Comments on: The Basics of Banking Explained

By: AverageJoe

AverageJoe — Thu, 22 Jan 2009 16:46:11 +0000

I agree completely. Most banks simply look at accounts as opportunities to charge fees for this and that, it’s really a shame. DO NOT pay excessive fees! Ask your bank how to avoid them, and don’t be afraid to ask for a manager if you’re looking for a refund. Or for that manager’s supervisor. Just always be polite and express your desire to stay with the bank if the situation can be resolved, that will get you the best results.

By: AverageJoe

AverageJoe — Thu, 22 Jan 2009 16:38:57 +0000

Most ATM cards can be used in most developed countries. Look on the back of your card, there are different logos describing which networks your card can access. Also call your bank and ask them how to get a list of locations in the cities you’ll be visiting. Many times there is an extra fee for overseas ATM transactions involving currency exchange, on top of the ATM fee charged by the bank that owns the machine you are using. Lastly, let your bank know when and where you’ll be traveling so the fraud department doesn’t cancel your card due to “suspicious activity”!

By: SimplyForties

SimplyForties — Tue, 13 Jan 2009 16:35:35 +0000

Jim – this is great and I have forwarded the link to my son who is in college. He’s called me a couple of times about the difference between available balance and actual balance – or something like that. He says it’s listed on his ATM slip. I’m sure he’s not the only one who doesn’t know the difference so that might be a good thing to add. I may have the names wrong as I don’t actually see this on my slips. I always tell him to go by the smaller one!

By: the weakonomist

the weakonomist — Tue, 13 Jan 2009 02:15:59 +0000

technically yes and technically no – you can open up a Roth IRA and simply put a CD in the Roth.

99 times out of 100 Jim’s right though. Interest earned is taxed. I got a letter today from the IRS saying they owe my $11 and I need to report that as income.

By: jim

jim — Mon, 12 Jan 2009 21:49:18 +0000

Yes, they are. All interest you earn at a bank is taxed.

By: James

James — Mon, 12 Jan 2009 21:42:41 +0000

Not sure if you want to go into this kind of level of detail, but on FDIC insurance you may want to explain coverage for joint v. individual accounts.

By: srikks

srikks — Mon, 12 Jan 2009 21:29:50 +0000

Are the interests earned in high reward checking accounts and Certificate of Deposits taxable too?

By: the weakonomist

the weakonomist — Mon, 12 Jan 2009 18:50:32 +0000

Many many months ago I wrote about how the banking industry works. As someone who works for a bank I’ve learned a lot about internal motivations.

Banks are no longer interested in making money from their loans, often referred to as spread revenue. Spread is the difference between the rate a bank uses to pay interest and the rate it charges the borrower. For argument’s sake, say the spread on a 6% mortgage is 2%. The other 4% is used to pay back to depositers (mostly CDs). The banks don’t care as much about spread anymore.

They want the fees. They want origination fees, advisory fees, management fees, insufficient funds fees, late payment fees, blah blah blah. This is why we’re in a heap of mess because the mortgage folks only cared about the fees. The guy who got your mortgage will sell it anyway, so they don’t mind as much not making money on the spread.

What they don’t want you to know is these fees are often negotiable. The spread is usually locked to your income level, type of loan, and credit rating, but fees are negotiable. You’re most likely dealing with commissioned officers when obtaining fees and they have discression to reduce the fee to get your business.

I tell you all of this because I think it’s sad the banks are no longer interested in simple spread revenue.

Jim, feel free to pluck whatever you want from what I’ve written:

http://weakonomics.com/special-features/college-of-weakonomics/
“Weakon 151 Parts I and II”

PS, your post was spot on though!

By: thomas

thomas — Mon, 12 Jan 2009 17:49:16 +0000

Great explanation of banks and their services. I would also note that using your ATM card at machines other than your banks can result in double charges – one from your bank penalizing you for not using theirs and one from the issuing bank (or service) charging you for their great service.

If you have to pull money out, make sure you pull out a higher percentage of cash to avoid such an excess fee. $.75 from my bank and $1.50 to pull out $20 results in 11% fee. Pulling out $100 knocks it down to 2.25%.

By: theoddbod

theoddbod — Mon, 12 Jan 2009 16:22:13 +0000

more than i’ve ever learned from my bank

By: John

John — Mon, 12 Jan 2009 14:57:42 +0000

What did you miss? That depends a bit on how the series are set up… But perhaps the following questions could be answered: can you use your ATM Card in a foreign country? Are there any extra costs involved?

By: Miranda

Miranda — Mon, 12 Jan 2009 13:49:33 +0000

Thanks for the great post! Education is an important step in learning how to properly manage money, and understanding modern banking — and your options therein — is a great way to start.