Comments on: Finance 101: How Do Banks Make Money? http://www.moneyunder30.com/how-banks-make-money Simple, Honest Financial Advice Thu, 09 Feb 2012 22:53:06 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Jonathan http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-13833 Jonathan Mon, 14 Nov 2011 16:46:32 +0000 http://www.moneyunder30.com/?p=4327#comment-13833 Well written and accurate, but Regulation E to the rescue. Consumers who opt out cannot legally be charged for overdraft fees in using their debit cards. They can still be charged for overdrafting with checks and ACH transactions. Consumers are now protected from exhorbant banks fees. Those fees aren't charged as pure profit. They cover the cost of cover the account, and also the charged off accounts that can be as high as $2000 or more. Unfortunatley many of those fees are charged to cover other customers negative accounts that are all pooled together Well written and accurate, but Regulation E to the rescue. Consumers who opt out cannot legally be charged for overdraft fees in using their debit cards. They can still be charged for overdrafting with checks and ACH transactions. Consumers are now protected from exhorbant banks fees.

Those fees aren’t charged as pure profit. They cover the cost of cover the account, and also the charged off accounts that can be as high as $2000 or more. Unfortunatley many of those fees are charged to cover other customers negative accounts that are all pooled together

]]> By: Jonathan http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-13830 Jonathan Mon, 14 Nov 2011 16:26:49 +0000 http://www.moneyunder30.com/?p=4327#comment-13830 In general that is accurate information. What you may find these days is the dollars you have locked in to a CD may be costing the bank big bucks. Les say you fixed a rate at 3.75% several years ago on a 10 year CD. The bank realizes an expense near 3.25% on those deposits since the discount rate is at .25%. The bank needs deposits to maintain liquidity, and be within reserve reqirements, but they'd rather pay you .01, or .05. That being said loans and fees are the primary profit generation of banks. As long as they can still collect debit and credit card fees that will be their focus with rates so low. If debit card fees are legislatively eliminated fee generation for banks will get very interesting. In general that is accurate information. What you may find these days is the dollars you have locked in to a CD may be costing the bank big bucks. Les say you fixed a rate at 3.75% several years ago on a 10 year CD. The bank realizes an expense near 3.25% on those deposits since the discount rate is at .25%. The bank needs deposits to maintain liquidity, and be within reserve reqirements, but they’d rather pay you .01, or .05. That being said loans and fees are the primary profit generation of banks. As long as they can still collect debit and credit card fees that will be their focus with rates so low. If debit card fees are legislatively eliminated fee generation for banks will get very interesting.

]]> By: Jonathan http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-13828 Jonathan Mon, 14 Nov 2011 16:22:04 +0000 http://www.moneyunder30.com/?p=4327#comment-13828 Most people that are paying 20 plus percent on their credit cards have made poor decisions leading to these rates and the inability to pay core debts down. Many times correctint this is simply making a decision to sacrafice extras. For example how many people in debt over their heads continue to pay $200 plus per month for cable, $150 a month or more for unlimited data plans, extravagent cell phones, car payments over $300 that are more than rent or the mortgage. There are many more examples but most people aren't willing to make cuts. Most of the time income is sufficient, but people refuse to adhere to financial plans and core budgets. If anyone out there needs help budgeting, cost cutting etc call me. A thrifty plan can pay down debts and start long term savings for retirement, education or a new home. Most people that are paying 20 plus percent on their credit cards have made poor decisions leading to these rates and the inability to pay core debts down. Many times correctint this is simply making a decision to sacrafice extras. For example how many people in debt over their heads continue to pay $200 plus per month for cable, $150 a month or more for unlimited data plans, extravagent cell phones, car payments over $300 that are more than rent or the mortgage. There are many more examples but most people aren’t willing to make cuts. Most of the time income is sufficient, but people refuse to adhere to financial plans and core budgets. If anyone out there needs help budgeting, cost cutting etc call me. A thrifty plan can pay down debts and start long term savings for retirement, education or a new home.

]]> By: Jonathan http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-13824 Jonathan Mon, 14 Nov 2011 16:00:57 +0000 http://www.moneyunder30.com/?p=4327#comment-13824 Here is th deal on CD's: Using them as Investing vehicles or income generating tools at this point in time is not worthwhile. Cd's certainly have some benefits in ensuring your money is safe and the risk is near zero, but thos paltry benefits significantly outweigh the negatives dependant on your age. The core reason I am so bearish on CD's is the fact that they have a negative real reate of return. After taxes and inflation they yield below zero. Lets assume inflation is 2% and you early 1% on a CD ( which is unlikely right now, since banks can borrow money at .25%, and would therefore have an expense in paying you above .25%), forgetting about taxes you lost 1% of the value of your dollar. Thats not to say the money is gone, it is simply worth less. Investing is in my opinion the best way to beat inflation. Obviously there are some inherent risks in investing (especially right now) but it sure beats knowing you are losing money. CD's are ideal for the retiree who can't afford to take on risk, but you may as well stuff the mattress. Here is th deal on CD’s: Using them as Investing vehicles or income generating tools at this point in time is not worthwhile. Cd’s certainly have some benefits in ensuring your money is safe and the risk is near zero, but thos paltry benefits significantly outweigh the negatives dependant on your age.

The core reason I am so bearish on CD’s is the fact that they have a negative real reate of return. After taxes and inflation they yield below zero. Lets assume inflation is 2% and you early 1% on a CD ( which is unlikely right now, since banks can borrow money at .25%, and would therefore have an expense in paying you above .25%), forgetting about taxes you lost 1% of the value of your dollar. Thats not to say the money is gone, it is simply worth less.

Investing is in my opinion the best way to beat inflation. Obviously there are some inherent risks in investing (especially right now) but it sure beats knowing you are losing money.

CD’s are ideal for the retiree who can’t afford to take on risk, but you may as well stuff the mattress.

]]> By: All Cash Lifestyle http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-11134 All Cash Lifestyle Thu, 16 Jun 2011 04:07:36 +0000 http://www.moneyunder30.com/?p=4327#comment-11134 My Saving bank practices somthing perplexing , even though I have plenaty of $$ in checking about $1,943.00 they randomly throw in a Credit $35.00 into my checking that goes into an overdaft as a loan at 14% , this has been happening quite of then its very underhanded. I don't understand why they practice this pattern ---??? they never giveme a straight answer it's always well it's going back to some retroactive timeline --- not clear. My Saving bank practices somthing perplexing , even though I have plenaty of $$ in checking about $1,943.00 they randomly throw in a Credit $35.00 into my checking that goes into an overdaft as a loan at 14% , this has been happening quite of then its very underhanded.
I don’t understand why they practice this pattern —???
they never giveme a straight answer it’s always well it’s going back to some retroactive timeline — not clear.

]]> By: onyx http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-5685 onyx Mon, 07 Jun 2010 17:48:15 +0000 http://www.moneyunder30.com/?p=4327#comment-5685 the loans may be the muscle of bank income, but the juicy delicious fat is those penalties... anyone care recently overdrawn their account? maybe it was on Wednesday and you had to wait till payday to remedy it? calculate that interest for your "impromptu loan" that was quite likely only in the double-digits... much higher than 5...10...15% overall interest for hefty loans? I recently had the mishap of overdrawing by $23 and when I caught things up the profit margin for loaning me that 23 bucks was almost 1000% profit for the bank...similar stories lead to profit margins for similar accidents around 500% and (at least this is logical) triple digit accidents breaking the 1000% mark easily... so pay with quarters next time you buy a snickers bar, that little chocolate craving might cost you more than 100 bucks... the loans may be the muscle of bank income, but the juicy delicious fat is those penalties…

anyone care recently overdrawn their account? maybe it was on Wednesday and you had to wait till payday to remedy it? calculate that interest for your “impromptu loan” that was quite likely only in the double-digits… much higher than 5…10…15% overall interest for hefty loans? I recently had the mishap of overdrawing by $23 and when I caught things up the profit margin for loaning me that 23 bucks was almost 1000% profit for the bank…similar stories lead to profit margins for similar accidents around 500% and (at least this is logical) triple digit accidents breaking the 1000% mark easily… so pay with quarters next time you buy a snickers bar, that little chocolate craving might cost you more than 100 bucks…

]]> By: Lisa of Creditnet.com http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-4401 Lisa of Creditnet.com Wed, 10 Feb 2010 02:10:12 +0000 http://www.moneyunder30.com/?p=4327#comment-4401 Banks are getting desperate these days; bankers have even been known to practically beg customers to deposit money! If you're wanting to get a loan or line of credit, don't be surprised if the bank first asks you to make a hefty deposit (in addition to down payment) into a checking/savings account! Banks are getting desperate these days; bankers have even been known to practically beg customers to deposit money! If you’re wanting to get a loan or line of credit, don’t be surprised if the bank first asks you to make a hefty deposit (in addition to down payment) into a checking/savings account!

]]> By: 20smoney http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-4338 20smoney Thu, 04 Feb 2010 13:44:22 +0000 http://www.moneyunder30.com/?p=4327#comment-4338 Actually, a penny saved is like 10 pennies lent. To truly understand our financial system, you need to understand fractional reserves. It's the backbone of our system and in my opinion, the biggest problem with our system. For the best explanation I've found of fractional reserve banking in easy to understand language, read "End the Fed" by Ron Paul. Actually, a penny saved is like 10 pennies lent. To truly understand our financial system, you need to understand fractional reserves. It’s the backbone of our system and in my opinion, the biggest problem with our system. For the best explanation I’ve found of fractional reserve banking in easy to understand language, read “End the Fed” by Ron Paul.

]]> By: moneyhoneysf http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-4325 moneyhoneysf Wed, 03 Feb 2010 19:56:06 +0000 http://www.moneyunder30.com/?p=4327#comment-4325 Consumer gets charged an interest of 22%+ on their credit cards nowadays for their balance. Not only that, most consumers don't have the money these days to even pay down the principal portion of the credit cards but only the interest portions. Now banks are really dealing in the money. And what do they offer in return on savings & checking account? The percentage is not appealing for sure. Consumer gets charged an interest of 22%+ on their credit cards nowadays for their balance. Not only that, most consumers don’t have the money these days to even pay down the principal portion of the credit cards but only the interest portions. Now banks are really dealing in the money. And what do they offer in return on savings & checking account? The percentage is not appealing for sure.

]]> By: Allison http://www.moneyunder30.com/how-banks-make-money/comment-page-1#comment-4323 Allison Wed, 03 Feb 2010 18:29:57 +0000 http://www.moneyunder30.com/?p=4327#comment-4323 Gahh, the link I tried to embed didn't work! Apologies! Here it is: http://blog.learnvest.com/learnvest-daily/the-cd-a-users-guide/ Gahh, the link I tried to embed didn’t work! Apologies! Here it is: http://blog.learnvest.com/learnvest-daily/the-cd-a-users-guide/

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