrative costs are lower because of this as well.
Like I said, it’s a scam unless your bank is giving you a fair cut. You’re not a bank customer, you’re a venture capitalist.
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Yes, of course banks invest combined deposits, but many costs are more or less per account. That means that accounts with modest average balance have a hard time pulling their weight via the bank’s investments alone.
That means that accounts with modest average balance have a hard time pulling their weight via the bank’s investments alone
Hmm, frankly, that’s just a talking point that the banks use and propagate.
Accounts with “a modest average balance” don’t have a “hard time” pulling their weight, they are just less profitable accounts, that’s all. They pull their weight and then some. The bank still very much takes more profit from the “modest” account than it spends in expenses via maintaining the account on a hard drive and offering basic services for you to manage and spend said money. If it wasn’t a net gain, trust me, your bank would quickly tell you to fuck off and point you to your nearest mattress.
Administrative costs are very low nowadays for a host of reasons. Banks only lose money with poor investments, etc. not by people giving them free money to invest.
Disclaimer: I worked for years at a bank headquarters relatively near Washington, D.C. when it literally started Capital One. I did various things there, but in my line of work, I legally and directly accessed bank accounts small, large (RNC, etc.) and huge.
I observed money that was collected and spent by said customers in their accounts down to the penny. This was along with observing money laundered absorbed and invested by the bank, data sent to the Fed, etc., etc.
There was a lot of literal screaming every night in parts of the headquarters as associates were desperately barking at each other trying to balance all the accounts by a nightly deadline because vast amounts of investment money would be lost every second past said deadline.
I stepped in with a new associate that was freezing up and freaked out by the screaming of other associates and the vast sums of money passing before her eyes on the screen (that she could fuck up). When I was asked to sit down in her seat to take over and assist her, her seat was soaking wet with cold sweat like someone had poured a glass of water into it.
Trust me, the banks want your “modest money” in the collected investment pool and are literally screaming to invest it.
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Which is also noticeable in the push for everyone to have a retirement account, which usually involves putting money into some sort of stock market/bond market investment vehicle. And even though I’ve paid into this system, it still bothers me. To that extent, I usually try to find Credit Unions to do my business and investments.
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hmm, kinda sucks for gamestop though. he pre-orders a game, they buy that game, ship it to the store, and then you go “nah i don’t want it” now they gotta sell it, and if it’s been there a while it loses a lot of it’s value. so while he has money “in the bank” they have games that they can’t sell, siting on a shelf, losing value.
One presumes he says “Nah I don’t want it” before it’s ready for him to pick up. I don’t know Gamestop’s policies regarding pre-orders, but I imagine once it’s at the store, you’re on the hook for it.
i had a copy of FFXIV i reserved for my friend, some weeks after it was released he said he picked it up at another store instead so i went to the store and canceled it, they were happy because it had been sitting there and people had been asking about it (because it was a pre-order and they didn’t have any more)
i don’t know how long they would have held it but i imagine indefinitely. since i think a pre-order is a legally binding contract…but i might be wrong.
I usually try to find Credit Unions to do my business and investments.
Amen to that.
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Plus, all those overdrafts count as money to invest as well.
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Right, especially when the banks rig things to clear or not clear so it causes overdrafts. I wish the fines against banks that’ve been caught doing that was vastly higher.
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Obviously it’s not a solution for everybody. Did anyone pretend that it was?
One market niche that I can see it being particularly useful for is travellers and backpackers. They generally don’t have a ton of money, or a lot of knowledge about the foreign banking landscape, and the fees associated with a traditional bank account could have a noticeable impact on their total balance. They also don’t want an account for a long period of time, and so the lack of earned interest would be quite small. They don’t, generally, having a lot of recurring bills that need to be automated, but being able to withdraw modest amounts of cash from anywhere in a national network that has long business would be useful. Furthermore, having the bulk of their money deposited with Gamestop (or the TAB) would be a lot more secure than wearing a money belt or stashing it at the bottom of their pack.
I’m not in that niche, so I don’t have a Gamestop (or TAB) account. But, you know. I do have an imagination and can see how someone in different circumstances could find it a good fit for their situation.
