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I remember when I opened my first bank account. Not the one my parents were custodians of when I was a kid but the one of which I signed my name on the dotted line. When I graduated high school and enrolled into college, I had a feeling of sudden maturity. Opening my first bank account gave me a similar feeling. Fast forward 10 years, I have certainly opened many more bank accounts and closed a few ones. That peculiar feeling of excitement is long gone and is in-existent when I signed financial documents these days. In fact, until I was a bank employee and saw financial transactions from a different perspective, I had never thought about what goes on, on the back end. As long as I could use my debit card, save some money, get a loan or a credit card, I was pretty set and content. I did not need to know what the bank does since my funds were secured and insured. I would guess you probably feel the same. Today, I see things from a different light.
Banking has tremendously changed with technology. There was a time when your banker wasn’t just a random guy who opened your checking account or processed your credit card application. Bankers were neighbors, they knew exactly where you worked and they knew about your family members. Bankers were as familiar to you as your physician may be today. That is no longer the case today. At least, that’s what I used to think. But behind their desks and their computer protected by privacy screens, bankers see and know quite a lot about you that you may not have thought of.
Jean was a very nice older lady who lived a few blocks down the street in the retirement community. I had seen her before at the teller line depositing or cashing her checks but we had never officially met. That Monday morning, when Jean entered the branch at 9 am, she skipped the tellers and walked directly into my office. My banker’s instinct kicked in and I knew something was up. And I was right… Jean had incurred a few overdraft fees and was in desperate need of a banker’s leniency. She explained to me how it was difficult to live on her fixed retirement income, how careful she usually was and how inflation was eating at her savings. Everybody makes mistakes. I surely have had overdrafts on my account back in the day when I wasn’t organized. Plus, on a fixed income, Jean must have had a costlier month. How heartless would it be if I didn’t waive those fees at least once! In other instances, I would’ve educated my clients on the importance of planning but in this case, I was going to be less rigid. So, I opened Jean’s account history. To my unpleasant surprise, she had not been honest with me. A week-long history of her transactions showed daily purchases on QVC in amounts worth a raised eyebrow. A few other purchases revealed that Jean had been very careless with her money.
What’s the first lesson of that story? It’s not about her spending habits. The truth is that when it comes to your money and your transactions, bankers have access to and see what you may consider your private business. They see it all. In the case of Jean, I did waive those fees as a courtesy. But I didn’t have to. So, the second lesson of the story is that bankers, for most financial institutions, do have the authority and the tools to waive your fees even when they claim that it is irreversible. And even if it is, credits can be applied to your account. It’s up to you to convince them to do so. I can guarantee you that yelling, complaining, whining and avoiding your responsibility will not work in your favor. A large portion of the profit that banks make is derived from the collection of fees so waiving those fees cut into their bottom line.
Next, let’s look at your credit applications. You walk into the banker’s office to apply for a car loan. A few answers to typical questions later (income, monthly debt payments, credit history, etc.), you sign on a dotted line giving permission to access your credit score and credit history. Here is the problem: for some individuals, [while a banker] before our conversation was over, I could bet if their application had some chances to be automatically approved or declined. Unfortunately, when it was a negative feeling, legally I couldn’t share that with them and no other banker shouldn’t either. It was simply a wasted and possibly detrimental credit inquiry to my clients. My recommendation is that if you are building your credit history or repairing a bad credit score, opt for a credit monitoring service. Personally, I’m a fan of Capital One Credit Wise (this is not a paid advertisement).
‘They are just checking and savings accounts’. No, they are not. Checking and savings accounts are the basics of banking and so common that most consumers do not realize their importance. However, for the banker on the other side of the desk, it provides food on the table for his family. Many institutions incorporate in their compensation plan an incentive for these basic accounts. Today, it may be insignificant as a unit but over a quarter or a full year, it adds up. The same applies for credit cards, car loans, personal loans, home equity line of credit, mortgages, etc. Believe it or not, the median salary for tellers across the US was only $27,260 in 2016. For relationship bankers, it was $36,712 and branch managers came at $55,697. Even at the branch manager level, some may feel comfortable with that income but truly, it will not get you very far especially in areas with high cost of living. What I want to convey to you is that no matter what the marketing technique is or the beautiful articulated wording used in commercials, bankers sell. That’s a major component of their job; the bottom line is to sell you a ‘need’.
Here is another fact your banker may never mention to you: you will most likely save money by opting for a loan at a credit union; you will also make more in interest when you open your savings account at a credit union. How come? Simply review this rate chart published by the National Credit Union Administration. When I purchased my car in 2016, even with an employee rate discount, the bank I worked for couldn’t compete with the credit union’s offer: 1.9%.
Finally, while we are talking about competition, it’s okay to ‘outsource’ your order of checks and deposit tickets. Okay, millennials, yes!, some people still write checks. Did you know that retailers such as Office Depot, Staples and even Vistaprint.com are more than capable of producing bank checks? Moreover, their prices are usually far from being as exorbitant as the checks the banks offer. If you write checks for your mortgage, your rent, your tithe or donations, I recommend going that route.
You now have a little insight into the banking system. Nonetheless, responsibility, budgeting and carefulness trumps every insight I might give you. To be financially stable, it’s a decision you must take and you must act on it. It is not the responsibility of the bank or any banker to ensure that you are financially stable.