We are living in a time of uncertainty and mistrust when it comes to government, the economy and financial institutions. Are banks safe? Can we trust them? Which one should I pick? Should I just hide cash under my mattress? These are questions so many Americans ask themselves every day. I think in order to answer these questions people need to be informed about the basic roles of a bank and what are the bank’s responsibilities and the customer’s responsibilities.
[dropcap]H[/dropcap]aving spent years in banking, it became painfully obvious to me how little people knew about the banking industry. Every day we hear and read things about banks, mainly negative. I want to talk about how to bank successfully. When you are shopping for a home, do you walk into the first house you walk through and just buy the house without asking any questions about your new purchase? No, most people look at many houses before they settle on one. Home buyers want to make sure they get the best interest rate and an affordable price. Yet it baffles me the number of people who will walk into any bank, open accounts and sign up for whatever bank products the banker suggests. This is your money we are talking about. People have to take a much more active role in their banking. Banks are a for profit business and it is their job to make money. I take no issue with this. Car dealers are a for profit business and yet people go to dealerships every day to buy a car and seem to be satisfied. Now don’t get me wrong, I am not saying the banking industry is a smooth well-oiled transparent machine. I am saying though that it is up to you to make sure you are an informed banker.
If I am looking for a place to put my money and open up bank accounts that I will use on a daily basis, I want to make sure I choose a banking institution I trust and feel comfortable with. How do I do that? I do it the same way as if I was looking to buy a home or a car. I shop around. There are different types of financial institutions, and the banks most familiar to people for their everyday banking needs are retail banks and credit unions. There are some differences between these financial institutions. A bank is an institution that accepts deposits and uses these deposits in lending activities, either directly or through capital markets. A bank exists with a motive for profit and that is to generate income for its shareholders. On the other hand, credit unions are cooperative financial institutions that are owned and controlled by its members and operated for the purpose of providing credit at reasonable rates, and providing other financial services to its members. Most credit unions are not-for-profit.
Your basic bank is set up as follows. You have your tellers, bankers and manager. The person you will want to really interview is your new banker. Why is the banker the most important you ask? If you need to open up a checking or savings account, apply for a loan, or find out about credit card options it is generally the banker that will assist you in these matters. Since this is a person you are allowing to give you financial advice it is up to you whether you find this person to be sincere and trustworthy. Does this person have your best financial interests at heart or are they trying to make their sales goals for the month? This is where it becomes the customer’s job to ask the important questions and in order to do that you must have an idea of what your goals are when you meet with that banker. Bankers run the gambit; some will tell you need a credit card when you already have four in your purse, some will tell you to apply for an equity line so you can finish that home repair you have been wanting to do even though you are trying not to accrue any more debt, and of course you have that banker that will tell you that you need to open an additional two checking accounts when you already have enough. [quote float=”right”]Banks are a for profit business and it is their job to make money. I take no issue with this. Car dealers are a for profit business and yet people go to dealerships every day to buy a car and seem to be satisfied. [/quote] The banker you are looking for is the one that sits down and takes the time to get to know you and your current financial situation and what it is you are looking for in a bank. Some of the important questions you want to ask of your banker are first and foremost about fees: ATM, minimum balance monthly service fees, check return fees, and overdraft fees. Make them take the time to go through them with you. Also, if that bank is trying to sell you a credit card, ask them why you should pick their card over someone else’s. If you already have several credit cards ask them why they believe you should have another one. Also know that if you have a problem with your credit card most banks will have you call a 1-800 number since the credit card department is generally separate from the retail bank. If you already have a checking and savings account and they are trying to sell you another one, have them explain what purpose that additional account serves and what fees are attached with an additional account. If you end up getting a loan through a bank, find out who is going to service that loan, don’t always assume it is the bank where you got the loan; it may be, it may not. Find out though. One other important thing to inquire about is overdraft protection. Have that banker explain in detail what that means to have or not to have overdraft protection and any fees that might be attached to that.
Part of my 5th through 8th grade curriculum for dollars and common sense goes into depth around many different aspects of banking. There are the students who have been into banks and might even have their own savings account, but yet they don’t know what a bank really does. Some of the comments I hear from them are, “I don’t want to put my money in a bank in case it gets robbed;” “Banks rip you off;” “I am going to keep my money at home;” and “My parents say banks are bad.” Some of the children I have taught for three years now could probably tell you more about banking than some of the customers I helped when I was in the banking industry. Aside from them knowing the mechanics of banking it is just as equally important to me for them to understand their financial responsibility when it comes to banking.
When teaching my students about banking and customer responsibility, I make sure they know what they are accountable for and what their role is as a customer. First and foremost, it is not the bank’s job to manage your money, that is your job. It is not their job to call you with a daily balance update and let you know if you are running low on money. If a customer incurs an overdraft fee because they were not keeping track of their spending, that is on the customer. Many bank customers these days rely on online banking for everything. I myself use online banking but I use it in addition to a check register. Many people find that to be an archaic system. The reason I do this is because online banking is not always 100% accurate. Customers do not always account for outstanding checks waiting to clear or automatic drafts that have yet to clear. Just as I tell my students, if you want to rely on online banking 100% that is fine, but if you do not keep additional records and you incur an overdraft fee because of matters I just mentioned do not get angry at the bank. If a banker talks you into opening a credit card and you find out after the fact there is an annual fee, do not get mad at the banker, you should have read the material on that credit card before signing up for one. Too often we think the banks should be the experts and always have our best interest at heart, but that is not always the case just like anything in else in life. It is our job to ask questions, do our homework because after all it is your money. Do I believe banks are safe? Yes, I do. However, when it comes to my money, you can bet that I am going to inquire about every fee, every cost, and how I benefit financially from what they are selling me. So should you!