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This isn’t so much an idea as an appeal for other people to contribute ideas to address this problem.
Last night I watched “The Card Game,” an episode of “Frontline” on PBS. The show covered all the tricks that banks and credit-card companies use to make money off their victims—uh, customers.
Mostly, it’s bait-and-switch marketing. Banks advertise “free checking” and then charge whopping big overdraft fees. They manipulate the order in which they process your checks (or debit card charges) in order to maximize the number of overdrafts. They advertise a “zero percent” credit card, but the fine print in the application says that you might not qualify for zero percent, and you might get a 28-percent card instead. Their target market is people who are *most* likely to incur late fees and overdraft charges.
<quote> [From] ‘92, ‘93 onwards, the industry started moving away ... from the traditional pricing [to] where they made it look like it’s a giveaway, and took it back in the form of–I used to use the word “penalty pricing” or “stealth pricing.”<end quote>
—Shailesh Mehta, former CEO of Providian.
So I’m trying to think of services that undermine this marketing strategy.
I am handicapped by a lack of detailed knowledge of financial laws and procedures. So, if you think my ideas “won’t work,” I urge you to suggest modifications that *will* work—and to submit ideas of your own.
Here’s a start: Make it more convenient for people to find out their current checking account balance, or amount owed on a credit card, as well as when their next payment is due and what the minimum payment will be. You shouldn’t have to wait for a statement to come in the mail; you shouldn’t have to own a computer or be computer-literate; and you shouldn’t have to compute your own balance in a pocket ledger-book. The bank/credit-card company has this information already—why shouldn’t you?
The time you most need this information is when you are considering making a purchase, so set up terminals in stores and malls that give you the information you need. Customers should only have to swipe their card and maybe key in a PIN.
I know an ATM will give you your current *checking account* balance—but only if the ATM belongs to the bank where you have your account. They won’t provide it for a competitor. And will they give you a credit card balance at all? I don’t know—I’ve never tried to get it. Anyway, the terminals I am talking about needn’t dispense cash, and so needn’t be as secure or expensive as ATMs, and they certainly should be more ubiquitous than ATMs.
It wouldn’t be immensely expensive. Nearly every cash register nowadays has the ability to send and receive information to and from banks and credit card companies. Setting up an extra terminal for the customer’s use shouldn’t be as expensive as setting up an additional cash register.
Surely the only reason this isn’t already being done is because the banks/credit card companies don’t want to provide this information, because it is not in their best interest to do so. So I assume some regulation would be needed to require them to provide it.
"The Card Game" on PBS's "Frontline"
http://www.pbs.org/...e/creditcards/view/
[Jim Bob of Merriam Park, Nov 26 2009]
Banks Win Court Case
http://news.bbc.co....usiness/8376906.stm
'Excessive' charges for unauthorised overdrafts not illegal. [DrBob, Nov 26 2009]
[link]
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You should get an iphone and look up the info on the internet prior to buying things. |
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As far as banks being out of control, supply side economics rears its ugly head 30 years after it's inception. In the 80's and 90's when productivity increased due to internet and computers, Greenspan kept the prime low and gave us cheap credit instead of raising wages to create an artificial demand (without actually recycling resources to the middle class). He has since conceded this was a big mistake. Now were fucked and the rich people have all the money and buy politicians and misinform us all. As we are all now in debt and dependent on banks for survival, consumer choice can no longer regulate their nasty tricks. It likely can only be solved politically with regulation,so call your congressman and say WTF? |
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Or perhaps large online consumer groups, but I haven't seen any of these. |
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MFD for no idea, let's all and quasi-rant. |
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This must be a generational thing, I think. I wouldn't dream of buying something without knowing whether I have sufficient funds in my account before I go out of my front door.
I had a similar discussion with somebody yesterday. It's irrelevant what order a bank processes your cheques in, you either have the money to honour them all or you don't. If you don't then you shouldn't have written it out.
The banks in the UK won a case yesterday regarding 'excessive' overdraft charges and, I have to say, I am torn about whether this is a good thing or not. On the one hand, I have no sympathy for people who spend someone else's money without permission (in other circumstances this would be called 'theft') but, on the other, excessive charges can leave people trapped in a permanenet cycle of debt. Clearly a better solution is required for the problem.
Regarding the appalling service that you seem to be getting from your bank, I would echo 21Quest's comments and suggest that a) you cut up your credit card with a pair of scissors and throw it away (don't throw all of the pieces out together though) and b) you move your account elsewhere! |
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A lot of the functionality you seek for ATMs already exists in the civilised world, such as Europe where the EU has really helped with being able to access your money abroad. Within the UK I know I can access my balance from the ATM of any bank or building society, except possibly for the dodgier ones that charge you for a withdrawal. |
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Credit cards are meant to encourage bad fiscal behaviour. If you absolutely have to have one look for one that has the best reputation for consistent, good behaviour. I got rid of my seldom used one this year because I viewed it as a fiancial risk after someone cloned it. |
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Hmmm, Euro. If I live in France, does that mean I can go to Italy and use a cash machine there and not be charged a "Foreign Transaction" fee. I mean, sure, you wouldn't expect to pay a forex commission - but there's still border controls etc to consider - I seem to remember people getting told off for driving across the German/Luxembourg border with stacks of cash in their cars due to the possibility of hiding it away in Luxembourg banks - but they use the Euro too, if cross-border cash withdrawl within the Euro-zone was free, you could just opt for using a cash machine instead (when stashing your cash away from the authorities) |
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FYI: People seem be assuming I have a problem with my own finances. I do not. It *is* possible (though I see little evidence of it here) to manage one’s own finances well and at the same time have some sympathy/concern for others who don’t. |
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It *does* matter in what order they process checks. If you have $100 balance and you write checks for $20, $40, and $70, and the bank processes them in that order, you have ONE overdraft. If they process them in the order $70, $40, then $20, you have TWO overdrafts, and twice as much in fees. (I can already hear your reply: “Yes, but—that would never happen to *me*.” See previous paragraph.) |
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I am in the USA. The PBS program I referred to is shown (as far as I know) only in the US and addressed only problems that occur in the US. |
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Banks are increasingly offering mobile banking, so your balance need not be so unreachable. As to excessive fees, the phrase is an oxymoron. |
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//As to excessive fees, the phrase is an oxymoron// Don't you mean a tautology? |
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//It *does* matter in what order they process checks. |
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But JB, if you have an account, somewhere along the line you signed a contract agreeing to this. The thing that people are saying is that where's the notion of "caveat emptor". That these banks have your best interest is not true. That they would never be dishonest is not true. You are right, in that most of these bad faith practices, would/are regulated by the government in other parts of the civilized world, so as not trick those who don't know better. |
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Last I heard, it was still legal for banks in the US, when providing your balance via ATM, to not quote your "current" balance. They are allowed to quote any amount which would have been valid within the last 72 hours; or up to $200 dollars over your actual balance if the bank is willing to extend credit for that amount. |
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So, you check your balance, see that you have $350; you go ahead and purchase a TV for $300. Then you find out you have no money left, an "over-limit fee" of $75 dollars, and a $150 loan charging %24.99. |
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Still, this comes under advocacy right? Let's all and all that? |
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@lurch, you're right, the system is broken. did you know there are no usury laws in the US anymore? So, we have banks, that have a fiduciary responsibility to maximize their shareholders return where it is against the law not to seek maximum profits. And we have the consumers, who are now increasingly in debt and desperate and don't have time to examine every trick on the 25 page 20,000 word contract, they got a checking account with and are trying just to make it in the short term, so will agree to anything. |
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zen_tom, I stand corrected :) |
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There's no doubt that some of these practices are outrageous. And banking is a regulated industry, and, in the US, there are many changes coming -- whether they are good changes or not is debatable. I myself have switched banks over being charged for an overdraft -- but for most of us, there is almost no reasonto be in one bank rather than another -- in other words, it's a commoditized industry that should be competing for our dollars, and it does -- there are plenty of banks that highlight the absence of such fees as part of their marketing. |
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Jim Bob, I think you missed my point. If you have $70 in your account and you write out cheques for $20, $40 and $70 then what I am saying is that you don't have the money in your account to cover them, no matter what order the bank processes them, and so you shouldn't have written them out.
A cheque is a promise by the issuer that the payee can present it at your bank and receive payment of the equivalent value. If the bank doesn't honour the cheque because you don't have the funds in your account then you have, in essence, committed a fraud but if the bank does honour it then you have spent someone else's money which is a form of theft. |
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[zen_tom], putting schengen into Google could help
you get a better understanding of the Euro zone. |
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UB in the US very few people have positive net worth. For a person with significant debt a substantial checking account balance is poor money management. If you are trying to get out of debt you should carry as small a cash balance from month to month as is possible even at the risk of occasionally using additional credit. The interest rates earned by savings accounts are substantially lower than the interest on unsecured debt. If so designated your bank account comes with a line of credit attached (an "over draft" line of credit). It is not stealing to use this line of credit, nor is it fraud to write a check against it. |
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The savings and checking side of a bank's operation should not be a profit taking tool. Capitalism eats babies. |
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//Capitalism eats babies.// |
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See, even just a few years ago or so, anyone with that view was a "friggin socialist". |
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A number of years ago, back when I was more of an idealist, I went through a phase of wanting to find out more about socialism and capitalism, and other "alternative" economical models. Let's just say I was "discouraged" at school, and also when trying to do research at the local library, this being before the internet revolution. |
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Not that I have any partcular ideas about whether any of the alternatives to unbridled capitalism have any hopes of being successful, but I do hope that people are at least removing their blinkers in responce to recent events. Personally I think unrestrained capitalism eats more than just babies. But then again I think that pure democracy is inherently evil, too. |
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//The savings and checking side of a bank's operation should not be a profit taking tool.//
Wow, that must be the most profoundly ridiculous statement I've seen on the Halfbakery. As to US median Net Worth, you may want to check out Wikipedia. |
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I think credit cards should have a little display area that shows your current balance. The display would be updated by a machine every time you make a purchase. The display area could be something as simple as a dry-erase printed area, or something more sophisticated like the dyes in a rewritable CD. |
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xaviergisz: That’s the kind of thinking I hoped for when I made an “appeal for ideas” at the beginning of this thread. Whatever the faults with your (or my) ideas, at least you’re on the right track by applying some constructive thinking to the problem, and if we continue this process, we can make those ideas better. Thank you! Thank you! Thank you! I now know that at least one person (besides me) who acknowledges that there *is* a problem and is willing to think creatively about it. |
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How about this: Instead of a display area that shows your balance in a format that is readable by anyone who gets a glimpse of your card, have the balance encoded in the magnetic stripe on the back, and make it displayable (if you want it) whenever you swipe the card through a card reader and key in the PIN. |
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WTF competitor, I didn't assert the AVERAGE net worth was negative (given a national debt this could be argued), I said that a few individuals had a positive net worth and most households had more debt than assets. Since the national average is somewhere around 21k (sans housing) I don't think that I was that far off. I wouldn't rely on a wiki for this sort of information anyway. As to deposits being the profits engine for banks, the traditional way that banks made money was lending, specifically in making secured loans. The deposits side was meant to be as friendly as possible to provide reliable capital for the profitable lending operations. If that is the most unreasonable statement you have ever found on this site..... |
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Jim, Jim, Jim, it is of no help or use to make it easier for people to know what their credit is at all times. It only increases temptation. What we need to do is not use creditcards ourselves and change public opinion to include memes like: banks are as untrustworthy as crackdealers, debt is really bad, loaning and lending money is a crime. |
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[UB] Credit cards have their uses - I pay for lots of things on my credit card, particularly online transactions, because of the protection against loss or fraud it offers. Then, my entire credit card balance is automatically paid off every month by direct debit, so I never pay any credit card fees or interest.
[DrBob] I agree - if you don't have the money, don't spend it, or if you do spend it, acknowledge that you're borrowing money on terms set by someone else. |
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WcW, the current political climate has me overly sensitive :) |
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However, your statement seemed to indicate that banks should not make a profit on savings or deposits. |
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I understand that you meant (at least I think I do, correct me if I'm wrong) that it is bookkeeping functions that should not be a profit center. I don't necessarily agree with this, either, but I certainly understand outrage at overcharge fees. |
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I do believe the bookkeeping function of banks, will be disentermediated over time, by transaction oriented, low cost alternatives (in the way that online trading displaced that function from Wall St. firms). One can easily envision Intuit running such a new "bank", as an example. |
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But the pooling and investing function is rather a different matter. It is vital to economic growth, and while I'm very interested in lower cost, higher efficiency alternatives, and posted such ideas on HB, it is the engine of prosperity for the planet, and as politicians, who bear as much blame as anyone for the crisis, fuck with it, it makes me much, much angrier than overcharge fees. |
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There is no easy answer to the credit card problem.
The reason that people use them in the first place varies, according to that persons values. The solutions will also be varied because of said reasons.
The best answer is to simply live within your means and if you can't,...suffer and learn. |
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What people need and what they want may be very different.... Teachers are those who educate the people to appreciate the things they need. Elbert Hubbard |
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Experience is still the best teacher and in my opinion we are lifetime students. |
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[UB] But as far as I know, you don't get the same level of
protection with a debit card - e.g. if you pay for something
online with a credit card and the retailer goes bankrupt
before shipping your goods, the credit card company
swallows the loss. With a debit card, you lose. |
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//the pooling and investing function is rather a different matter. It is vital to economic growth// |
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Or is it? The Austrian school of economics ( Mises etc) does not seem to think so. An investment which is only possible due to artificially cheap credit is, by definition, an investment with poor returns. Cheap credit also has the effect of raising land prices. Banks then stifle commercial competition because aspiring entrepreneurs get lower returns on their own money, while already successful businessmen get the cheapest credit. |
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Those Islamic states usually have the resource curse. That is, they heavily export oil, there are armed conflicts over oil, driving out manufacturing business. Government is funded by oil rather than taxation, which erodes democracy as they are not dependent on the population. The heavy export strengthens the nations currency making it difficult to manufacture for export. |
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Also, Sharia law only prohibits lending at interest. Banks can still invest by purchasing shares and can offer interest free credit (which the government may provide). So it's not true to say there is no pooled investment. |
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//There is no incentive to invest if there is no return on it// |
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A state run bank may choose to do it anyway to promote certain forms of business or activities. |
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I've not read the idea or the posts yet, but + for the contradiction of terms in the title. |
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[UB}, that characteristic is not limited to banks. In fact I would suggest it is universal. |
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which is why we have communities and laws. some people will be bastards if given the chance, but why should we put up with it? We outlaw many ways of making money why not simply make extortionist banking a social taboo. if you think that that is too anti-capitalistic consider the huge body of law that currently legislates loans and interest rates, wouldn't fixing the problem simply be a small expansion of these existing laws? |
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//why not simply make extortionist banking a social taboo// Seeing as the extortionist bankers run the government, this seems an unlikely step. |
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//consider the huge body of law that currently legislates loans and interest rates// |
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And consider how it made us safe from banking collapses... |
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Glass-Steegal is anecdotally perceived to have stopped banking failures until its relatively recent repeal. But genuine students of the issue acknowledge that it's effects were largely due to a side effect of reducing leverage, and not direct prohibition on banking and insurance mix. |
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That's the one regulation we need -- you cannot lend more than X times what you have, and you shouldn't borrow more than X times what you have. |
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And guess what, that brings us full circle to why we all instinctively felt that the poster of this idea should more carefully manage his money. For some reason, it's tougher for people to understand that it's government manipulation of money, through policy and regulation, that drove the current crisis, by encouraging the violation of both of the above rules by both banks and consumers. |
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/It *is* possible (though I see little evidence of it here) to manage one’s own finances well and at the same time have some sympathy/concern for others who don’t./ |
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Thinking outside of the box, or maybe inside, it occurs to me that people who do not manage their finances well and spend beyond their means are similar to those who engage in risky sexual behaviors and put themselves at risk for STDs. In both cases there is an immediate reward but the risk of long term consequences. Maybe tools from the public health arsenal could be redirected to encourage fiscal health. |
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Exactly how this would be done is left to the reader, since that seems to be the general theme of this posting. |
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Some basic mandatory financial education throughout high school would be a good place to start. Any creature that has evolved to survive by feeding off of its unsuspecting young is not destined to be very successful in competing for survival. Such is the state of our nation. |
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/feeding off of its unsuspecting young/ |
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this actually might lead to the evolution of very suspicious young. I suspect many creatures follow exactly this paradigm: clear your birth area quickly, because Mom might still be around and she might be hungry. |
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//feeding off of its unsuspecting young// |
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It occurs to me that ants do that. The queen has a zillion daughters and they all run off and fetch food for her so she can have yet more daughters. Yet they are generally considered very efficient creatures. Although the ones doing the work are sterile. |
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More likely drones, to continue the insectoid theme, then slaves. |
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