What your Bank Isn’t Telling you

There’s a cliche that prostitution is perhaps the oldest profession on earth. If prostitution was the first profession, banking was a close second. 4,000 years ago temples served as banks. Money was stored in form of compressed gold plates. People though temples would be the safest place to store their money, because they were well built and considered sacred. There are even archaeological signs dating back to 1800 BC of temple priests giving loans to local merchants.

Over the last 4000 years, bankers have had quite a bit of time to improve their trade. Now the financial services companies such as banks and investment firms are some of the most profitable businesses in the United States. Of course, there’s a lot of competition for your business, so banks have to give out a number of perks and high interest rates to get new accounts, but they have to make up that money from somewhere. Quite often banks will make use of some less than honest business practices in order to separate you from your money. Be sure to know what they are so that you don’t get trapped by them and have to write a check to the school of life.

Many banks have begun using what’s called a two-cycle billing process for credit cards. Here’s how it works. Let’s say you borrow $100 on a credit card. You pay $50 on it the first month, and $50 on it the second month, and pay it off. On the third month, you have a zero balance, but the bank still charges you a finance charge! This is because with two-cycle billing, they use the average balance of the last two cycles to calculate the amount of interest you pay. So in this case, you would still be paying interest on $25, even though your account was wholly paid off. Discover’s credit card line is perhaps the most notorious making use of this shady business practice.

When you are banking online, more often than not your bank will show you what’s called an available balance. Allegedly, this is the most accurate picture of how much money the bank thinks you have today. This is all well and good, but sometimes that number is a bit less than honest. Many online banks add the amount of overdraft protection you have on top of the available balance. So if you had $500 in your checking account, and $500 in overdraft protection, you would see an “available balance” of $1000. This will cause people to think that they have more money than they actually do. They spend the money they think they have and end up pay un-necessary overdraft protection fees

When banks offer Visa debit cards, they often claim to offer the exact same protection as your Visa credit card. This is not the case. If someone were to steal your Visa credit card, you can easily have all of the money refunded. When someone steals your Visa debit card, you can have all of the money that was in the account refunded, but there’s a catch. If they steal your debit card, chances are they are going to cause several overdrafts giving you hundreds of dollars in NSF fees. Visa isn’t under any obligation to pay for these things if your card is stolen. If your bank doesn’t want to cooperate and waive them, you’ll get stuck paying them.

It doesn’t end there. Quite often, your bank will send you a check in the mail for ten dollars or so and on the back of the check, there’s a little note that says if you sign this check and deposit it, you are automatically enrolled into some sort of credit protection or other optional program. If you don’t pay close attention, and a lot of people don’t, you could find yourself paying $10 a month for some service you probably don’t need.

These are just a few examples of the many things that banks will do to separate you from your money. They are completely legal, but very deceptive. Watch out, and always read the fine print.