Money grab

Your bank may not be the sneaky culprit that some would have you believe, but don’t confuse it with your kindly old uncle either. Your bank is in business to make money, and it will take as big a slice of your pie as the law (and you) will allow. Today’s volatile economy has given banks plenty of reasons to look for new ways to shore up their own sagging finances, and they’re finding them.

New service charges, confusing account options, and wildly varying interest rates are just a few of the techniques banks use to pump up their slumping profits these days — at your expense.

How bad is it? One former banking executive estimates that you will likely overpay your bank through checking and savings fees, service charges, mortgages, credit cards, and business loans by thousands of dollars in the lifetime of your business, unless you learn how to beat the banks at their own game. Here’s how.

Whether you’re paying interest or receiving interest, never be satisfied with the first offer.

Shop around before you sign. Bank deregulation has produced a competitive environment with wildly differing interest rates and bank charges. If you can find a better deal than your present bank is offering, take it. There is no reason for you to stick with a bank that isn’t competitive.

Consider certificates of deposit (CDs) as a place to stash your extra business or personal cash.

Considering today’s anemic interest rates, one of the best investment choices through your bank are CDs. As a rule, the longer you’re willing to leave your money in a CD, the higher rate of interest it will return.

One popular way to gain maximum advantage investing in CDs is to break up your total kitty into several equal parts and invest them in CDs with staggered maturity dates. This technique, called laddering, will allow you to take advantage of the highest available interest rates while ensuring that a maturing CD and its penalty-free cash are never very far away when interest rates start their inevitable climb.

Don’t think your bank will give you the best available rate when you allow a CD to roll over automatically.

It almost surely won’t. Always call or visit the bank to review all current interest rates for CDs, including any promotional rates that might be available. Banks often run promotions offering interest rates higher than their regular rates. An automatic renewal isn’t likely to get that rate unless you ask.

Your bank will send you a reminder when each CD approaches its maturity date. The notice will dutifully explain that you aren’t required to do anything at maturity. If the bank doesn’t hear from you, they’ll just roll it over. They’ll renew it for the same period as the original and pay you their current interest rate. Sounds fair, so millions of individuals and busy business owners take that easy road. Those people are making a mistake that you should avoid.

Keep a lid on bank charges.

According to the Federal Deposit Insurance Corporation (FDIC), banks collected an astonishing $38 billion in 2014 in service fees from such things as assessing bad check charges. Estimates for 2015 call for more than $40 billion.

Some banks make you pay big penalties for small errors. Let’s say you accidentally overdraw your checking account. You have $500 in the account and you write three checks in one day. The first is for $10, the second for $20 and the third for $520. Some banks process such checks in order of size. In such a case, the $520 check would be processed first. That would mean all three checks, not just one, would bounce. Then you’d be hit with three separate bad check charges. Besides an overdrawn account, you’d be out as much as $105 in painful overdraft charges (some banks are now charging $35 for each overdrawn check).

Never allow your money to lie idle.

If you don’t already have one, open a money market account at your bank and ask to have it linked to your business checking account for telephone or online transfers.

Deposit all of your daily receipts into the money market account where they will immediately start drawing interest. Never deposit receipts directly into your checking account. Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks written.

The banks have made this technique so easy to use that there is no longer any reasonable excuse for not using it. While even money market interest is anemic now, interest rates are bound to climb and you’ll be set to benefit when they do.

Get a divorce from those ATMs.

Remember when ATMs came on the scene? That’s when the banks embarked on extensive marketing campaigns designed to persuade you to help them lighten their payroll load. Of course, they didn’t put it quite that way. Instead, the ads trumpeted how convenient and time saving it would be for you to use an ATM instead of bothering to visit a live cashier. What’s more, this new service would be entirely free.

Millions of us took the bait. Once the public became hooked on ATMs, the predictable happened; some anonymous bank executive had a brainstorm. “Let’s levy a charge on customers’ accounts whenever they use an ATM owned by a bank other than our own,” he said. Once that word got around, nearly every bank in town joined the cause. At last count, nearly 90 percent of banks are assessing ATM surcharges. Fees now average from $1 to $2 per transaction.

This situation presents another opportunity to keep the bank’s hands out of your pockets. If you’re paying anything at all for the use of ATMs, stop using them. Cut up your ATM card and resume that old-fashioned practice of stepping inside the bank to transact your business.

Is this an unthinkable step backwards? With your busy schedule, would it be a frightful inconvenience for you to do without ATMs? Of course not.

Dumping your ATM card requires nothing more than a slight change in your timing. Once you arrange your schedule to visit your bank during banking hours, you’ve won the battle. With the extended banking hours offered by most banks these days, the whole process is a non-event. You’re likely to find that the line waiting to use the ATM machine is often longer than the line inside the bank.

However you do it, don’t allow your bank to charge you for withdrawing your own money.

Consider firing your bank.

Chances are that you and your business have been a victim of merger mania at least once. That’s when you wake up one day to find out that the bank you’ve grown comfortable with is no longer around. It has merged with a strange new bank that promptly laid claim to your accounts.

Will this new bank, which is larger than the gross national product of some countries, treat you better? Will it exercise economies of scale in order to bring you better services? Not likely. Experience has shown that some of the huge megabanks resulting from merger mania are raising inefficiency and customer alienation to undreamed of heights.

No, this isn’t the work of charlatans intent on robbing you blind. It’s simply the classic symptom of unwieldy bureaucracies grown to a size that defies the best of management intentions. Now, with new laws blurring the line between banks and other types of financial institutions such as insurance companies and stock brokerages, financial behemoths can only grow even larger.

Fortunately, solving this frustrating problem is relatively painless. Just search out the smallest FDIC member bank in your neighborhood and give it a try.

They’ll be happy to have you and your business as a customer. They need you and your business and they will appreciate you. You’ll receive more personal attention from a neighborhood bank than you’ll ever get from a financial goliath, with exactly the same insurance protection you receive from the largest banks.

Even at a small bank, you should follow the principles outlined here. But you’ll be doing it in a friendlier atmosphere. Fewer banking frustrations will leave you better prepared to enjoy your stroll down the path to increased profits.

William J. Lynott is a freelance writer specializing in business management as well as personal and business finance. Reach him at lynott@verizon.net.