Banks Are Evil
By Mike Hillyer | Related entries in BankingWhen I was in school our accounting and finance teacher had one lesson he wanted all students to take away from his class: Banks Are Evil. How right he was.
While I won’t be getting into a full rant on banks today, let me give you one example:
Just before getting paid this month my life insurance was auto-drawn. The draw put me in over-draft by four cents. I do not have overdraft protection, so the bank charged me five dollars for being four cents overdrawn.
Now isn’t that just lovely? So what are the solutions? Well, I guess you could make sure you are not overdrawn by four cents by keeping extra cash in the account. Another thing is to avoid auto-draws as much as possible. While some love the convenience, I do not like the loss of control. I use auto-withdrawal for those things that cannot be done otherwise.
What I would not recommend is the use of overdraft protection. While I have never used it I have seen friends use it like another credit card: when their paycheck comes in it covers the overdraft, then they re-spend the overdraft and repeat the process every month. Just keep better track of checks and auto-draws and avoid being over-drawn.
So remember class, Banks are Evil. It will be on the exam.
This entry was posted on Friday, March 11th, 2005 and is filed under Banking. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
March 11th, 2005 at 3:20 pm
Agreed. I use PC Financial because I don’t pay fees, don’t get any service, and don’t expect any.
Which, to me, is better than paying for service you expect, that you simply never receive.
Banks can help, but typically they are not there for their customers. Individual branches are often exceptions, and if you can get an actual account rep who cares it can be a great relationship to have.
But, yeah, banks can be evil.
March 11th, 2005 at 3:26 pm
That is why I use ING Direct for savings, no fees, no service, but 2.5%.
March 11th, 2005 at 9:16 pm
I learned that lesson when I was 14. Used my debit card and put myself about 20 cents overdrawn. 30 days later I went to deposit money, and my balance was -$40. See, they charged me an initial $10 overdraft fee, than every 5 days they charged another fee for not paying them the initial fee. I obviously tok this as robbery and I closed my account, balance unpaid.
I’m with TD Canada Trust now. Though I pay fees, as I usually needs lots of service :p
March 13th, 2005 at 10:06 pm
The One Holiday You Don’t Want To Take
I personally consider Credit Card companies to be as evil as banks, and maybe even a little more evil. One example is that I applied once for a credit card, only to be turned down. I applied to the same company a short while later since they offered a …
March 20th, 2005 at 4:33 pm
I worked at a debt collecting company many many lifetimes ago (it was during the summer, i need some cash ) - all they care about (Credit Card companies) is money - collecting it, giving it out, getting it back.
It’s sick. Note to self: Never work for a collection agency again.
March 21st, 2005 at 8:32 am
I’ve had problems with silly overdrafts like your 4-cent example and every single time I have called or gone to the bank and politely explained what happened. I took full responsibility for the mistake and the person removed the overdraft fee. This has happened at different banks and in different countries. The key is: Be nice and remember you are talking to a human being.
Another comment: I agree banks are evil and I recommend that everyone use Credit Unions or Building Societies (or the equivalent in your company). Unlike banks, these are focused on providing a service for the “union” or “society” rather than on profits.
March 21st, 2005 at 11:56 am
I disagree. I would recommend going to an account manager at your bank and asking for a review of your banking packages. Explain that you wish to continue banking at (X) Bank, but that you feel your fees are too high. Ask if they have any packages that would provide reduced fees with overdraft protection. If you have multiple accounts with one bank, chances are that the account manager will find a way to keep you happy.
For example, my bank offers a VIP package for $30/mo which covers all service fees, ATM, debit transactions, etc. for up to three accounts plus a $US account, safe-deposit box and premium credit card, and overdraft protection on all accounts.
The reason I recommend overdraft protection is for during travel, or when quirks of the calendar month mean that you don’t always get your paycheque deposit before your insurance or MSP auto-payments are withdrawn. It’s much easier to manage your finances if you have this freedom.
That said, it’s simply a matter of WILLPOWER to avoid abusing your overdraft. It’s not credit. At some point you have to grow up and use your financial tools responsibly instead of removing every possible temptation. If you just exist in a stripped-down world with no financial tools at your disposal, you’re not really learning financial responsibility. The minute the tools are brought back, you’re going to abuse them again.
March 21st, 2005 at 12:04 pm
Sue: What’s your return on that 30$/month (upwards of 400$/year)?
Personally, I’m a big fan of overdraft protection, because during that once-a-year when you need it, it pays for itself. It’s only when you abuse the tool that you run into problems.
I’m sure the “don’t abuse the tool” discussion will come up fairly often though. The reality is that with the average American credit card debt approaching 5,000$ and the average overall consumer debt load fast approaching 15,000$ (outside of mortgage and leases) it’s obvious the vast majority of people are abusing the tool.
A part of this blog will be, unabashedly, how to stop the cycle of abuse and then how to get back to using the tool in a responsible manner.
Credit cards aren’t evil: when used responsibly. Credit card companies, on the other hand, are evil.
March 21st, 2005 at 12:10 pm
My return is terrific. I’m a big user of debit cards and electronic transactions, and my husband and I have ten different accounts with the same bank. Yes! Ten! And they all have different purposes and get used! (This includes credit cards and investment accounts though).
Anyways, I used to pay about $16/mo in service charges and fees on my chequing account, and $6 or so on my savings account. Then I have a premium credit card which I collect travel points on (that I actually use) which would cost $125 per year if I paid the fee, but it’s included in the package. Plus I have a safe-deposit box that would be $5/mo. My personal use adds up to $449/year. My husband’s banking fees were about $15/mo, so that’s just an extra added bonus which you wouldn’t even really need to consider if you were single, because my own banking activities cover the $360/yr that I pay in VIP fees.
March 21st, 2005 at 12:16 pm
Sue, with my bank I pay 0$/month and get the same services you just describe. We have 4 chequing accounts, 8 savings accounts, 4 cards and 2 credit cards. Our CC includes Air Miles, with no yearly fee.
I can’t say my service itself is better or worse than yours, however for daily banking needs I think my 0$/month beats your 360$/month
That said, if you’re determined to stay with your bank (for relationship, ease of lending, etc reasons) then yeah it’s great value for you.
But when there are no fee options out there, and you’re trying to get out from under a debt load, I’m a huge fan of moving the bulk of your banking to something which allows your money to work for you instead of your money costing you.
March 21st, 2005 at 12:19 pm
Yeah, the no-fee option would be very nice. I don’t mind paying the fee while it keeps my account manager looking the other way on my student credit line, though. I haven’t been a student for 3 years now but I’ve still got $15K available to me should I ever need it. That sort of flexibility is worth a few deniro!
That said, I’m a HUGE fan of ING Direct’s no-fee savings accounts. And who can say no to their interest rates?
March 21st, 2005 at 12:20 pm
Whoo, we agree on something! Heh.
March 21st, 2005 at 1:55 pm
Sue: Yes, I keep a no-fee ING account for longer-term savings myself. That said, I’ll have to agree to disagree on banks being evil. Even if you find a non-evil account manager, he/she still works for an evil bank.
Yes, overdraft protection may work for some, but I make the assumption that willpower is unreliable, and I commend those who have it in spades, but I think it is better to treat personal credit as evil and let people find the exceptions on their own.
June 8th, 2005 at 3:06 pm
Are banks evil or people stupid?
June 9th, 2005 at 7:11 am
Are the two mutually exclusive?