8 Ways That Your Bank Might be Screwing You!!
Most people have, at one time or another, had an experience with their bank that left them like they had been used like a Kleenex. Here are eight ways that you may not even realize that your bank uses to get even more revenue from it's subject's, I mean customers.
#1: Applying Payments to the Lowest Interest Rate First
Let's say that you are making scheduled payments on a medium to large debt, and you steadfastly make your payments according to the schedule. Your creditor can choose to apply these payments, rather than the traditional illustration of interest heavy payments first, towards lower interest payments first, thereby prolonging the time, and volume, of interest payments. This happens often when a debtor get a new credit card for balance transfer purposes, but has been known to take place in home, car. and even personal loans.
#2: "Headfake" or "Teaser" Introductory Rates
We've all seen it. Banks offer a low, 1-2%, credit card rate or a high, 3-6%, savings rate to get you signed up, but if you read the fine print you'll see that credit card rate jump, ~28%, or savings return drop, ~0.06%, after a period of time. By then you are stuck in a deal that only benefits the institution, and leaves you in the lurch.
#3: Slight of Hand Rate Increases
If you read your fine print, you may find provisions that allow for your financial institution to increase, permanently, your rates by 2-5x for such trivial items as being one day late on a payment. Even if this provision is not included, virtually every institution holds the power to arbitrarily increase rates with no restrictions at any time.
In Q4 FYE 2014, US commerical banks collected more than $40 Billion in fees, and it is estimated than more than 50% of all banking revenue comes from user fees. Overdraft fees are particularly troublesome since an overdraft of just $0.01 can result in a fee of more than $30, and many institutions automatically enroll customers in this "service". Some investment analysts have even estimated that up to 40% of all interest income is consumed by fees.
#5: Double Charging Billing Cycles
While you may, reasonably, assume that you would only be charged for interest on the remaining balance for a debt, may institutions actually charge you interest on the original debt amount until the entire debt has been repaid. This means if you have paid $200 of a $250 debt, you can still be charged interest on the original $250, rather than the remaining principle of $50.
Many institutions will increase rates for anyone that hits a trigger such as a change in credit score, inquiring about a new loan, being a day late on a payment, too much available credit, or having too much debt (even if your debt is serviced impeccably).
#7: Credit Limit Increase Fees
Many credit providers will apply fees for increasing your credit limit, in some cases as high as 50%. This means you might end up paying $1000 for the privilege of accessing a $2000 credit limit, and paying the interest and fees associated that go along with it.
If you keep money in a bank, you are losing Real Value. Real Value, also known as purchasing power, this measurement of how much your money can be traded for. Since the average return for any traditional bank based savings vehicle is less than 1%, and average inflation for the last 100 years tops 3%, at best your savings account, CD, or Money Market is losing you 2% of your Real Value every year, and that's before fees.
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