v1_0
Chief Petty Officer
- Joined
- Aug 27, 2007
- Messages
- 575
Re: Bank Fees Rant
Ahhh... Having worked for a while at a couple of financial institutions I've had the opportunity to observe some things.
I could go on for pages and pages. Let me hit a few points then move on to the main topic.
Point 1: Money is not distributed equally. A few big customers can very much outweigh a lot of small customers.
Point 2: Banks are pretty much a necessary service. Checks, electronic payments, and even money orders go through banks. Unless you are paying cash or bartering you are using a bank.
Point 3: Banks make money on any money they handle. Even if one side of the transaction uses the bank, it makes money (sometimes more than if both sides of the transaction stay in the bank).
Point 4: When funds are unavailable to you (the out of state waiting period, or not posting till the next day, etc), they are still available to the bank.
Point 4a: This applies when you transfer to another bank - unless you cash out your account right there and then. As soon as they cut your check, the money goes into a 'limbo' state - they don't need to pay you interest on it, but until the *end* of the transfer they still have the money.
So now to the major point. The interesting thing about banks is that they don't manufacture anything - they just store and move money around. There are no materials, tools, etc. to manage.
They make their money on moving money around, but not on storing it. All of this is governed by a fairly wide set of rules to operate within.
Banks really only have a few ways to make more money: move more money around, or charge more to move the same amount. All of the services that they offer are for the express purpose of doing one of the previous - getting more people (or businesses) to put their money into their bank, or for being able to charge for moving money around.
The larger banks are not tied to any one particular community, they have grown much larger than that. Especially the ones that are 'public ally owned' - they are more responsible to the shareholders than to anyone else. So, there is a lot of pressure on those banks - perhaps we can call this 'hypercapitalism' - to make money for the sake of making money. They are necessary enough so that people pretty much have to use some bank, and the larger ones are large enough so that even if they had no 'retail customers' they would probably still make money either as a clearinghouse or from their business accounts (in the short term).
The banks have a pretty good idea of how much they can charge for things before they loose too many people. They do expect people to leave, but they offer enough for other people to open new accounts. And they know that advertising works.
Now and again, they get things wrong. Remember a few years back - some banks were going to start charging a "teller fee" for transactions that involved a teller? That caused a commotion, which was expected. But it also caused charges of discrimination - that was unexpected - that ultimately lead to the dropping of that particular fee. Of course, it was spun a little differently...
It is possible that in the present circumstances of the economy, people will actually start scrutinizing their bank charges more and actually compare banks by them. In that case, there will be an equalizing pressure at some point. OR, perhaps we will start seeing a resurgence of lawsuits against credit unions, and a increase in charges that the larger banks levy against the smaller banks when money changes between the two...
Ahhh... Having worked for a while at a couple of financial institutions I've had the opportunity to observe some things.
I could go on for pages and pages. Let me hit a few points then move on to the main topic.
Point 1: Money is not distributed equally. A few big customers can very much outweigh a lot of small customers.
Point 2: Banks are pretty much a necessary service. Checks, electronic payments, and even money orders go through banks. Unless you are paying cash or bartering you are using a bank.
Point 3: Banks make money on any money they handle. Even if one side of the transaction uses the bank, it makes money (sometimes more than if both sides of the transaction stay in the bank).
Point 4: When funds are unavailable to you (the out of state waiting period, or not posting till the next day, etc), they are still available to the bank.
Point 4a: This applies when you transfer to another bank - unless you cash out your account right there and then. As soon as they cut your check, the money goes into a 'limbo' state - they don't need to pay you interest on it, but until the *end* of the transfer they still have the money.
So now to the major point. The interesting thing about banks is that they don't manufacture anything - they just store and move money around. There are no materials, tools, etc. to manage.
They make their money on moving money around, but not on storing it. All of this is governed by a fairly wide set of rules to operate within.
Banks really only have a few ways to make more money: move more money around, or charge more to move the same amount. All of the services that they offer are for the express purpose of doing one of the previous - getting more people (or businesses) to put their money into their bank, or for being able to charge for moving money around.
The larger banks are not tied to any one particular community, they have grown much larger than that. Especially the ones that are 'public ally owned' - they are more responsible to the shareholders than to anyone else. So, there is a lot of pressure on those banks - perhaps we can call this 'hypercapitalism' - to make money for the sake of making money. They are necessary enough so that people pretty much have to use some bank, and the larger ones are large enough so that even if they had no 'retail customers' they would probably still make money either as a clearinghouse or from their business accounts (in the short term).
The banks have a pretty good idea of how much they can charge for things before they loose too many people. They do expect people to leave, but they offer enough for other people to open new accounts. And they know that advertising works.
Now and again, they get things wrong. Remember a few years back - some banks were going to start charging a "teller fee" for transactions that involved a teller? That caused a commotion, which was expected. But it also caused charges of discrimination - that was unexpected - that ultimately lead to the dropping of that particular fee. Of course, it was spun a little differently...
It is possible that in the present circumstances of the economy, people will actually start scrutinizing their bank charges more and actually compare banks by them. In that case, there will be an equalizing pressure at some point. OR, perhaps we will start seeing a resurgence of lawsuits against credit unions, and a increase in charges that the larger banks levy against the smaller banks when money changes between the two...
(my firm is NOT a recipient of any taxpayer funds- we are actually solvent and profitable)
