Sat 18th September 2010, 8:43pm
QUOTE(anthony @ Sat 18th September 2010, 11:53am)
QUOTE(Somey @ Sat 18th September 2010, 6:41pm)
QUOTE(Kelly Martin @ Sat 18th September 2010, 1:34pm)
Pretty sure it isn't, as my checking account has been earning interest (albeit at a rather paltry rate) for at least the past two or three years.
I think he means business
checking accounts, in which case I believe he's correct. Personal checking accounts are a different ballgame - I recently asked my so-called "personal banker" about this, when she essentially insisted that I set up a business savings
account in order to avoid a $5/month service charge on my business checking account. The interest rate on the former is negligible, but there's apparently some reason why banks want business owners to set up these accounts... and if past experience is any guide, it probably has something to do with bringing about the ultimate ruination of the economy in an even more ruthlessly efficient way than was once considered possible.
Sort of. It looks like "checking accounts" are barred from paying interest, but "NOW accounts" are not, and "NOW accounts" are basically checking accounts for individuals. I believe non-profit organizations are also allowed to get NOW accounts.
But I'm still not sure how up-to-date this is. In particular, I'm not sure if it was affected by Gramm–Leach–Bliley in 1999.
By the way, one possible reason your bank wants you to have a savings account rather than a checking account is because they have no reserve requirements with savings accounts (they probably want to increase their leverage to the hilt, thus "bringing about the ultimate ruination of the economy in an even more ruthlessly efficient way than was once considered possible"
Forget Gramm–Leach–Bliley. Commercial banks could loan to small businesses and act as their banks under the old rules. They just couldn't do it for brokerages, or act as cash sources for big mergers and stock buyouts (basically, they couldn't touch equities).
The larger banks like Bank of America (may they burn in Hell) make most of their money from people paying exhorbitant interest rates on carried-over credit card balances (often jacked up unmercilessly after a late payment that the bank worked very hard to present to you at the last second).
But second only to that as bank revenue source is the ding they nail customers with, when they "overdraw" their checking account and need a transfer from savings. The bank (until very recently) automatically linked the two (you couldn't UNLINK them, in fact), and gave you "overdraft protection." So you were saved the horrid embarrassment of writing a bad check by mistake, a mistake you could never live down.
Instead, you bank would save up your debits, take care of the large ones first (even out of order), and then charge you the overdraft fee on all the small checks or debits, on each one. So instead of one overdraft fee charge on the big check for the mortgage, they got to charge you 10 separate overdraft fees on the next ten small checks and check card transactions that are now in the hold due to it. The fees alone could add up to big money if you didn't have what you thought you had in your account (some check YOU deposited didn't clear, or somebody who paid you electronically was late). Wow, if you count the overdraft fee, each of those Starbuck's coffees actually cost $35.
All that is what pays for your "free checking and savings". And why they go bananas if you don't WANT a savings account. In fact, unless you're depositing regularly into your savings account, many banks will charge you. They want that account there and they want it active. They don't give a damn how much is in it-- it's a myth that they make major money loaning out your $100 balance. Where they clean up is when that balance gets tapped on overdraft, and they charge the fee.
So banks worked VERY hard to get people to keep minimum amounts on the checking side, so the above unhappy overdraft would have more chance of happening. It's much like the "rewards" for using your credit card-- all that is to sucker you eventually into carrying a forward balance come month, and hopefully then make a late payment and then end up paying 28% interest on what you have left. It's all smooth and easy and pretty soon you're underwater.
Some of this has gone away with the new laws, which allow customers to turn overdraft off, and require customers to actually request banks to give them overdraft protection (if you don't have it, your debit card merely ceases to work when the account runs dry, much as happens when you reach your credit card limit-- boo hoo). The banks were outraged by this, not only because of the money they would now lose on overdraft fees, but because now they had a lot of paperwork to go through again. There was great wailing, weeping, and nashing of teeth, so I heard from many sources.
Some of the same thing has happened to way banks can jack interest on credit cards also (thanks, Democrats, and screw you, Republicans). But they don't apply to business credit card accounts, so look out. (Naturally, Democrats don't give a fig about small businesses being loan-sharked; that's not their constituents).
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