In honor of the Thanksgiving season, it’s time to identify what are, in our opinion, some of the biggest turkeys being fed to the public by financial institutions.
We’re not talking about the 15-pound feathered variety, you understand, but rather certain types of bank accounts where you may be the one who gets plucked. Be warned in advance, however, that in some cases the consumer, not the accounts, should be barbecued for their behavior.
This year’s turkey shoot takes aim at the following:
– The 20.5 percent rate on a $3,000 unsecured personal loan charged by Bank of America to the new walk-in customer who has no other account relationship with the bank.
– An even more stunning 60 percent rate charged by another big California outfit, Wells Fargo, to folks who obtain a $200 cash advance on their direct-deposit account.
– Home buyers and refinancers who, without analyzing the current low-rate environment, instantly fall for a 5.5 percent adjustable-rate mortgage, which is an “introductory” deal for the first year only. The rate could soar to as high as 11.5 percent in a few years.
– Banks and finance companies who mail unsolicited, cashable checks for a couple thousand dollars to people who don’t realize that if they endorse and deposit such a check, they’ve entered into a legal loan contract at an interest rate of 25 percent or higher.
– Consumers who foolishly use ATM machines other than their own bank’s, and thus get nipped by two fees–a double whammy: One for using a foreign ATM, the other a new $1 to $1.50 “surcharge” by the bank whose machine they use. A new Bank Rate Monitor study shows that, shockingly, nine out of 10 customers never bother to ask their bank about ATM fees.
– First Union Bank, in Florida, which offers kids a no-minimum-balance “Youth Account” earning 1.65 percent, but charges $12 a month if there’s no activity on the account for one year.
– Banks that promote low-ball rates on credit cards, but in footnote copy (about the size of an ant) reveal that the rate only applies to the balance you transfer from another institution. Any new credit card purchases will be charged at a higher rate.
– Anyone who doesn’t read all the footnotes in bank ads, which often disclose that a cheap loan rate adjusts upward after a few months, or that a “high” money market or CD rate may drop after 30 or 60 days.
– Consumers who haven’t learned that it’s easy to beat your present bank’s savings rates by a full percentage point or more, simply by shopping more banks, thrifts and credit unions.
– Car buyers who finance through a dealer and pay a finance rate that’s usually 1 to 2 percent higher than what a bank would offer them directly, and 2.5 to 3.5 percent more expensive than going through a credit union.
– Anyone carrying a credit card whose interest charges are based on a “two-cycle balance method,” which adds the average balance in the current billing period to the balance in the previous period to compute the interest you owe.
– Credit-repair outfits that charge consumers to obtain a copy of their credit report, when they can get one for free from TRW Information Services (800-422-4879).
– Consumers who don’t bother to pull up a copy of their credit report at least once a year, and comb it for errors that could hurt them. These kinds of mistakes are common.
– Debtors who are being hounded by collection agencies, but who don’t exercise the strong rights they have under the Fair Debt Collection Practices Act. Example: You have the right to sue a collector in a state or federal court within one year from the date you believe they violated the law. Phone the Federal Trade Commission office nearest you, or write the FTC’s Correspondence Branch, Washington, D.C. 20580.
– Checking account customers who don’t hunt for the cheapest–if not free–account based on their day-by-day checking behavior. Step No. 1: Ask for a copy of each institution’s fee disclosure document and study it. You’ll save more than you think.
– And the biggest turkeys of all: Consumers who settle for paying 18 percent on their credit cards while they earn a paltry 2 percent on their savings at the same bank.
