Is your bank robbing you blind?
By Todd Williams
Banks play a major role in the economic development and financial
growth of the entire country. The period following the great depression
saw radical changes in the banking industry that proved to be beneficial
for the building of consumer confidence in the banking system.
While our confidence has grown our knowledge and understanding
of how banks work has not.
While one could write a doctoral dissertation on the banking system,
these tips will focus only on a few things we should all be aware
of:
1. What is a bank?
The primary purpose of banks has always been to act as a storage
house for unused financial resources. It is a place where those
who have excess money place in storage. The banks then use
that money to loan to those who need capital to expand their
business
or to make major purchases.
2. How banks make money
Banks make money the old fashioned way. They buy it low, and sell
it high. Here is how it works. The bank receives your money in
the form of a deposit to a checking or savings account. They
pay you a certain interest rate (rental fee) for the privilege
of holding your money. They then loan the money to individuals
or businesses and charge them a higher interest rate (rental
fee) for the use of the money. The difference between what they
pay you, and what they get from the loan is called the net interest
margin. Sounds reasonable right? Hold on a minute, there’s
more…
3. Holes in your pockets
Banks also make money by charging fees. Banks may charge
you a fee to hold your checking account with them, and may
charge you a per check fee, a fee for not having a minimum
balance, and a host of other reasons. This is called fee
income. Fee income for many banks is big profit!
Fee income is free income to the bank.
Fee income can erode your hard earned money. Every month
a bank that charges you a fee for the privilege of holding
your money is in actuality transferring wealth from you to
them. |
|
4. Keeping more in your Hip National Bank!
So what do we do? Shop around and ask questions. Ask what kinds
of fees are associated with the different type of accounts the
bank offers? What benefits the different accounts have for you
as the consumer.
There are also non- bank options available such as Credit Unions
and Brokerage Companies. You may also want to check out some
internet-banks or trading online services.
Just remember that you are in control. Manage your bank like
you would manage any other relationship. You are the customer
and it
is a privilege for the bank to do business with you, not a
right.
Todd A. Williams is a money coach. He appears regularly on NewsChannel
5 "Good morning Cleveland." He is an author, educator,
and speaker. Subscribe to his free ezine at http://www.moneybytodd.com
|
