This is a fairly simple, but often overlooked, concept in the world of banking…. FEES. A bank that charges you fees to put your money there is, to put it bluntly, ripping you off.
You see, the major function that a bank serves, is to provide money to people in the form of bank notes and loans. In return the person who took out the loan, returns the money to the bank, over time, with interest attached.
So lets say a bank puts out $100,000 in loans in a year, and charges 6.0% annually on that money, assuming that that full sum is out, and people have only paid the interest on these loans, at the end of the year the bank will make $6,000 for lending out that money.
So where do they get the money that they loan out. There are two possible places for a bank to get money.
- From the Federal Reserve, which will loan it to them with interest attached. This means that they would have to give a portion of the previously mention $6,000 back to the reserve.
- From the people who keep their money at the bank.
You see, it used to be that if you kept your money in the bank, they would pay you interest on that money, because it allowed the bank to make money by loaning it out. Essentially, when you put your money in the bank, you are loaning them money, usually at a better rate than the Federal Reserve will provide.
Now a-days, it seems that the banks feel that it is a privilege for you to keep money with them. To make you understand how privileged you are, they charge you for it. Basically, they get you coming and going, and show you no respect in the process, and sometimes will go as far as to say that you should thank them for allowing you to pay that fee.
(If you do the research, you will find that the same concept of charging on both ends is what incited the T.V. writers strike)
For your own personal knowledge, the bank is required by law to disclose two pieces of information to you when you open an account:
- A schedule of fees associated with your use of the account.
- A funds availability disclosure which states how, when and where you funds will be available to you while engaging in different transactions.
So, the lesson is, don’t pay fees, and read your literature, so you know exactly how the bank plans on taking your money from you.
“Give me the right to issue and control a nation’s money and I care not who governs the country.”
- Meyer Amschal Rothschild, International Banker
