CLOSE-UP:SPECIAL SITUATIONS IN CHECKING

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CLOSE-UP:SPECIAL SITUATIONS IN CHECKING

Published by sam - 28/08/07 - 12:08:55 am

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While you are scrutinizing a bank, the bank is often doing the same to you. Banks clearly prefer certain groups to others. No group can be barred from a bank, but the favored ones can be attracted with such incentives as better services and higher interest rates for higher balances. The less favored groups can be provided with dis-incentives: high minimum-balance requirements before interest can be earned, and poor-quality service. Following are the four major groups most bank either love or hate.

The Wealthy
As one might expect, people with plenty of money are favorites of a bank—and for good reason. The wealthy individual has an abundance of what a bank needs—money. In recent years, banks have moved to provide wealthy customers—often defined as high-balance customers—with so-called priority services. For checking accounts, that has meant special, shorter teller lines, highly personalized service, and fee waivers. In some cases, banks will go to extremes in personal service to please a wealthy depositors. One New York banker helped a customer get a car into and out of the country; another intervened to rescue lost luggage from the clutches of an airline’s bureaucracy.
If you are wealthy depositor, be sure to use your advantage to the fullest. But be aware that some banks offering “priority services”—especially large, mass market urban banks—do not always provide the levels of quality depicted in their advertisements. Wealthy depositors may be better off passing up such mass-market banks for an old line institution that has a long history of dealing with a moneyed clientele.

The Middle -Income Depositor
The middle-income depositor is caught in a classic banking bind. Banks need the aggregate of this group’s deposits, yet they often cannot treat the individual mass-market customer with the respect and service he or she deserves. Consequently, many such customers feel that they are serving the bank, not the other way around.
Here, then, is where the careful shopping outlined in much of this chapter can be most beneficial. Middle-income depositors must be aggressive in taking of whatever strengths they do have, where they can exert little or no advantage over the bank, they must then shop wisely for the best of the available options.

The Poor
Banks deny that they discriminate, but the fact is that poor are being denied banking services because of the high cost. Low-income consumers—by the very definition—do not have $10,000 or even $500 to keep in a checking account all the time so that high monthly fees can be waived. Likewise, few can afford to spend $100 a year to have a checking account.
The alternative for these people has been to leave the bank altogether and convert checks into cash at check-cashing storefronts found in some low-income urban areas. Such businesses exact a high price for their services. They take a percentage of the check’s face value.

Lifeline banking legislation, aimed at providing low-cost banking services for low-income depositors, has been proposed in California, but it was defeated. Such laws would have required banks to provide certain basic checking services to low-balance customers. According to the American Bankers Association, many banks are already offering or are planning low-cost, no frills checking accounts, but in some cases only if customers uses ATMs instead of human tellers.

Low income depositors who cannot find a low-priced checking account in their area should consider opening a free or inexpensive savings account to serve their check-cashing needs (see chapter 2) and use money orders from the same bank to pay bills.

The Elderly
Many people over 65 may be surprised to know that they are desirable customers as far as banks are concerned. Why? Elderly depositors frequently have a deeply ingrained savings drive that dates back to the Great Depression. Consequently, they tend to let large amounts of money sit on deposit at the bank for very long periods of time. Other aged depositors, either because of fear or lack of knowledge of what to do with their money, will deposit money in a bank and literally forget about it.

Elderly checking customers should take advantage of such options as free checking for people over a certain age—many banks offer it, with varying age thresholds—as well as direct deposit of pension, Social Security, and dividend checks. Most of all, recognize your value to the bank and expect adequate compensation in return.

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August 28, 2007 | Checking Accounts, Banking |

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