Investing Curiouscatblog

Tag: banking

  • Finding a Credit Union

    NCUA logo

    I have discussed the advantage of using credit unions over trying to cope with a bank since so many banks constantly try to trick customers into paying huge fees. Here are some resources to help:

    • Find a local credit union (site broke link so I removed the link) – with an overview of services offered
    • Find a local credit union from (NCAU) with links to Financial Performance Report data.
    • Credit Unions have National Credit Union Share Insurance Fund (NCUSIF) (“backed by the full faith and credit of the U.S. Government”) instead of FDIC. The limits on the share insurance are the same as the limits on FDIC, currently $250,000 per individual account holder. Use the link to make sure your credit union provides NCUSIF coverage.

    You can also get credit cards through your credit union. In general credit unions are much more interested in trying to provide the customer value instead of trying to stick them with huge fees. But don’t just trust your credit union, check out the rates and fees they charge and comparison shop for the best credit card.

    Related: posts on banking – FDIC Study of Bank Overdraft Fees – Credit Unions Slowly Fill Payday Lenders Void

  • Credit Card Debt and Delinquencies Decline

    The credit card delinquency rate (borrowers 90 days or more delinquent on one or more of their credit cards) dropped to 1.10% percent in the third quarter of 2009, down 6 basis points from the previous quarter. Year over year, credit card delinquencies remained essentially flat from 1.09% in the third quarter of 2008.

    Credit card delinquency was highest in Nevada (1.98%), Florida (1.47%) and Arizona (1.35%). Credit card delinquency rates were lowest in North Dakota (0.66%), South Dakota (0.70%) and Alaska (0.73%).

    Average credit card borrower debt decreased to $5,612 from the previous quarter’s $5,719, and $5,710 for the third quarter of 2008.

    “At end of the 2001 recession, the national bankcard delinquency rate had increased to a high of 1.69% as that recession came to a close (in November of 2001),” said Ezra Becker, with Transunion.

    The slight declines in credit card debt are an encouraging sign that more people are taking the right action to eliminate their credit card debt.

    Related: USA Consumers Paying Down Debt – Consumer Debt Down Over $100 Billion So Far in 2009 – Families Should not Finance Everyday Purchases on Credit – Some Movement on Regulating Credit Cards Companies

  • If you Can’t Explain it, You Can’t Sell It

    Over the last few years Elizabeth Warren has become one of my favorite leaders. She is a leader in economic thought, ethical society and the law (she is a law professor at Harvard Law School). Far too many on Wall Street, Washington and in C-suites are leading us down a very bad path. She is a voice we need to heed.

    If you can’t explain it, you can’t sell it

    “We need a new model: If you can’t explain it, you can’t sell it,”
    …
    The 1966 high school debate champion of Oklahoma may get what she wants. The House of Representatives will vote in December on her idea. She suggested a Financial Product Safety Commission in a 2007 article in the magazine Democracy [Unsafe at Any Rate]. President Barack Obama proposed it to Congress in June as the Consumer Financial Protection Agency.

    Warren won’t discuss whether she may be a candidate to lead the authority, which would have the power to regulate $13.7 trillion of debt products. A Warren nomination would tell banks that Obama is determined to force reduced checking-account fees and limit lender claims in mortgage advertising, among other measures the industry opposes, said Thomas Cooley, dean of New York University’s Stern School of Business.
    …
    In her role overseeing the TARP, Warren has been critical of the administration, accusing the Treasury Department of undervaluing the stock warrants that were supposed to compensate taxpayers when banks repay their bailouts. A lack of transparency about how TARP functions “erodes the very confidence” it was to restore, her committee said in a report.

    I hope she can take her attempts to reduce political favors being granted huge financial institutions and those institution be forced to follow sensible rules to protect individuals and our economy. With a few more people like there we will have a much better chance of a positive economic future.

    Related: Bogle on the Retirement Crisis – Bankruptcies Among Seniors Soaring – Don’t Let the Credit Card Companies Play You for a Fool – http://investing.curiouscatblog.net/2009/04/08/the-best-way-to-rob-a-bank-is-as-an-executive-at-one/

  • Lying to Customers – No Surprise A Bank Does It

    It is a shame that it is no surprise when a bank lies to you. I got a “priority notice” from my mortgage company that my 30 year fixed load could be reduced. They show big huge figures showing current interest rate, new interest rate, potential yearly savings of over $5,000… Complete lies. They are claiming savings with a completely different mortgage, a 5/30 year adjustable rate mortgage (which you have to turn over the paper and note they list “mortgage product: 5/1 ARM” and then know what that means).

    Then they go on for a page with all sorts of text seemingly designed to confuse fools. Obviously they try to claim the savings are what is important and the different mortgages, risks of rising interest rates etc. are not important [why don’t they just make it a 30 year mortgage at the low rate, if they think the interest rate risk they try to stick the client with is such an unimportant detail that isn’t even mentioned on the front page with the “comparison” mortgage rates]).

    Anyone that trusts any company that so blatantly tries to fool you is crazy. When they are not shy about using such obviously deceitful tactics you can’t trust them to do much much worse in ways that are very difficult to protect yourself from.

    As I have said before, don’t trust your bank. More than any other companies I see, financial institution, treat customers as fools to be fleeced not customers to provide value to. It really is amazing people defend banks paying obscene bonuses to those that are able to fool financial illiterates into stupid decisions. The company trying to deceive in this case, did indeed fail (and was saved by the FDIC). Financial institutions have decided that they will just focus on tricking those that are not financially literate out of as much money as they possibly can. If you don’t educate yourself you are at great risk to be taken advantage of by financial institutions focused on finding people they can take advantage of.

    Related: FDIC Study of Bank Overdraft Fees – Ignorance of Many Mortgage Holders – Don’t Let the Credit Card Companies Play You for a Fool – Customer Hostility from Discover Card – Legislation to Address the Worst Credit Card Fee Abuse – Maybe

  • Small Banks Having Trouble Competing with Bailed Out Banks

    FDIC chief: Small banks can’t compete with bailed-out giants

    As the Federal Deposit Insurance Corp. braces for the 100th bank failure this year — the most since 1992 — Bair warned that small community banks are struggling to compete against behemoths such as Citigroup and Bank of America. The reason: Last year’s $700 billion bank bailout proved that the federal government is willing to spend whatever it takes to keep the biggest banks from going under.

    ” ‘Too big to fail’ has become worse,” Bair told USA TODAY. “It’s become explicit when it was implicit before. It creates competitive disparities between large and small institutions, because everybody knows small institutions can fail. So it’s more expensive for them to raise capital and secure funding.”

    The left-leaning Center for Economic and Policy Research last month found that banks with more than $100 billion in assets paid 1.15% for funds, and all others paid 1.93% late last year and early this year. That amounted to an annual subsidy worth up to $34.1 billion for the 18 biggest bank companies.

    Too big to fail is too big to exist. The actions to provide massive taxpayer bailouts to banks deemed too big to fail so that they could pay out billions in bonuses to those who failed so completely in managing their banks has been a continuing example of how bad an idea corporate welfare is. Not only are those given the huge bailouts just looting those payments for their friends much of the rest was just forwarded onto other big financial institutions (that had made bad bets in the unregulated financial markets they lobbied for) to have worthless financial instruments payoff with billions from taxpayer welfare payments to them.

    If we allow the continual increase in anti-competitive behavior by financial institution to be encouraged by the politicians they provide with huge payments we are going to have much bigger problems than we have seen so far.

    If you have accounts with these mega welfare financial institutions: close them. Move to some other institution that can support itself and does not abuse the taxpayers with support from “your” politician.

    Related: Looting: Bankruptcy for Profit – Small Business Owners Angry at Big Banks – Canada’s Sound Regulation Resulted in a Sound Banking System Even During the Credit Crisis – More Outrageous Credit Card Fees

  • Micro-credit Research

    I really like micro-credit as a tool to improve the lives of those willing to put in the effort to build a successful business. I do worry however, that the actual success is less than what is hoped. The idea is so appealing but objective results are not as obvious (for one thing the results, do not seem to be available). I want to find research that indicates what will make micro-credit most effective at improving the economic well being of people. Small change by Drake Bennett

    two new research papers suggest that microcredit is not nearly the powerful tool it has been made out to be. The papers, by leading development economists affiliated with MIT’s Jameel Poverty Action Lab, have not yet been published, but they are already being called the most thorough, careful studies yet done on the topic. What they find is that, by most measures, microcredit does not offer a way out of poverty. It helps a few of the more entrepreneurial poor to start up businesses, and at the margins it may boost the profits of existing microenterprises, but that doesn’t translate into gains for the borrowers, as measured by indicators like income, spending, health, or education.
    …
    They created their controlled experiment by altering the algorithm the bank used to evaluate creditworthiness so that some borderline applicants were randomly denied loans while other otherwise identical applicants had loans approved.
    …
    Working with a microcredit bank in India that was looking to expand in the city of Hyderabad, the researchers did find some small positive effects. Borrowers who already had a business did see some increase in profit. Households without businesses that the researchers judged more predisposed to start one were found to cut back on spending, suggesting they were saving to augment their loan for a capital business expense like a pushcart or a sewing machine.

    Overall the article suggests that the data is hard to get. The time of the studies may be too short to see improvement. And the gains seen are small. I do believe we are in danger of creating problems with the rapid expansion of micro-credit. I can understand why, the situation is desperate for billions of people still. And we do not have many good methods for improving economic conditions for the world’s poor. I still strongly support micro-credit but I worry, especially if interest rates are high, that it may not help. We need to study what is working and adopt methods that will bring about improved results.

    Related: Creating a World Without Poverty – Capitalism from the Ground Up – MicroFinance Currency Risk – 2006 Nobel Peace Prize to Grameen Bank Founder

  • Small Business Owners Angry at Big Banks

    Main Street vs. Wall Street by Kevin Kelly

    Small businesspeople I spoke to over the past few days feel little love for their bank, or the banking system. “Every time I turn around they’re raising their fees just for our business checking account,”
    …
    Fees are only one part of the problem. Several owners I spoke to talked about how difficult it has been to get loans, or how restrictive loan covenants had become. “My bank won’t even talk to me,” confessed the owner of one local eatery who had received a Small Business Administration loan nearly two years ago that financed an upgrade and expansion of his kitchen.
    …
    As for my relationship with Wells Fargo, it endures. Our line of credit comes up in six months, and I’m expecting the bank to try to boost our interest rate, especially given how much it has complained about how it’s too low. Where we once bundled many of our services through Wells Fargo—including our corporate, commercial, and equipment lending and our 401(k) plan, a policy the bank encouraged to deepen our ties—we’re looking to back out of some pieces…

    Good idea, big banks have shown over and over again they take pride in consistently raising fees, reducing service and treating customers as though they are a bother. It is annoying that the big banks are constantly buying out the little banks to eliminate competition (and that regulators allow this is a sad commentary on our disrespect for the principles of capitalism) but when that happens move your banking needs to a small bank and you will be much better off in the long run.

    Choosing to deal with big banks is bad idea. They have provided lousy service for quite some time. Obviously they do not chose to provide value to customers.

    Related: Small Business Profit and Cash Flow – Smaller Companies Grab Bigger Share of Surging USA Exports – Congress Eases Bank Laws – 1999 – FDIC Study of Bank Overdraft Fees

  • Retail Credit Card Fees Much Higher in the USA

    Retailers Ready for Fight on Credit-Card Fees

    Americans are being forced to pay significantly higher swipe fees whenever they use their credit cards than any of their peers in the industrialized world, according to a report by the Merchants Payments Coalition.

    The report, released Thursday by a coalition of retailers, supermarkets, drugstores and other businesses, found that Americans currently pay about $2 in “interchange” fees for every $100 they spend using credit cards. The fee is actually paid by retailers, though consumers feel it in a higher retail price. This rate is twice that charged in the U.K. and New Zealand, four times the rate levied in Australia and more than six times the cross-border rate charged in the European Union, the study says..
    …
    “If we paid the same low credit- and debit-card swipe fees as consumers in Australia pay, then the net benefit for American consumers would have totaled $125 billion over the last four years,” the report says.

    It truly is amazing how incredibly poor the banking services in the USA are. The banks have managed to provide mediocre service at exceedingly high prices. It sure seems to be due to unfair trade practices (allowed by poor regulation). See our tips on how to avoid getting ripped off by credit card companies, though it won’t help with these excessive fees.

    Related: Continued Credit Card Company Customer Dis-Service – More Outrageous Credit Card Fees – Hidden Credit Card Fees – Poor Customer Service by Discover Card

  • Financial Services for the Poor from the Gates Foundation

    The behavior of banks is despicable enough when they are merely trying to trick educated, financially secure people out of their money. Banks charged $38.5 billion in fees last year according to the Financial Times. But that behavior, toward the poor, by banks (paying millions to hundreds of executives for, I guess, getting congress to send the companies billions) is immoral.

    The Gates Foundation has decided to go into improving financial services for the poor. The are supporting micro-credit but also micro finance. Saving is key for poor people to get and stay out of poverty. Most already save money informally but want better, safer options. Setting aside money in a safe place will allow poor people to weather setbacks, build assets and financial security, and invest in opportunities for the next generation. Formal savings accounts also help them keep more of what they earn and easily access their money when they need it.

    The poor need better banking options in poor countries. But the poor need better banking options in at least one rich country (the only one I know is the USA and banks in the USA provide lousy options for the poor). Credit Unions are much more likely to actually try and provide value to customers. Unfortunately banks in the USA seem to operate on the principle that customer are suckers that exist to pay for Porches for the children of bank executives.

    Related: FDIC Study of Bank Overdraft Fees – Microfinancing Entrepreneurs – Incredibly Bad Customer Service from Discover Card – 10 Things Your Bank Won’t Tell You

  • Mobius Says Derivatives, Stimulus to Spark New Crisis

    Mobius Says Derivatives, Stimulus to Spark New Crisis

    A new financial crisis will develop from the failure to effectively regulate derivatives and the extra global liquidity from stimulus spending, Templeton Asset Management Ltd.’s Mark Mobius said.

    “Political pressure from investment banks and all the people that make money in derivatives” will prevent adequate regulation, said Mobius, who oversees $25 billion as executive chairman of Templeton in Singapore. “Definitely we’re going to have another crisis coming down,”
    …
    A “very bad” crisis may emerge within five to seven years as stimulus money adds to financial volatility, Mobius said. Governments have pledged about $2 trillion in stimulus spending.
    …
    “Banks have lobbied hard against any changes that would make them unable to take the kind of risks they took some time ago,” said Venkatraman Anantha-Nageswaran, global chief investment officer at Bank Julius Baer & Co. in Singapore. “Regulators are not winning the battle yet and I’m not sure if they are making a strong case yet for such changes.”

    Mobius also predicted a number of short, “dramatic” corrections in stock markets in the short term, saying that “a 15 to 20 percent correction is nothing when people are nervous.” Emerging-market stocks “aren’t expensive” and will continue to climb

    I share this concern for those we bailed out using the money we paid them to pay politicians for more favors. Those paying our politicians like very much paying themselves extremely well and then being bailed out by the taxpayers when their business fails. They are going to try to retain the system they have in place. And they are likely to win – politicians are more likely to provide favors to those giving them large amounts of money than they are to learn about proper management of an economy.

    Related: Congress Eases Bank Laws for Big Donors (1999) – Lobbyists Keep Tax Off Billion Dollar Private Equities Deals and On For Our Grandchildren – General Air Travel Taxes Subsidizing Private Plane Airports – CEOs Plundering Corporate Coffers