Are Excessive Bank Fees Getting You Down?

For years, people have relied on banks for a variety of services including mortgages, savings accounts, checking accounts, personal loans, credit cards, investments, and the list goes on and on. During this period of time, the majority of these people have said nothing in regards to bank fees, late charges, or penalties. However, things are beginning to change and people throughout North America are expressing their dissatisfaction with all of the many fees that a bank can now charge. Even ATM fees are getting higher, click here for ATM deals.

A bank can make an amazing annual profit simply by relying on all of these additional fees. In the past, a bank would only make money on the interest difference between saving accounts and loans or perhaps other currency exchange transactions. Today, we see many financial institutions making astronomical amounts of money because of all of these additional fees that were never charged in the past.

For example, there are many familiar credit card companies trying to increase their yearly profits by increasing their late payment penalty fees. If you have a balance of $1000 or more, for example, then you may pay a small penalty such as 5 dollars. On the other hand, if you have a balance that is less than 100 dollars then you may end up paying as much as 15 dollars for a late payment fee. There are also certain banks that charge late fees no matter what your balance is.

A recent statistic shows that the average American household has more than $8000 in credit card debt. Obviously, a late charge fee would affect a whole lot of people. Over the years, credit card companies have introduced higher late payment fees and shorter grace periods. This deadly financial combination makes it very difficult for anyone to pay on time.

Various fee and penalty charges make up an astonishing 30% or more of the profits for many banking institutions. There is no indication that these type of annoying fees will do anything but increase from year to year. The truth is that banks and credit card companies are notorious for introducing new types of fees each year. In fact, a consumer action group recently did a survey that showed that there was a rise in late payment fees from one year to the next from 47% to 69%.

There are some banks that provide a one strike penalty policy. This type of policy allows you to have only a one time over the limit or late payment. After your first offense, however, the bank will charge you a penalty or fee for any additional late or missed payments.

The bottom line means that the consumer will now have fewer days to pay off the entire bill to avoid a late payment fee. In the good old days, financial institutions typically allowed 10 or 15 days for the client to make their payment after their bill had arrived in the mail. Today, you will need to be quick with your payments because if they arrive even one day late, you will be penalized.

Understand Why The ATM Machine Remains An Intricate Part Of Banking

When the ATM first arrived on the scene it was revolutionary and really added to the convenience of banking. The average consumer now takes this machine for granted and often thinks of it as just something that is largely separate from the bank itself. The average person doesn’t really realize how much this machine has changed over the half-century that it has been around.

The ATM Machine Is No Longer Just An Outlet For Getting Cash

When this machine was first introduced its sole job was to dispense cash during and outside of traditional banking hours. This is no longer the case. In addition to doing this traditional job, it is now a tool that can be used to more conveniently pay bills, purchase certain types of tickets, and is now evolving to do other things such as foreign currency exchange. It is estimated that close to a half a million dollars is withdrawn from an ATM machine every second. This clearly demonstrates that using this machine as a dispenser of money is still its most common purpose but no longer its only purpose.

Will Internet Banking Eliminate The ATM Machine?

Many consumers and those in the banking industry often contemplate whether or not internet banking will eliminate the need for ATM machines. The reality is, however, that the exact opposite seems to be the case. As technology improves so does the overall functionality of the ATM and that makes it increasingly useful for consumers. Currently, ATM machines are seeing an increase in use even with the rise of internet banking.

As consumer habits change, the banking industry is looking at how it can improve the functionality of these machines to meet those changes. Throughout Asia, the new ATM machines are being installed in record numbers. North America and Europe are also seeing a significant change in the technology used, as well as the placement of these types of machines.

Usability And Safety Are Some Of The Biggest Changes Coming With ATM Machines

Because ATMs continue to be very useful and highly used by consumers, the banking industry is looking at how it can make these machines more usable and safer. By increasing the number of different types of transactions that can be made from these machines it will make them highly relevant for the future. By creating innovations that reduce the chances of fraud it improves the safety of using these machines and that will further propel the popularity and use of them.

Although some speculated that the coming of age for internet banking might bring an end to the ATM machine it is doing the opposite. For all the advantages that internet banking offers there are still some things that the ATM machine simply does better. As a whole, the banking industry is in the process of adding features to these machines and increasing the number of machines available in areas where they are needed. Within the foreseeable future, there is no doubt that the ATM machine will remain and continue to be a very intricate part of the banking industry.

How Banks Work In Our Modern Wold

it can be difficult to understand banking since there are so many different types of banks including commercial banks, savings banks, cooperative banks or savings and loan associations, and credit unions. The primary function of a bank is to lend money deposited by account holders to other borrowers who need it for financing business, buying a home, or sending children to college.

Banks create money by making loans. The amount of money that banks are allowed to lend is subject to a reserve requirement by the Federal Reserve. For example, if the Federal Reserve requirement is 10% and a bank receives a deposit of $100, the bank is allowed to lend $90 which goes out into the economy. Eventually, it will be deposited in a different bank where it is again lent out with a 10% reserve which amounts to $81, and so on.

The depositing customer gets a small amount of interest on savings while the lending customer pays a much larger amount of interest on loans. The bank makes money by keeping the difference. The amount of interest a bank charge depends on several factors including the amount of money the bank has on deposit and how many people want to borrow funds. It is also dependent ‘funds rates’ – the interest rates that banks charge between themselves for short-term loans they need to make in order to meet their requirements. Because lending money is a risky enterprise for a bank they will charge higher interest rates for larger and riskier loans.

How Modern Banks Make Money

There are 3 main sources of revenue for banks in retail banking today:

1. Net Interest Margin
   Net is the difference between the amount of interest the bank pays to depositors and the amount of interest they receive from borrowers. With current low-interest rate policy by the Fed, it means that depositors get very little interest on their savings while bank margins are very high.
2. Interchange
   Every time a purchase is made at a store using a credit card, the merchant pays a percentage of the purchase price to the bank. This is called an interchange fee which could be around 1.7% for credit cards and 1.1% for debit cards. Because most Americans spend more than they save, this is a huge revenue stream for banks.
3. Fees
   The bank charges various fees for their services. This includes ATM fees, monthly service fees, late payment fees, overdraft fees, and penalties. It is estimated that the average household in the US ends of forking out over $200 annually on overdraft fees and bounced checks. Along with foreign exchange charges, these fees can add up to more than 50% of revenue for larger banks.

All this revenue becomes a real cost to customers in the form of fees that show up on monthly statements as well as implicit fees of interchange and net interest margins as merchants pass on the cost of interchange to their customers in the form of higher prices. In effect, every time a person uses a bank service a fee is charged.

Of course, there are costs associated with banking including maintain IT systems, ATM networks, call centers, marketing and advertising, and paying salaries. Maintaining branches used to be a huge cost, however, being online has reduced these costs considerably as very few people actually visit the bank nowadays.

After the recent banking crisis the banking market is now dominated by a handful of large banks and at the scale they operate, retail banking is immensely profitable for them. However, without banks it will be impossible to function in a modern society.