posted
Jun 5, 2010 by News Gatherer
Greetings. Powerful stuff. I know how the financial system works — the details, the tricks and traps — and I’m going to let you in on some industry secrets. Don’t worry, though: I quit my job at a big bank years ago. By the time you’re finished reading, you’ll know a lot more about the games banks play and how to beat the system — or change it. I’m Dan and I’m a banker.
You belong to a small group: just 3% of Americans.But even if you do, you might not realize that there are ways banks can reduce the value of what they provide without ever formally letting you know.Here are the three most commonways banks give you the bait and switch. First up: product terms that change without notice.You read your entire bank and credit card terms and conditions every time they’re updated? Bravo.
As the worldwide head of ING Direct was quoted in a2002 INSEADcasestudy: “People are sleeping. The practice of raising interest rates and dropping them (knowing most customers won’t notice) is so common that it has a name within the industry: pump ‘n’ dump. Remember that awesome interest rate you first got with your savings account? You’re probably not getting it now. Even friendly banks do it. We wake them up with very dramatic advertising, they switch their money and then they go back to sleep.”.
How the world has changed. The result? You might still be earning the same number of miles but the majority of rewards tickets now cost twice as many miles and include a booking fee. Over time, almost all rewards programs change. Every year, as part of the annual budgeting process, big banks and travel companies review the costs of their rewards programs. Make sure you know if you should make a change, too. Once upon a time, 25,000 airline miles used to get you a round trip ticket, a bag of peanuts, and space on the plane for your bags (for free). And every year, the goal is explicit: reduce costs without changing how customers earn rewards, so the program still feels the same.
The moral of this story? Take a few minutes every year to see how good of a deal you’re getting from your financial services providers. Unfriend your credit card company. Fire your bank. Let them know you noticed. If you don’t like what you see, make a change. They’re changing the terms of your relationship and not letting you know.
I’ve been knowing this for years…hence I never keep a dime in the bank.well expect for the checking minimum so i can cash checks but as soon as they r cashed the money gets pulled out right away….In fact I hate banks, paying someone to handle your money…how dumb is that likeReply.
A savings account keeps your money perfectly safe (FDIC), you earn interest (very small, but better than nothing) and if you take a minute to read and plan you can make sure you will never be charged anything. Not so dumb…1 like.
The first $6500 you charge earns 0.5% and 1.5% at gas stations, grocery stores, etc. Also the $6500 bonus resets annually, so next year you have to spend another $6500 before getting the bumped up interest rate3 likesReply. The american express blue card is especially sneaky with their interest rate as mentioned in the article. I’m sure there are a ton of people who don’t charge $6500 on their card. After spending $6500, the 0.5% gets bumped up to 1%, and the 1.5% gets bumped up to 5%.
That was a real pump and dump. That was despicable. likeReply. Also, I had an emigrantdirect account at 4% interest before the economy began collapsing but it went down to 2% or so and emigrant opened up another savings bank with the same layout, different name, but with a better interest rate.
Meaning — banks are allowed to create money out of thin air, “lend” you that money, and then charge interest on it. He didn’t mention the biggest way that banks make money… We all learn in school that because of our monetary system in the US, banks are allowed to lend out 10:1 ratio of money to reserves. Oh, and if you have a mortgage? they then turn around and sell your promissary note on the open “mortgage derivative” market, so they get paid in full upfront for your note, plus the interest and principle you are paying monthly. When you are paying your mortgage, the bank has already been paid in full for it. It’s just a huge money-making scheme for banks… and they need “bailouts”… I love it.1 likeReply.
httpv://www.youtube.com/watch?v=14UHEk5DziY&feature=youtube_gdata
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