Saturday, September 21, 2019

Convenient For Who?

Banks used to turn away their worst customers, until they realized they were the most profitable ones.

A lot has changed in the banking business during my lifetime.   As I recounted in my previous posting (and elsewhere) when I was a "kid" in my 20's, I would write checks until they bounced, which is a pretty stupid thing to do.  I would go to the bank and apologize (giving them more power) and they would waive the bounce fee - the first time, maybe the second.  But as I bounced more checks, they lost patience with me and charged me bounce fees and finally closed my account and asked me to take my business elsewhere.

By the way, bouncing checks is a crime, and you can go to jail for it.   I was lucky in that I could pay back the amount owed, and the bounce fee to the bank, as well as the fee to the convenience store where I bounced the check.  Speaking of convenience stores - are they really all that convenient?

Today, it is a lot harder to bounce a check.  Check-21 means that merchants can scan your check and the computer checks online to see if your account is legit and has a balance.  Of course, you can still bounce checks - or debits or whatever - if you put your mind to it.

And banks have changed their tune in this regard - they realize now that those $25 bounce fees (which are even higher today) are nearly pure profit.   So they play the float for a few days with your money and then, in effect, charge you payday loan rates for the float.   You are borrowing money to buy beer, and paying as much as 100% interest for a loan of a few days or so.   Pretty good business, eh?

In the old days, banks made money by working the "spread" between "bank interest" paid to depositors (about 3%, and no, it didn't fluctuate that much) and the loan interest charged to local mortgage holders of 6% or so (again, it didn't fluctuate that much).   This was the bread-and-butter business for banks.  But that changed.

We, as customers, stopped going to the bank for mortgages, but went to a mortgage broker or some online website.   We got a car loan not from the bank, but from the car company.  And our credit card was obtained online from the outlet that offered the best rates or the best perks.   Pretty soon, all banks had was savings account, checking account, and debit card business - as well as ATMs.

To make money from this, they have to charge fees.  And these fees make them a lot of money. There are fees just for having an account - particularly a dormant account or a low-balance account. As I noted before, these are helpful in draining off and closing "phantom" accounts where people move away and leave $15.97 in a checking account - forever.  They charge ATM fees, particularly foreign ATM fees.  Foreign transaction fees.  Bounced check fees.  Teller fees.  Overdraft fees.  Fee-fees.

And they keep inventing new fees.  As I noted in my last posting (as updated):
By the way, if you do use a credit card, beware when your bank offers you the "convenience" of "overdraft protection." Anytime a bank offers you something "convenient" it is likely convenient to them, not you.  The way these programs work is, if you go over your limit on your credit card, they will honor the charge and then zing you with a $35 fee.  It is not convenient at all.  If you are going over your limit, you should stop charging.   But then again, if you have financial discipline and check your balance daily - and pay the balance daily - you never get close to your limit to begin with.
It is convenient, but the question is, convenient for who?  And pretty much that sums up the point of this posting.  Anytime someone pitches something to you as being "convenient", chances are, it is convenient for them, not you.  Whether it is convenience foods, or convenience fees, odds are, they are not very convenient for you, but cost you money.

It is akin to "Peace of Mind" which people try to sell you, but in reality, can only be found within your own soul.   When someone tries to sell you "peace of mind" they are selling you a pig-in-a-poke.  Things like extended warranties provide little peace to you - you often end up in protracted disputes with such companies (if they don't go bankrupt first) trying to get some repair covered under warranty.   You spend thousands and get... nothing but aggravation.  Peace of mind, indeed.

Similarly, if you sign up for "overdraft protection" on your credit card, you are basically signing up to be dinged for bounce fees. More of an inconvenience fee, if you ask me. Just say "no" to such protection.   On the other hand, you can set up your checking account so any overdraft comes out of your savings account at no charge to you.  This is convenient, I suppose, but if you check your balance daily and log all your purchases, odds are, you will never need it.  I've had this on my checking account for over a decade now, and have yet to need this feature.

But it illustrates the point - banks don't make money from good customers anymore.  If you have just a few thousand in a savings account and an average balance in your checking account equal to one paycheck, odds are they don't want your business - you are not making money for them, but costing them money.  If you used a teller, you really cost them money - which is why many banks are closing branches and also charging a monthly fee if you want to use a teller.

If you have a lot of money deposited with the bank (or its associated investment house) maybe they make some cash from you.  If you use one of their credit cards, they may snag a few bucks from you as well.   Only then do they want your business.  My bank probably isn't too happy that I have no mortgage and no car loan.  They are probably unhappy I pay off my credit card every month day and don't pay perpetual interest on something I ate three years ago.

Of course, there are some instances where you have to pay "convenience fees" or forgo doing something altogether.   Many State Parks use Reserve America to make reservations, and they charge - you guessed it - a "convenience fee" just as ticketmaster does.   Yes, act shocked, these places are not charities operating at a loss just to bring together people and events, free of charge.   If you want to go to the Grand Ole Opry (which I am doing next week, twice) you have to pay these fees,  or just decide not to go.

Again, this reminds me of a thread I read once, where some youngster was whining about Ticketmaster and how they were charging a "convenience fee" if he bought tickets to Battle of the Rap and Heavy Metal Bands, which he desperately wanted to go to.  You either pay or don't go - there is really no third option.

The traveling company of Wicked is coming to Jacksonville this fall, and I was idly curious as to what the ticket prices were like.  I logged on to the "special pre-sale seats available only for preferred customers!" and was chagrined to see that the only seats made available to me (and millions of others, no doubt) were in the third balcony, last row.  I took a pass, even though the ticket prices were fairly reasonable.  The way they sold this - using "pre-sale" come-ons (how can it be "pre-sale" if they are offering to sell me tickets?  It is an oxymoron!).  Plus, I had to enter special codes and whatnot, and the site was a PITA to use - plus, of course, there were "convenience fees" which were a substantial portion of the ticket price.   You want to play, you gotta pay.  In that instance, I chose not to play.  I read the damn books (free, from the book exchange at a campground) and really didn't understand what the fuss was all about, anyway.

Now, RenĂ©e Zellweger as Judy Garland, I might pay cash money to see that - although I am not a big fan of Judy Garland, having been scarred by her music as a child.  When in her cups, my mother would play Judy Garland albums and weep profusely.  Also, I don't buy into that whole tragic pills-and-booze suicide crapola.  Being rich and famous and having millions of adoring fans isn't some horrible burden to bear - please!   Attention all celebrities and rock stars:  No, we don't feel sorry for you, and if I hear one more song about how hard "life on the road" is or how awful it is to be a rock star, I will throw up.  Please!  There are people with real problems in this world, and you aren't one of them.

But hopefully, I could see that movie in a theater that won't be shot up by some disturbed individual, and given the subject matter, I doubt it would be filled with popcorn-throwing teens who would have to be on their cell phones throughout the movie.  Let's hope anyway.  Maybe better to wait for it to appear online, or in the $1.99 closeout bin at Walmart.  Or maybe at a book and DVD exchange at some campground.   Having to see the new releases puts you over a barrel.   Movies are still good, even years after they are made - they are not like milk.

Getting back to our point, if you want the convenience of seeing a first-run movie, you have to pay extra.  If you are willing to wait, well, you can end up paying nothing.  Someone left a copy of The Shawshank Redemption at a campground, and seeing it again, years later, was a treat and cost nothing.  I could have done without the rape scenes, though.

Convenience costs money, plain and simple.  And one way to save a lot of money is to deal with inconvenience - which may not be all that inconvenient, in retrospect!