Banks, like credit cards and brokers before them, are hoping their customers stay safely unaware of what the financial industry actually entails. Fortunately for banks, most customers are living up to the industries very low expectations. The vast majority of banks, especially those with large downtown offices and football stadiums, don’t operate with the customer in mind – despite marketing to the contrary. Banks are business, pure and simple. The more money they can squeeze out of customers, the better the business and the more profit the shareholders and owners of that business make.

Considering most of us are customers of those banks, this scenario does not paint a pretty picture for us. You and your checking account are the means of income for some of the biggest and most profitable companies in the world. Do you have any idea how much the banks hope you’ll never figure out about your accounts?

Bad Banking

One of the worst things you can do with your money is save it. Money should be utilized for productive investments whether they are interest-bearing accounts, bonds, stocks, commodities or real estate. Restated, the worst thing you can do is stockpile your money in a place where it won’t incur any interest or will incur so little that you’re losing money in the long run. And ironically, this is exactly what most people do. Banks hope that we keep on doing it and smiling all the way, well, to the bank.

More than $1 trillion dollars is being kept in checking accounts that pay little or no interest and in savings accounts that cost more in fees than they make in interest. Banks make more than $2 billion from ATM transactions alone every year– consider that next time you blissfully agree to pay the “small” fee for service. The most popular way to save money is in a savings account that pays less than 2%. That doesn’t even keep up with inflation, not to mention you can find the same account paying twice as much with just a minimum of research.

Most consumers with statement savings accounts and too much money at the bottom of their checking account don’t even realize they are doing anything wrong. The bank certainly isn’t going to tell them that keeping money in these two places helps to make the financial institution a greater profit by paying you almost nothing. Only by doing your homework and understanding your options when it comes to checking, savings and loans can you navigate the murky waters of banks and their financial games.

Understanding Banking

Banks are in business to make money. They make money by charging as much as possible for your dedicated patronage and paying you as little as possible while you’re hard-earned money is stashed away in their accounts. They shave nickels and dimes off expenses every time you use an ATM, not to mention they earn a considerable chunk from the fees they charge. They offer you “free” checking that costs more than you’d think possible. They let you open a savings account with 2% interest and offer an alternative as the market changes and rates rise.

Banks are not all bad. Yes, they have to make money, but you don’t have to let them rip you off to do it. Some banks are definitely better than others, and often the larger a bank, the more effort they will put into keeping customers in the dark. After all, large banks need more profits to grow and maintain operations.

Traditionally, banks use the same tactics as Wall Street and credit card industries to help keep customers pacified and completely unaware they are being taken for a ride. If your bank is guilty of the following, it’s likely you’re dealing with a highly skilled industry of illusion and you need to stop and pull the wool back off your eyes. You’ll know you’re in trouble if your banks is paying you significantly less interest than those marketed online, offers free services for programs that are of little value anyway, are charging you excess fees for ATM use and minimum balances.

Small, local banks, online financial institutions and credit unions may offer the services you need for far less than large banks. You may be able to put your money in savings at higher rates, and have a more positive overall experience. But you’ll never know what options are available to you without spending time learning how traditional banks work. You need to know at least the fundamentals of the industry to determine the best way to make your money (and bank) work for you. Search the top rates paid in the various short term investment categories. Maximize the use of your hard earned dollars by allocating to the proper accounts. Now more than ever is the time to research and utilize your money in the most advantageous manner.

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