Why is banking culture so bad?

So I’m pretty irritated by most banking culture.

Banks made bad decisions.  They got bailed out, and they are still being given access to a lot of cash for 0% or very very low percentages. This means they can make even more money.

Merchant Accounts, the good and bad.

Banks also give merchant accounts.  These accounts let business do commerce with your credit and debit cards.  They don’t cost the consumer, they cost the merchant.  My business gets charged between 1.8% to 3% + a .20-.30c transaction fee.  In terms we can all understand if we cleared $10k through 400 purchases we paid them somewhere around $320 for the privilege.

Now we work hard not to pass this on to the consumer, we just soak it as a cost of doing business.  The point is that we pay for those cards.

On to debit cards.

Then the government said you can’t charge a heck of a lot more to merchants for those debit cards.  Rates were almost competitive to the above numbers where they used to be pretty cheap.

We like debit, saved us money, but lately, not so much. To the point we stopped asking, “Credit or Debit?” We just charged it credit, made so little difference.

Now banks are pilot testing charging their customers a “convenience” charge to use their debit cards (yea the BoA $5/a month comes to mind today.)

It’d be like charging you for basic check usage.  All because the government said you can’t keep extorting money from merchants. They turn and look back at the consumer directly.

Bank of America said that they need to make a profit.

I’m all for profit, really.  You make profit through excellent products and customer service. Not from just taking money for something which has been paid for 100x over.

Lets recap.

Banks make a lot of money.

Banks make a lot of money off your money.

Banks make a lot of money off merchants.

Banks want you to pay for more without giving you more.

Banks are not innovating.

Why should anyone pay more for the current level of services?

Why is banking culture so bad?

Now I know this isn’t all banks, and it probably doesn’t involve 70% of the private credit unions but there is an endemic problem with banking culture. I think it needs to really be thrashed for being so callous, stupid, and outright heavy handed with how it is doing business with our capital.  While our money sleeps in their coffers they use it to make more money.  They often charge us for this benefit, rarely give us anything back, and have you seen the current savings interest rate?  Oh yea it’s too small to see.

If I were a bank I’d be looking at how I can serve the consumer, what I could do to make their life easier, better, faster, while earning more with what little we have.

Instead many who took bailout paid back early (illegally) so they could get their kickbacks set back up for the executive arms.

It’s just sad, and I had to rant about it for a moment.  I’ve got a keen eye on those banks which hold mine, and my businesses monies.

6 Responses to “Why is banking culture so bad?”

  1. Marty
    October 6, 2011 at 4:20 pm #

    I don’t think it’s in anyone’s interest
    for the gov’t to ask any bank to make “less” money/profit, without serious consequences.

    As I was explaining to a friend recently, the banks were charging merchants a % to accept debit cards (which were free to the consumer) and the gov’t said no, you you can only charge a much lower percentage. So, the banks make less money. They need to make that revenue up somehow, right? Right? So, they charge the customer a $5 convenience fee.

    I don’t really have a problem with that — it IS convenient alright. And as much as you’d like to think otherwise, it IS the consumer who ultimately paid the merchant’s % fee. All of your business expenses are ultimately (hopefully!) “soaked” up by the chocolate addict.

  2. andy
    October 6, 2011 at 4:38 pm #

    Marty I understand the game, I just don’t understand the why–or I do and the answer is just greed over substance.

    The interchanges were built decades ago, the overhead costs are nominal if not inflationary stable. So what is charging more getting us, it’s not getting us better anything, it’s just paying the machine more. I don’t like profiteering like that. Just because you can doesn’t make it right.

    Luckily banking is one sector that is very influenced by those who put their money in them and you can rather easily move to another bank if you don’t like the rules of one. I guarantee the backlash from this will be watched closely by those who were even fingering the trigger of such notions.

  3. Marty
    October 6, 2011 at 4:48 pm #

    Apple is no less part of the machine you don”t mind paying ;) No reason a phone should cost 400 nor a song 99 cents nor a CEO earning $1 a day to the tune of 8 billion dollars.

    Greed you say?

  4. andy
    October 6, 2011 at 5:09 pm #

    No, that’s not a logical point. Apple’s a hardware and software developer. By nature it develops. If I bought my music through apple, which I rarely do, I’d say they purchased 20m songs over the last few years. It’s all a massive reinvestment.

    Again, banks profit off of our money and what you get for that is very little sum gain. Show me the reinvestment strategy which gives consumers better options. Show me the last great advancement since plastic and the interchanges.

    Many other industries give you something for your fee. Just because you couldn’t extort one group, for another, isn’t a fair shake it’s just lazy execution. It’s uncreative and shouldn’t be rewarded. If I were a stock holder of such a company I’d complain that the product diversity and emerging growth was very lackluster and should be looked at. I’m betting it’s one reason that secondary banking elements like Square are killing it.

    Even the telco’s which I abhor for not doing enough are forced into massive reinvestments or collapse under the sheer weight of usage.

    I think it’s fair to raise rates to support a business, especially for inflation, cost of goods, and reinvestment. Just to inflate charges on the backs of either side of the coin, just because, is rather hollow and should be called out as such.

  5. Marty
    October 7, 2011 at 1:50 pm #

    More good background info. Plenty of greed to go around:

    campaign2012.washingtonexaminer.com/article/thank-wal-mart-your-new-bank-card-fee

  6. andy
    October 7, 2011 at 3:49 pm #

    Man that article has a lot of inflammatory tone to it. I love the “outlawed the old debit card business model” or the “highway robbery” tactics. Law put a cap on where it could grow and for some over-extension this drew fees back. It didn’t make it unprofitable, lets be clear, it made it less profitable. I also like that it was supposed to be set by market forces. If the game is being played by the same team then there is no market force. I’ve never seen a lessening of any fees have you? What market force is supposed to do the tidal draw back?

    Like marketing we’re all being conned all the time. This just pissed me off enough to rail a bit.

    If we also want to go back to a check and cash culture I’m all for that as well. If a bank wants to see how unprofitable their service can be I’m fine with that. I think we’d see an end to big banking and the rise of new banks who didn’t need to pay 82M to executives for losing money with bad decisions. Oh wait, that’s probably another gripe. ;)

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