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Your banker's 6 big dirty secrets

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  • Your banker's 6 big dirty secrets

    Your banker's 6 big dirty secrets

    Banks may believe "the customer is always right," but that doesn't mean they'll put your best interests ahead of their own. Here's what they're not telling you.
    [Related content: banks, banking, credit unions, online banking, interest rates]
    By InvestopediaThere is a fine line between telling a lie and avoiding telling the truth. It comes back to intentions -- you can be hurt by a clever omission as easily as you can by an outright lie. It won't come as a surprise, but there are some things your bank would rather not tell you. We'll look at six dirty secrets your banker has been keeping.
    1. You probably don't need the insurance.Banks offer insurance, sometimes marketed as "balance protection," on every debt instrument they offer. You can get insurance on a credit card, line of credit, plain vanilla loan and so on. In return, your payments are covered in certain cases and a death benefit is paid if you still owe when you die.
    Going through the contract can be interesting and enlightening for consumers. Often many conditions have to be met to receive the "hardship" qualifications to cover payments. Even the death benefit can be capped at a maximum that may be much less than the value of the loan.
    Your banker isn't to blame for that; the
    bank is. The banker's omission comes in when it doesn't advise clients that their life insurance policy may already be enough to cover the new debt -- and if not, adding life insurance coverage for the amount of the debt will be much cheaper in the long run than paying an extra percentage of the balance on top of interest.
    2. Even if I like you, the system decides.

    Many banks market the fact that you can go into any branch and have a productive conversation with their representatives -- the human touch. If you are looking for a loan, however, there's little human involvement in the decision process.
    Large banks use a computer model that takes inputs such as income, current debt levels and assets, and uses those to decide whether you qualify for a loan -- and, if so, how much. For most people, this process is flexible enough that they don't notice. For farmers, entrepreneurs and business owners, though, the process can be enraging because it discounts elements of their business and often paints them as credit risks.
    3. I'm a salesman.
    There are many different terms for it -- complete banking, one-stop banking, holistic service -- but when it comes down to it, your banker is there to cross-sell you other products from the bank. Have a checking account? How about a savings account, credit card, savings bond, car insurance, retirement account and mortgage appraisal? Banks want to lock in a customer as much as possible.
    4. We offer a complete package to get complete fees.
    Once a customer opens an account, the pressure is on to open three more. Holding more of a customer's financial life at the same bank gives that bank the ability to nudge customers into more fee-bearing accounts without having to worry about the customer shopping around for a better deal. Your banker will never tell you that the bank down the road charges less in service fees and offers the same interest.
    Instead bankers emphasize the ease of transferring funds between your accounts within the branch, the transfer fees they waive and the deal they have on balance-protection insurance.
    5. We make more money from fees than from banking.

    Banks have been pulling an ever-larger slice of their revenues from fees. The tipping point came in the late '90s, when fee income climbed to more than half of revenue at the largest banks. Most people, your banker included, will tell you a bank makes its money off the interest it earns from loans to customers. But, given how important fees are to revenue, it's easy to guess which direction they will be heading in the future.
    6. You should check out a smaller bank.The biggest secret your banker is keeping is that a smaller bank may be a better fit for you. Instead, your banker will focus on the convenience of having lots of friendly staff wanting to serve you. All those people and buildings cost a lot to keep going. This cost is one of the reasons banks need to tighten their lending models and increase their fees. By contrast, a smaller bank has a smaller market and less of an eye on expansion. This allows them to charge less in many cases, while also giving the customer more.
    The bottom line

    Your banker is there to protect the bank's interest, not necessarily yours. A banker is not bound by the same fiduciary duty that a financial adviser would be, so it's important to do some thinking for yourself. Tally up all your fees, add in the interest on any loans and compare them to the returns on your interest-bearing accounts. If you don't like what you see, maybe it's time to look into alternatives like a credit union or online bank. Just don't ask your banker for a recommendation -- that's another one of those things he just won't say. Published Aug. 17, 2010

    http://articles.moneycentral.msn.com....aspx?page=all
    Last edited by BusyLizzy; 19-08-2010, 09:15 AM.
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    I'm considering a career in banking/finance and you make them sound evil !! The books and people I've talked to regard their banker(s) as one of their best assets in moving forward, getting loans and making money from property/business.

    But of course they are there to cross sell products and charge fees. The banks are there to make money and pay the bills just like any other business. They aren't "dirty" secrets really, they are just the facts that the banks use to make money from consumers.
    "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right"

    Comment


    • #3
      Originally posted by muppet View Post
      Your banker's 6 big dirty secrets
      ..............
      2. Even if I like you, the system decides.[/B]
      I had this happen to me once. When trying to get my credit card limit increased they kept saying "oh, you can only have $x if you don't have a home loan with us". After pushing hard enough I got put through to a supervisor who said the same thing but then "let's see what the computer decides". She put my numbers into the computer and it came up with 2 times the limit they said it would!

      Sometimes it is best to let the computer decide, you just have to get past the humans trying to second guess it

      Comment


      • #4
        Originally posted by ENP View Post
        I'm considering a career in banking/finance and you make them sound evil !!
        If you can't beat them, join them. I used to work in one and the knowledge of how it works has been very useful.

        I also used to be a real estate agent. Ditto.

        Comment


        • #5
          the climbing fees are starting to annoy me greatly

          to move money recently i found there was a limit of $20k on electronic banking

          to move a $100k it had to be broken up into 5 lumps

          each attracting a $20 fee

          so $100 charged to do something that not long ago would have cost only $20

          how's that for inflation!

          of course it's all in the name of increased security

          but it has resulted in my taking funds out

          and placing them elsewhere
          have you defeated them?
          your demons

          Comment


          • #6
            Originally posted by Tan View Post
            If you can't beat them, join them. I used to work in one and the knowledge of how it works has been very useful.

            I also used to be a real estate agent. Ditto.
            All you need to do now is work as a property manager and you will get hit the triple!
            "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right"

            Comment


            • #7
              Originally posted by eri View Post
              to move money recently i found there was a limit of $20k on electronic banking

              to move a $100k it had to be broken up into 5 lumps

              each attracting a $20 fee

              so $100 charged to do something that not long ago would have cost only $20
              What !! I agree that's a shocker. $ 20 to do your own internet transfer.

              I also have the 20k per day limit but there is no charge to do a transfer to another bank.

              I found out that if it is a joint acct, you can both have a separate login in and so transfer 20k EACH per day...so 40k per day can be useful...but only if it's fee free.

              SB

              Comment


              • #8
                Originally posted by ENP View Post
                All you need to do now is work as a property manager and you will get hit the triple!
                Um... I do

                Comment


                • #9
                  Originally posted by Tan View Post
                  Um... I do
                  I can see how you got into property investment!!

                  That's what I call working to learn not to earn. Nice!
                  "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right"

                  Comment


                  • #10
                    Wait till you get fees like what the US banks charges in the US. Wire transfer $20USD on average per transaction, no matter how big the transaction is! (more than $10k may incur additional cost). In NZ, online transfer is free (most accounts), so it makes collecting rent much easier!

                    Comment


                    • #11
                      Originally posted by eri View Post
                      the climbing fees are starting to annoy me greatly

                      to move money recently i found there was a limit of $20k on electronic banking

                      to move a $100k it had to be broken up into 5 lumps

                      each attracting a $20 fee

                      so $100 charged to do something that not long ago would have cost only $20

                      how's that for inflation!

                      of course it's all in the name of increased security

                      but it has resulted in my taking funds out

                      and placing them elsewhere

                      How about transfer by check? much cheaper in that case.

                      Comment


                      • #12
                        Originally posted by muppet View Post
                        Your banker's 6 big dirty secrets

                        1. You probably don't need the insurance.Banks offer insurance, sometimes marketed as "balance protection," on every debt instrument they offer. You can get insurance on a credit card, line of credit, plain vanilla loan and so on. In return, your payments are covered in certain cases and a death benefit is paid if you still owe when you die.
                        Going through the contract can be interesting and enlightening for consumers. Often many conditions have to be met to receive the "hardship" qualifications to cover payments. Even the death benefit can be capped at a maximum that may be much less than the value of the loan.
                        Your banker isn't to blame for that; the
                        bank is. The banker's omission comes in when it doesn't advise clients that their life insurance policy may already be enough to cover the new debt -- and if not, adding life insurance coverage for the amount of the debt will be much cheaper in the long run than paying an extra percentage of the balance on top of interest.http://articles.moneycentral.msn.com....aspx?page=all
                        The problem is when you really need insurance, you may not be able to get it.
                        Hamish Patel | ph: 09 625 4693 | mob: 021 625 693
                        My Website
                        Be informed - register for our free monthly newsletter

                        Comment


                        • #13
                          High fees

                          Originally posted by eri View Post
                          the climbing fees are starting to annoy me greatly

                          to move money recently i found there was a limit of $20k on electronic banking

                          to move a $100k it had to be broken up into 5 lumps

                          each attracting a $20 fee
                          I don't know who you are banking with but you certainly want to talk to them about those fees. Electronic transfers are generally free. I recently did some manual transfers at a branch and I incurred some fees but that was to be expected - but nothing like you are talking.

                          Comment


                          • #14
                            Yes, it's not easy to keep a kind smile on your face when you simply go in to do a transaction and they try to sell you extra services.

                            Similar to a fast food outlet trying to "upgrade" your order.

                            I don't know, it just seems pushy and rude to me.

                            I'm pretty sure many of the staff don't like to do it.
                            I even think their union was fighting it.
                            Many tellers hated being forced to sell by their upper management.

                            When you have had a long day and are busy..that smile starts to flatten out a bit when the same old selling questions come up.

                            They should refund my transction fee if I am there at their pleasure to listen to a vocal ad.
                            Last edited by McDuck; 21-08-2010, 09:28 AM.

                            Comment


                            • #15
                              ANZ chief hints at rate rise, as its profits rise 37pc

                              ANZ chief Mike Smith says the world's banks need to change their business models to adapt to the "permanently" higher cost of banking.

                              This prompted renewed speculation that lending rates in Australia will move after today's election.Mr Smith made the comment yesterday as he announced a third-quarter underlying profit result of $1.3 billion, up 37 per cent.
                              The strong earnings improvement for Australia's third-largest bank by market capitalisation was driven by a slowing in its bad debts, which unexpectedly increased in the second quarter.
                              For the first nine months of its financial year, ANZ's underlying profit was $3.6bn, up 26 per cent.
                              However, Mr Smith said higher wholesale funding costs were now a fixed feature of banking as a result of the global financial crisis.
                              "We have to face up to the fact that banks now have permanently higher costs of doing business," he said.
                              "These include continuing pressures on wholesale funding costs and at the same time rates for deposits have never been higher compared to short-term wholesale rates.
                              "We also have to carry significant costs associated with the new international capital and liquidity requirements.
                              "The result is we simply to have think differently about our business.
                              "We need to change, we need to streamline our structures and do things in new and different ways."
                              Mr Smith's outlook on costs immediately sparked speculation Australian banks would move their key lending rates higher after the election.
                              The warning from ANZ followed similar statements from National Australia Bank and Commonwealth Bank that mature debt about to expire would be replaced with more expensive current funding. Aquasia credit strategist Mark Bayley said the banks would increasingly try to offload higher costs to their customers.
                              "You can expect further pressure on corporate Australia, as banks try to maintain interest margins," Mr Bayley said.
                              "ANZ and other domestic and global banks have pointed out that funding costs have permanently increased.
                              "And who will this impact? You can rest assured that the banks will not suck up all the pain.
                              "They will share the joy through higher mortgage, consumer and credit card rates, and (with) corporates through higher margins on business loans."
                              ANZ increased its income to $11.6bn in the first three quarters, up 9 per cent compared with the previous corresponding period.
                              Provisions were $342m in the third quarter, which was 38 per cent below the average rate in the first half.
                              Despite the uncertain global outlook, Mr Smith said Australia's economic prospects were brighter. "I'm actually very positive on Australia," he said.
                              "We are looking for opportunities to grow our retail, commercial and wealth businesses."
                              The bank was still carrying out due diligence on the 57 per cent stake in the Korean Exchange Bank that was being offloaded by US private equity group Lone Star, Mr Smith said.
                              The stake is expected to be worth between $4bn and $5bn.
                              "Some people have questioned whether this fits our super-regional strategy, and I think it unquestionably does," Mr Smith said.
                              ANZ's were the only major bank shares to rise in a weaker market yesterday. They closed 38c, or 1.7 per cent, higher at $22.78c.
                              The ANZ strategic focus on Asia is being increasingly embraced by the market in the expectation that analysts will upgrade their full-year earnings forecast from $4.99bn.
                              Citi banking analyst Craig Williams said ANZ was well placed for growth, especially compared with its three main rivals.
                              http://www.theaustralian.com.au/busi...-1225907970674
                              "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

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