What? "Yeah, my school has a bank branch here," Cate said.
She led me down a hallway of classrooms to the newest branch of the Golden 1 Credit Union, opened last fall. It's a tiny room but it's stocked with computer screens, brochures on the credit union's checking and savings accounts, and student bank tellers working behind the counter.
Sallie Mae, the nation's largest lender of college student loans, has just unveiled two ways to save: certificates of deposit and an FDIC-insured, online savings account. Let me quickly review the details on what Sallie Mae is offering.
It seems like a no-brainer, right? Why would you sign up for a service like this? Well, because banks have started alarming their customers with direct mail that makes not signing up sound very, very scary. The New York Times has a story that details some of the scare tactics banks are pulling out.
Maybe you've already gotten one of these letters (or more than one!). If not, and if you don't want to click on the Times link, here's the short version: They'll warn you that your debit card might not work. (Of course, it only won't work if you don't have any money in your account.) They use words like "emergency" to make you think of the worst possible scenario, and they underline words and use red ink a lot.
In other words, this is just a lot of hype. There are plenty of other ways you can protect yourself if your account runs low and you have an emergency, points out Kathleen Day, spokesperson for the Center for Responsible Lending.
If you're an average American family, you only have about $10,000 in net financial assets -- and that includes the money you need to pay day-to-day bills and buy things like gas and groceries as well as pay for bigger things like the mortgage, car payments and credit card bills.
While the total savings rate has inched up a bit in the past few years, when we as a nation were literally spending more than we were saving, we still need to ramp up our savings efforts.
But banks made more than $38 billion in overdraft fees alone in 2009, so it's apparent that a lot of Americans are spending more money than they have in their checking accounts.
New rules about overdraft fees kick in this coming July. As we've pointed out in other posts, though, this doesn't mean you're off the hook if you try to buy something when you account balance is at zero. Rather, you'll just get slapped with an "insufficient funds" fee, which can cost as much as that overdraft "protection" fee you thought you were avoiding.
Banks were expected to make $38.5 billion from overdraft charges alone in 2009, so they're going to want to make up that shortfall -- along with the money their credit-card units earn that will be curbed thanks to the CARD Act -- somehow. One way they'll probably do it is by reducing or eliminating free checking.
This Bankrate.com article points out that offers of free checking have been dwindling, and many "free" checking programs now come with conditions or catches, such as minimum balance requirements or direct deposit. The article also suggests that customers who want to keep free checking might be limited to online- and ATM-based transactions only. Translation: If you want to speak to a real human being, you'll have to pony up.
Huffington singles out the Big Four banks (that would be Bank of America, Citi, JP Morgan Chase and Wells Fargo) for particular ire, pointing out that they've curbed business lending even since receiving TARP money. She urges Americans to park their money at community banks instead of these TARP-receiving behemoths.
Remember when Uncle Billy in It's a Wonderful Life loses the bank deposit, and George's troubles ensue (and a holiday classic is born)? Or when Loretta Castorini in Moonstruck forgets a bank deposit as part of a series of comedic misunderstandings? Bank deposit bloopers happen in real-life as well, but the dollar amounts are considerably higher and the bank deposit bloopers are often caused by the bank, not the customer. And, the end-results of these bank deposit bloopers are, unfortunately, not always as heartwarming as in the movies.
Take Randy and Melissa Marie Pratt, whose perceived windfall turned into jail time, when they took an erroneous bank deposit and ran. Melissa made a bank deposit to FNB Bank in the summer of 2008 of $1,772.50, but the bank read the check as $177,250. When the central Pennsylvania couple saw the difference in their bank balance, they wrote checks to another account, quit their jobs, bought a new vehicle and moved to Orlando, Fla. They were in the process of buying a house before the bank deposit mistake was traced.
According to the FDIC, which compiled the stats, poor, immigrant and minority members of society are most likely to have trouble finding a bank. In total, a whopping 25.6 percent of all citizens are unbanked or "underbanked," a situation which makes their day-to-day financing more expensive and makes it extremely difficult for them to attain upward mobility.
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