My Soapbox: Are we being ripped off by our banking system?
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In 2014 Bank of America had a total revenue of almost 93 billion dollars. Their claimed operating expenses, taxes, interest paid, … etc. was roughly 77 billion dollars. They turned a NET profit of over 16 billion dollars. http://finance.yahoo.com/q/is?s=bac
And yet…
Bank of America pays 0.01% interest on their regular savings and interest bearing checking. But you better keep at a minimum $300 in your savings account or you’ll pay a $5 maintenance fee. The fee for checking is $25 unless you have $10,000 in all your accounts combined. If you put $25,000 into a BoA account, you would make a paltry $3 in interest. Not per month, per year! https://www.bankofamerica.com/deposits/bank-account-interest-rates.go
Credit unions and smaller banks aren’t much more generous.
Compare this to Navy Federal Credit Union where a Share Savings pays 0.25% APR. You must keep $5 in the account but there are no maintenance fees. You would still only get $63 a year in dividends for your $25,000 deposit. Credit unions are not-for-profit but they sure do like making it. https://www.navyfederal.org/products-services/checking-savings/savings-rates.php
USAA Bank requires a $25 minimum balance, no service fees, and has a stepped interest plan:
Less Than $4,999 pays 0.05%, $5,000 to $9,999 pays 0.10%, and $10,000 or more pays 0.15%. Your dividend for the $25,000 deposit is $38. https://www.usaa.com/inet/pages/bank_savings?wa_ref=pub_global_products_bank_savings
If you carried this $25,000 balance on a credit card you’d be paying $175 - $225 or more each month in interest.
Notice Navy Federal CU has APR while the others show APY? What’s the difference? At these rates basically nothing. APR = Annual Percentage Rate while APY is annual percentage Yield. Yield is what you get by letting any earned interest ride. In other words, APY is earning interest on the balance plus the interest previously earned payed at the APR.
BTW: In England the banks pay 1.25% to 2.1% AER. That’s a return of $314 to $530 annually. Makes BoA’s 3 bucks look like an insult. Note that AER (Annual Equivalent Rate) is the same thing as APY.
http://www.money.co.uk/savings-accounts/instant-access-savings.htm
What say you?
- 21 comments, 39 replies
- Comment
I say a society who hands the government over to businessmen should shut u and stop whining. There's a reason 80% of them run their businesses into the ground and them go bankrupt within 5 years. Yes the banks have a sweetheart deal going, but you gave it to them. Now shaddup and tea party on.
@cranky1950 Um, while I can appreciate the sentiment and your indictment of our general stupidity, we're not all teabaggers in here. So, no, I don't think we should shut up. I think it's high time that we speak up.
wait so the free market doesn't regulate itself?!
@Lotsofgoats
@Lotsofgoats well it often writes its own regulations. :)
@Lotsofgoats the free market works pretty well when it's allowed to. It's not perfect but overall it works much better than people who can't even balance a budget trying to tell for-profit organizations how to run their businesses.
@Lotsofgoats if it were truly a free market system it would, but this system has politics involved.
I say triple ouch.
But whacha gonna do, keep it in the mattress?
I know i never voted for this. I didn't vote for the Great Crash either.
You have to look at the whole setup, not just the return rate on checking and savings accounts. A lot is dependent on the going rates for mortgages and where the prime rate is heading. I remember getting 5% on a savings account. I was renting an apartment at the time because the interest rate on a mortgage was running upward of 13%, even for those with excellent credit. I was also paying a monthly fee for a checking account rather than being paid interest, however small.
If a company is screwing its savings account holders to make huge profits for its shareholders, then for crimmany's sake, take your money out of a passive saving account and buy stock in the company!
I can't speak for the others, but I have been a member of USAA for 42 years. Since it is member owned, the members are the stockholders. There's the overhead/operating costs, which have to come from somewhere; and there are profits which go back to the shareholders/members. How well you do depends on how you handle your money. I don't bother with a savings account there because even a boring/safe stock portfolio will do much better on interest. Hell, even my checking account there doesn't do much worse with interest. I'm sure there are good reasons for keeping money in a passive savings account, up to a certain point. Christmas money. College fund, maybe (though safe stocks or bonds would make more sense to me.) Keeping enough there so that the rate of return is a serious consideration ... um, no.
@rockblossom
Dearly love USAA. Have insurance & cc w them. Outta open a checking account, but i always put if off cause i cant remember where are my checking accounts are as it is.
@f00l The advantage of a checking account is that it is available wherever you are, and you can use any ATM at any bank. If the bank ATM charges a fee, USAA will pay you back the fee.
@rockblossom
I have at least 5 accts. 2 with major banks (1 opened because Merrill Lynch tie-in)....one credit union whose computer remembers i exist but my debit card expired 6 years ago and they never sent a new one (ok, i shoulda dealt with it, ok ok ok), and two w local banks because they gave me great loans or special services.
Sometimes i can even remember which banks. I have it all down in a safe dep box and w family lawyer jic. Or i think i did that. Should prob check.
I should open a usaa acct, but i'm afraid i would become even more addled.
Re big $ biz: yeah the banks screw us right left and center, but that's not what really gets me...i dont like that they write their own congressional bills and have the bills pushed thru by paid-for captive congresscritters.
And i don't like their investment instruments and techno-investment strategies/methodologies are so complex that no one in those companies, nor at the SEC, nor at the various ratings services understands what the hell they're doing, including the CEOs. Esp the CEOs. The brokers and the salespeople and the executives go by the high-concept explanations. The math and code geeks understand the investment instruments and techno-trading protocols, but nothing of economic consequences, given that the geeks in question are asked to reason only about closed-loop systems w limited info and complexity.
And no one working at those biz's understands the economics, or is willing to talk straight about it. And within the industry, persons with common sense combined with logic, economic, and mathematical acuity are absent.
Tl;dr version: in the larger perspective, big $ people are playing ball with our future prosperity, and they have no clue what the rules of the game are, or even what game they're in.
Besides, they're a buncha greedy lying fucks who like rigged games.
@f00l Wow. I got a headache now. So let me see if I get this straight. Bankers are in the business of padding their own pockets but really don't know what they're doing. Did that cover it?
@Mehrocco_Mole
Si.
And this is why I have Credit Union.
Personally, I care more about what banks do with funds rather than interest rates. Check out Beneficial State Bank. They have a cool mission and provide a lot to the community. Plus profit that Beneficial State Bank makes goes back into the community.
You can get free BofA checking/savings accounts for $750/$2500 minimums, so it's fine for basic services. BofA isn't good for interest bearing accounts or other services (they are overpriced), but BofA has lots of branches and usually short lines, plus an average rewards credit card and a pretty good web site.
Apparently the OP missed reading / seeing The Big Short.
@earlyre Love it!
Yes.
Try buying a house. For some reason there is a whole gang of third party people who will profit from the sale. Our $100k mortgage contained almost $15k that went to cover just the fucking paper work and shit. And even if we simply paid cash for the property we'd still have to shell out that $15k!
Just the mere moving of money in this country has become very, very profitable.
@Teripie sounds like the next Soapbox. Go for it!
@Teripie 6% for realtors is criminal, but there's no way you shouldve paid $9000 in friction on top of that. Any chance you are mistaken about the nature of each of the charges?
@JerseyFrank Florida has no income tax, thus they screw you in a dozen other ways, including sales tax on "some" home purchases. We bought a modular home which was placed upon our paid for piece of property. It qualified for a 7% sales tax.
@Teripie Ouch. I lived in Florida and owned a home there. i didn't realize mobile homes were subject to sales tax.
If you think the 7% sales tax is bad, move to NJ and pay property taxes. I pay about 3.7% every year in property taxes (and a flat wage tax to the city, and income tax to the state, and my spouse's pension is getting dicked over.... and now I'm basically stuck here)
@JerseyFrank We lived in Jersey for a couple years back in the 70's. We looked into buying a house but he taxes on them just freaked me out. Crazy high property taxes, and that was back in The Dark Ages!
Why should a bank pay you an interest rate any higher when they can borrow money from the Fed for 1% with absolutely no customer to deal with and only 1 account to maintain? It can borrow at even lower rates from other banks.
@JerseyFrank To attract customers/members. Why do grocery stores have loss leaders? In the example above BoA is paying 0.01% interest. That's 100 times less than the FDR. BTW: the prime rate is 3.5%
@Mehrocco_Mole If they could do it more profitably, they would. It's not as if there's only one bank to choose from.
TIL from the OP's pic that I've been standing on my soapboxes all wrong.
@dsljack that method gives the best height to stability ratio.
Interest rates are low. You're not going to earn high interest when loans and mortgages aren't earning high interest for banks.
And it's not like banking is free. Banks have risk (robberies, fraud, bad loans) and have physical premises to maintain. Large bank machine networks cost money. Online banking infrastructure costs money.
For most banks checking accounts (the Canadian in me really wants that to read "chequing") are already profitless ventures so they're already loss leaders of a sort. Banks make most of their money from special transactions (like NSF fees, foreign ATM fees, overdraft fees), from loan and mortgage interest, and from credit card service charges (most of which are paid by retailers and service providers). The checking account is the gateway into all the rest.
Compared to what bank accounts cost here in Canada I think most US accounts are pretty well-priced. And some US banks have fee-free accounts (the checking account I have in Montana has zero fees if I don't go below zero balance). Fee-free virtual banks like we have in Canada are becoming very popular here, and I know the US has at least a few (Capital One runs one e.g.).
So no, I think things are pretty good. And even when interest rates are high, a savings account earns a terrible rate compared to what you can earn elsewhere (GICs/CDs, etc.), and that's even just considering very safe and low-risk interest-earning options.
@PhotoJim Part of what you're saying is completely true: interest rates are low, and banking services cost time & money. If all banks did was safely hold people's money and make the occasional qualified loan (like back in the day), then no one would expect to make much, if anything from interest on those accounts. However, many (most?) banks are now part of huge financial institutions, using ALL your money that isn't being spent RIGHT NOW on complex investment instruments sometimes of questionable merit and considerable risk. They do this to pump up profits because the environment for loans/mortgages doesn't generate enough $$ for an attractive bottom line. Bank execs (and investors) are looking for a bigger payout, so they end up reducing their banking exposure. They are making a crapload of money using consumers' assets without sharing those benefits via better banking terms, services or loan access.
@compunaut I don't disagree with you. So that makes it up to us to not put large amounts of monney into bank accounts, and instead to put that money where it works harder for us and works for others that we prefer to have the benefit.
@PhotoJim Banks make money on every debit card transaction. A lot of it. So much that the government stepped up to limit it. (Look up the Frank-Dodd act). So checking accounts aren't loss leaders. They are very profitable.
The great thing about free market capitalism is choice.
If you think the bank is not paying enough for the privilege of using your money, you don't have to keep your money in a bank account.
If you think the bank is charging too much for the privilege of using their money, you don't have to borrow money from the bank.
If I took the large risk of opening a bank and lending people my money, you bet your sweet ass I want to make some loot. I would do just like Sam Walton said, lower rates, put everyone else out of business, then jack the rates up. Profit from business 101, it has been this way since the dawn of time. Stop trying to make capitalism evil, it isn't evil, now socialism on the other hand is.
Meh (formerly Woot which was sold for a profit) makes money every time one of us idiots buys a product. DO we decry this as an evil act? Is snapster the devil in disguise? Why do they charge so much? Why do they make so much? Where do they spend the profits? DO I agree with snapsters lifestyle? Why am I forced to shop here? Oh wait, I'm not forced to shop here or bank there. Dam you choice.
If you don't like banks, you can go and visit some of my relatives. They will offer any loan you want, and when you don't pay on time, well, you don't worry about annoying phone calls or angry letters. They offer a much more personalized service for discriminating customers.
Is the system perfect? Nope, nothing is.
Shaking fist at kids on lawn.
@Ecriscit So the guy who charges twenty bucks a gallon for gas after a hurricane isn't profiteering but just making a buck?
@Mehrocco_Mole
People who don't plan ahead are forced by their utter disregard for murphy's law that they are forced into limited choices. This is of course by their own design. Are they forced to buy this product from this person at this price? No, they still have a choice. Dammit. E.G. Well I need gas for my car to get to point A. Getting to point A can be achieved through a variety of options, using gas for a car is just one of those options.
I make a choice to keep extra fuel, food, batteries, etc on hand for emergencies. It isn't convenient, it doesn't satisfy my immediate gratification, and it costs me money. But I have chosen to do this so that I am not unprepared, and I am not forced into limited choices.
People have long term memories, and when choice returns to the area impacted by devastation, people normally choose not to do business again with the profiteer. this has been proven time after time in many areas affected by natural and man made disasters. Dammit, they get to choose. Ugh.
@Ecriscit but some people dont like freedom. Why shouldn't they be able to dictate price caps on retail products, price floors on labor, days when alcohol sales are banned, and other bullshit?
@Ecriscit A couple of terms ago I had a student who want to open a business along the lines of payday loans and not charge such high interest rates. After investigating it he realized (based on industry losses and other expenses) that he'd not survive even 6 mo with the interest rates he wanted to charge.
Banks are in business to make a profit. They have shareholders that they pay dividends to -- just like any other for-profit business.
Why are you picking on the banks? Why not pick on Apple or Walmart while you're at it? They all make huge profits.
@cengland0 What makes you think this is going to be my only Soapbox topic? Corporate welfare and Wamart just might be next.
I'm retired from banking so in your words I'm picking on myself. I specialized in IRA/Certificates and also Card Fraud. I know how it works and why they exist. BTW: Credit Unions are non-profit organizations.
@Mehrocco_Mole
Technically true but my credit union makes so much profit every year that they use that to open new sites (eventually turning profits into another expense).
It amazes me how many buildings they keep buying every year and the obscure locations they keep putting them.
(1) What you're really upset about is Crony-Capitalism. That is far from free-market capitalism. The result of Big Government is Big Companies. Big companies love regulation because it stifles competition and they can afford the regulation.
(2) What you also hate without realizing it - the Federal Reserve. An organization that has little accountability to us, the owners of our country. Eliminate the FED. We not only don't need it - it makes financial life suck.
@RedOak
(1) I'm not upset, I'm just trying to get people to think. Oh all right, I'm trolling. Happy?
(2) I absolutely realize it. Most people don't realize that the FedRes is a privately owned financial institution. While it is not an arm of our government it does have its finger in a lot of government business. (see what I did there?) We need to audit the Fed!
I'm happy there's no ObamaSave law that fines people who don't have bank accounts.
@TexMehx
@Mehrocco_Mole that sums up Obamacare when you realize HE won't be paying for his own health insurance.
I am generally a hopeful guy...actually I have an eternal hope. Nevertheless, I have to say that the current financial system is bound to collapse. It just simply cannot be sustained as the fundamental gears that make it turn are fiat, not having actual value but only that which the government assigns. Every time money is created, debt is created with interest. Do the math. Remember the economic crisis in 2007-8? Guess what...nothing has really changed since then. In the meantime, check-out a really good movie called "The Big Short" that does a great job of explaining the housing crisis and is also quite entertaining.
@InspectorGadget
I don't think we are bound to collapse. I do suspect we are bound to lurch from crisis to crisis, and the "solutions" will be designed to give power to large corporations and to institutional investors. And repeat.
Economics is effing hard, and is v imperfectly understood at best by those who are most practiced and educated. And its conjoined twin is politics, and is politics we all know what money can buy. Ditto accounting/forecasting, jn large multinational corps, esp financial corps.
We all want solutions we have a chance of understanding and believing in, given the limitations of time, energy, political philosophy, and how complexity a person can tolerate in their mental model. This is effing hard. So most people i know (looks in mirror), tend to mentally cheat and collapse the probs into simpler probs because one is short on time, energy, patience, mathematical and behavioral sophistication.
I kinda wish i believed more in my own beliefs. But i just havent put thr work into them.
@f00l I really hope and pray you are right. I really do. I spent 10-years in banking and there were smart educated folks on either side of this argument...nevertheless, one side will be proven wrong. I used to fundamentally believe that the US economic system, monetary and fiscal policies are bend-not-break constructs until I met someone at work that enlightened me to things I had never considered. The information is out there hidden in plain sight and not only by 'fringe' organizations and institutions. I concede that there is complexity in economics--convoluted by politics--but I also think that some of that is by design. Those that create exotic derivative products and 'creative' negative amortization mortgage products, securitizations, fractional reserve banking system, etc. know that only they--the creators--will understand how they work and benefit most. That's why the folks that should have been thrown in jail not only retained their jobs but received bonuses apparently because they were the only one capable of unraveling the financial weapons of mass destruction they created. I don't have to be Einstein to know there's something wrong with that. All for more, and more, and more, and more profit. Even those charged with regulating them have no clue how it works. Smokescreen my friend. Does the tax code really have to be as complex as it is? We are so stealthily taught how to think and what to believe. I often say that there is usually simplicity in complex things. In this case (in my humble opinion), the impetus for all of this resides in the hearts of men rather than their minds.Sorry for length.
@InspectorGadget
I wasnt defending the complexity in our current system. The investment side of things is deliberately setup to make the rich richer, make the system impenetrable, make bank-initiated gambling with our money (individual $ and collective $) legal and profitable in the short run while passing the risk to the outsiders who cannot access the needed info....and then in addition to your list, the dark pools, take a swing at the lies, smoke and mirrors, the bullshit annual reports, the whack-a-mole corporate designs, the stolen sneak peaks on other's investing, the phony bought-and-paid for ratings, the bought-and-paid for legistration....
Hey how about they get their billions/trillions on their lie-bubbles and then comes a crisis and then they get our billions/trillions to do their own "clean up" of the mess they made because "nobody else can"?
Actually the complexity i mentioned is not the artificial "dazzle them while you steal" complexity of today, it's the stuff built into any economic system, small or large, even those based on beads or shells, from smallish tribes, either isolated or thousands of years ago.
And many econ models - esp the politically popular ones -make a bunch of closed system assumptions which aren't real world. But the real deal - good econ/social models are effing hard.
Sometimes i think, for all our investment vehicles and growth forecasts and data, we are still at the trepanning stage.
@f00l @InspectorGadget That's what the Romans thought. If the banks are too large to fail maybe it's time for the government to Break them up like they did the Bell System. So many eggs and only one basket.
I'm totally late to the conversation here, but does anyone use Discover for savings or is considering it? No minimums, and close to 1% interest.
I'm definitely considering it. Am I missing something that I should know about?
@luvche21
I have an account w them i ignore. I suppose i shouldn't be ignoring it. Sounds good...
@f00l I've loved them for my credit card, but haven't jumped into the savings acct yet. Do you have the savings acct? Or just credit?
I think they have a decent promotion for creating a savings acct too, if you're interested, check that out.
@luvche21
i have a savings account. Started w some other internet bank, which got sold to Discover Bank. Tiny $ in there, pay it no mind. Need to check out what they're up to.
Good call in service tho, as of 2 years ago.
Have a cc for them too, but just got approved on a promo. Waiting for card.
American Express has this also:
https://personalsavings.americanexpress.com/home.html
That says it stands at .9 percent interest, which is close enough to 1 percent to count. My daughter has this (although I think her account pays more than that).