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Credit Union VS Major Bank (Page 2)
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Eug
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Nov 21, 2011, 03:38 PM
 
Originally Posted by Uncle Skeleton View Post
I've long wondered, why do they want this? Are they trying to profile us and profit from the "full picture" of our complete financial psychology? In the same vein of asking "how are you going to benefit from the relationship," I am left wondering how does having the "full relationship" benefit the bank, in and of itself.
As Athens says, the more accounts with one bank, potentially the more money they make.

One bank offered me their best mortgage rate only if I brought my other accounts over to them. They make money through savings accounts, fees, non-mortgage loan interest, credit cards, etc.
     
Uncle Skeleton
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Nov 21, 2011, 03:48 PM
 
Originally Posted by Athens View Post
They just want all your business. They make money off of most of it.

Savings account, your money in the bank as a loanable source. More savings the bank holds on to the more money they have that can be loaned out.
I don't believe this. Banks don't need more money these days, because they can borrow from the federal government for no cost, and that's why deposit accounts aren't paying any interest anymore.

Direct Deposits, they charge a fee to the depositor
I don't believe that's true

debit cards they make on transaction charges charged to retailers (at least in Canada I assume its the same in the US) its why you will some times see min purchase requirement for debit.
I don't believe this either, as debit card charges were recently severely curtained by law, and as mentioned KCrosbie many banks actually want to charge us for debit card usage (even if they caved, they still wanted it). That just doesn't make sense if they are making money off debit usage. They also have to bear the fraud risk with debit (and credit and checking).

Loans, again they are making money off ya. Its no different then how the cable companies give you a better price for bundling services like TV, Internet, Phone together.
It makes sense with services like telecoms because 1 they actually make money off each service and 2 they can raise the rate after 6 months and a lot of people will pay it. With banking, I don't see them starting up a monthly fee for deposit accounts, and without fees they have to be a money loser. As we saw with the recent backlash, people wouldn't stand for fee increases, like they stand for high cable and phone fees (I don't know why, but they clearly do there). So I see why they want your loan, but I don't understand why having the rest of your accounts actually helps them, or why it helps them to have one customer hold both a loan and a deposit.
     
Athens  (op)
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Nov 21, 2011, 05:29 PM
 
Debit charges to the merchant. Though im not 100% sure in the US im assuming but here any time some one uses a debit card for POS the merchant is charged $35 cents. Same for Direct Deposit, the depositor gets charged a fee, but again that's up here.

Could be as simple as hes doing business with us and not a competitor as a reason. But im sure there is a lot back end fee's that go on between banks to banks, and between banks and merchant accounts that result in income for checking accounts and debit.

Our banks have always had monthly fees since I was a kid so its just normal to me. Cell phone fees and internet fees are also something that is normal since its always been there. Its different when something was free gets a fee added to it, you see a backlash. Give it time they will get those fees out starting with new accounts leaving people with fee free accounts alone.
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Uncle Skeleton
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Nov 21, 2011, 06:46 PM
 
Originally Posted by Athens View Post
Debit charges to the merchant. Though im not 100% sure in the US im assuming but here any time some one uses a debit card for POS the merchant is charged $35 cents. Same for Direct Deposit, the depositor gets charged a fee, but again that's up here.
(Again) then why would they try to start penalizing that by adding fees just for using it? That makes not sense. If one bank did that I would chalk it up to bad judgement, but 4 at once?

But im sure there is a lot back end fee's that go on between banks to banks, and between banks and merchant accounts that result in income for checking accounts and debit.
BS fees help the banks. This is just another reason for them to encourage cross ownership, to pump up the number of fee-incurring transactions between banks. It doesn't make sense for them to try to limit the number of inter-bank transactions. If anything, that would help the customer, not the bank.

Our banks have always had monthly fees since I was a kid so its just normal to me. Cell phone fees and internet fees are also something that is normal since its always been there. Its different when something was free gets a fee added to it, you see a backlash. Give it time they will get those fees out starting with new accounts leaving people with fee free accounts alone.
We'll see. My question is, is the only value of "full relationship" to bet on this future monthly fee? They get nothing, if that doesn't pan out?
     
Eug
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Nov 21, 2011, 10:34 PM
 
Originally Posted by Uncle Skeleton View Post
I don't believe this. Banks don't need more money these days
Huh? Making money is the whole reason for the banks' existence.
     
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Nov 22, 2011, 12:37 PM
 
Originally Posted by Eug View Post
Huh? Making money is the whole reason for the banks' existence.
Making money and borrowing money are not the same thing.
     
Athens  (op)
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Nov 22, 2011, 02:24 PM
 
A bank is a business no different then any other business. Its mandate is to make a profit.
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Uncle Skeleton
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Nov 22, 2011, 03:41 PM
 
That's exactly why I don't understand why they are so eager for the "full relationship" including free checking and ever-so-slightly better (for the customer) than free savings accounts.
     
Athens  (op)
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Nov 22, 2011, 03:57 PM
 
Because those things still make them money.
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Eug
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Nov 22, 2011, 04:09 PM
 
When you put $3000 in their no/low interest chequing account and leave it there, suddenly they've "borrowed" $3000 from you almost for free. That money is leveraged by them for other use, thereby making them money.

They need to have money to lend money. If they don't have enough cash or cash equivalents around to lend money, then they cannot make money.
     
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Nov 22, 2011, 04:38 PM
 
And I reiterate, for the last 2 years there has been absolutely no need to borrow money from consumers when they can borrow more money more easily from the government. Furthermore, private investors (including banks) have been scrambling to find something to invest in, they all have way more cash than they know what to do with (to get a return on it), and the last thing they need is even more cash that they have no good place to invest. This does not make them money, and that is why I'm asking what good it does do them.
     
Athens  (op)
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Nov 22, 2011, 04:41 PM
 
I just did some reading up how checking accounts make money for banks. There is the obvious ones such as account fee (not all banks charge this) then things like check fees, ATM fees, overdraft fee's and so on. The other common thing is when you already do your checking with a bank you might consider the other products they sell. The less obvious one is related to the fractional reserve banking system. Checking accounts help banks make money out of thin air. Because when you get a payroll deposit or you deposit anything into the bank to later use with your checking account the bank only holds onto 10% of that deposit. When you pull money out of your account exceeding that 10% they make up money under the fractional reserve banking system which is better you google then me trying to explain what that is. So even checking accounts make money through fee's even if the account is free they bet on you making mistakes that will cost you a fee and it helps generate new money under the fractional reserve system.
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Athens  (op)
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Nov 22, 2011, 04:44 PM
 
last thing they need is even more cash that they have no good place to invest
Yes they do, they are a business, more cash is good. Can pay CEO's more and pay out share holders more. At the same time its hard to know how much actual money a bank has. Its only required to keep 10% of its deposits. A bank could be sitting on a lot of money and not investing but how much debt is the same bank sitting on as well.
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Eug
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Nov 22, 2011, 04:53 PM
 
Originally Posted by Uncle Skeleton View Post
And I reiterate, for the last 2 years there has been absolutely no need to borrow money from consumers when they can borrow more money more easily from the government. Furthermore, private investors (including banks) have been scrambling to find something to invest in, they all have way more cash than they know what to do with (to get a return on it), and the last thing they need is even more cash that they have no good place to invest. This does not make them money, and that is why I'm asking what good it does do them.
Not really. Banks don't want to be borrowing money from the government, and in a lot of areas (like in Canada) they haven't been borrowing money from the government at all. If they avoid borrowing from the government, the government potentially has less power over them.

Furthermore, the more money, the better... if it's not from the government.
     
Uncle Skeleton
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Nov 22, 2011, 06:23 PM
 
Originally Posted by Athens View Post
I just did some reading up how checking accounts make money for banks. There is the obvious ones such as account fee (not all banks charge this) then things like check fees, ATM fees, overdraft fee's and so on.
Again, this is not compatible with them thinking they need to increase fees (the debit usage fee) to stay ahead.

The other common thing is when you already do your checking with a bank you might consider the other products they sell.
Circular reasoning. They want the full relationship so they can get the full relationship?

The less obvious one is related to the fractional reserve banking system. Checking accounts help banks make money out of thin air. Because when you get a payroll deposit or you deposit anything into the bank to later use with your checking account the bank only holds onto 10% of that deposit. When you pull money out of your account exceeding that 10% they make up money under the fractional reserve banking system which is better you google then me trying to explain what that is. So even checking accounts make money through fee's even if the account is free they bet on you making mistakes that will cost you a fee and it helps generate new money under the fractional reserve system.
Yes I know, this all depends on lending being profitable. It isn't now. It's more likely to be negative than positive. All their likely profitable lending (and more so) has been lent. Getting 0% return on investment is above average these days. You're lucky to not be negative. Are there some exceptions? Yes, of course. But my point is that these exceptions are already fully funded and there is tons of loanable capital left over. What good is more when you can't make use of what you have already?

last thing they need is even more cash that they have no good place to invest
Yes they do, they are a business, more cash is good. Can pay CEO's more and pay out share holders more. At the same time its hard to know how much actual money a bank has. Its only required to keep 10% of its deposits. A bank could be sitting on a lot of money and not investing but how much debt is the same bank sitting on as well.
We're not talking about profits, we're talking about borrowed money on which to profit, if lending it out again is profitable which it isn't.

Originally Posted by Eug View Post
Not really. Banks don't want to be borrowing money from the government, and in a lot of areas (like in Canada) they haven't been borrowing money from the government at all. If they avoid borrowing from the government, the government potentially has less power over them.
That's hardly been true in the US, which is where KCrosbie seems to be talking about considering the mention of BofA, Wells Fargo, Chase and the US Congress.

Furthermore, the more money, the better... if it's not from the government.
That depends on lending being profitable. When lending is negative, then more money is not better.
     
sdilley14
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Nov 22, 2011, 07:53 PM
 
Banks want deposit relationships from customers because it is cheaper for the bank to use the money (for lending purposes) the customers deposit rather than borrowing money from the fed. They also want full relationships for retention reasons. The more products you have at a bank, the more difficult it is to change banks. Plus people really create a deep attachment to their checking accounts and the institutions they keep them at. And once they start setting up their direct deposit from their employer and all of the automatic payments to pay all of their bills, it becomes an extremely difficult move to make if they want to switch financials. Also, I can tell you from inside experience that financials make the vast majority of their money from NSF fees on checking accounts and interest earned on mortgages and credit cards/lines of credit. The rest of the products are marginal to them, relatively speaking. I worked for a small credit union, only about 60,000 members, and one branch alone (of the 13 branches) could generate $200,000+ each month in NSF fees on checking accounts. These people, the habitual "overdrawers" who would constatntly overdraw, bring their accounts positive on payday, then go back in the red a few days after, racking up one overdraft fee after another...they were considered the CU's favorite customers. :/
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