On the one hand, this is awesome. Making deposits using the camera on your iPhone or Android phone is way more convenient than going to a branch — especially if you don’t have a branch nearby. On the other hand, practically every other bank in the country has been doing this for something like five years, and Wells Fargo’s mobile app is one of the worst I have used.
The same banks that used to make—or finance—the subprime loans that sent the world economy into a nosedive are now making and financing payday loans. Now they just use TARP funds and cheap loans from the Fed.
Payday loans are still subprime loans, but the risk is built into the enormous interest rates, which average 455%. The mafia offers better interest rates. Actually, the mafia is probably just operating payday loan storefronts now. Wells Fargo in particular is knee-deep in payday loans. It directly finances a third of payday loan branches in the U.S.
In order to make those 455% loans, banks like Wells Fargo and US Bank are able to borrow money from the Federal Reserve at .5% or less. (Wait, does that mean they can really average a 454.5% profit, not counting defaults? Holy shit.)
(Video from Showdown in America.)
Did you ever wonder why banks are wiling to safeguard your hard-earned cash, often for free, or even at interest? After all, it costs the bank money to have tellers and branches and the infrastructure necessary to do this.
The main reason banks want your cash is that they want to lend it to other people. In other words, when you put your money in the bank, you are really lending the bank your money so that it can turn around and loan your money to someone else.
Banks quite literally play with other people’s (your) money.
At first I doubted the ability of Occupy Wall Street to stay the course. Three weeks later, the occupiers are still on Wall Street, and new occupations are popping up across the country. This is a real beginning to what could—should—become a real, important, popular movement.
If you’re not quite sure what Occupy Wall Street is all about, Douglas Rushkoff has an excellent explanation. Paul Krugman explains why the Occupy Wall Street movement “is angry at the right people.” (Both articles are well worth a read.)
This is still a beginning, though. If the occupiers disband now, nothing will change. It will take many weeks—possibly many months. During that time, it is quite likely that the protesters will see little or no progress. But when change does finally come, it will come in a landslide.
As of October 1st, banks will be able to charge only 21¢ per transaction for debit cards, due to the Dodd-Frank Act’s Durbin Amendment. That’s a completely reasonable charge for sending a few bits of data over the wires. But charging comically large percentages for transactions is how banks pay for the mortgages on those skyscrapers, so they’re just going to charge you, instead.
Bank of America will begin charging $5/month to use a debit card early next year, and Wells Fargo is already testing a $3/month fee in some states. In other words, debit card use is going to get a lot more expensive for consumers.
Price tags on everything else may rise, too, since Visa and Mastercard (not banks, so not bound by the Dodd-Frank Act’s Durbin Amendment) plan to quadruple their merchant transaction fee.
That’s right. Instead of acknowledging that consumers don’t want to get screwed when they use their cards, banks are strategizing how to increase revenue from NSF fees. Maybe it is time to look for an online bank, after all.
Big banks “routinely treat their customers like shit, offer terrible services, and use inscrutable fee schedules to make billions of dollars per year from worthless fees alone,” according to Ramit Sethi. He’s right, of course. And big banks are gearing up new fees to make it impossible to bank without piling up absurd fees.
Fortunately, there are alternatives. Many online banks offer fair terms, convenient access, and great value. And they are getting popular. Twenty-two percent of bank customers under 30 use an online bank as their primary bank. Of those currently using a big bank, over 35% would not choose it again.
I don’t use an online bank as my primary bank. Yet. But the reasons people prefer them are pretty compelling. Free ATMs anywhere. Deposit checks using a scanner instead of making time to get to a branch. Better online interfaces. Better interest rates. And on and on.
When you subtract the culture of ripping off consumers and the overhead of brick-and-mortar branches, banking can apparently be a pleasant experience.
About a year and a half ago, I wrote about Judge Frank’s decision that Minnesotans may sue when a debt collector garnishes funds in a joint bank account. After a lot more litigation, pieces of that question were certified to the Minnesota Supreme Court. The Minnesota Supreme Court decided that, under Minnesota law,
- A judgment creditor may serve a garnishment summons on a garnishee, attaching funds in a joint account to satisfy the debt of an account holder, even though not all of the account holders are judgment creditors.
- Account holders bear the burden of establishing net contributions to a joint account during a garnishment proceeding.
- A judgment debtor is initially, but rebuttably, presumed to own all of the funds in a joint account, and if the presumption is not rebutted, all of the funds in a joint account are subject to garnishment.
What that means, in English, is that a creditor may take funds that belong to a non-debtor without notice or an opportunity to respond. This would seem to directly conflict with the due process requirements of the U.S. Constitution (and the Minnesota Constitution, for that matter), but the Minnesota Supreme Court ignored that conflict in reaching its conclusion.
The lawsuit is not over, but the law has shifted back in favor of creditors and debt collectors. For now, it looks like keeping money in a joint account is probably a bad idea if the other account holder owes anyone money.
Savig v. FNB Omaha and Messerli & Kramer, P.A. | Minnesota Supreme Court
According to Felix Salmon, Mint.com, the popular personal finance website, may be benefiting from playing outside the regulatory rules that govern banks. At a Banking 2.0 panel at SXSW, Mint’s Aaron Patzer explained why:
For instance, he said, he can see pretty much in real time how much money his huge database of customers is, in aggregate, spending at Blockbuster vs Netflix vs Redbox, or any other set of retailers — and that kind of information would surely be extremely valuable to hedge funds. It was clearly something he’s talked a lot about, and he never said that he wasn’t already selling that data to the highest bidder.
If I am to do my banking online, I need to be confident that my financial information is being kept secure. This is not like Google, where I can stomach giving up a bit of anonymized usage data in exchange for great software. No, when it comes to my financial information, I do not want my data sold to the highest bidder.
After reading Salmon’s column, I deleted my Mint account.