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Understanding the DOS 4.01 SHARE command and why i
Creators Syndicate
FIGHT BACK! BY DAVID HOROWITZ
Where's Our Share?
The basic theory of banking is actually quite simple. Banks
borrow money from their depositors -- and from each other and the
Federal Reserve -- at one interest rate and then lend it out to
consumers, home buyers and businesses at a higher rate. The difference
in interest rates, the spread, is where the banks make their money.
When the banks' cost of borrowing from the Fed goes up, as it
has recently, then the interest rate on consumer, business and home
loans goes up accordingly. OK, that makes sense. Except for one thing.
The interest banks pay on savings deposits has not gone up with the
cost of borrowing. Interest paid on savings and money-market accounts
is still down around 2.3 percent, while rates on home loans have gone
up as much as two percentage points. How come?
The answer depends on whom you ask. The Consumer Federation of
America says the banks are just plain greedy -- increasing their
spread by raising loan rates while keeping rates on deposits low. By
leaving their savings in low- interest bank accounts, CFA says
Americans are losing as much as $3 billion a year in interest
earnings. And that's $3 bil- lion a year in the banks' pockets.
The banks say it's not that simple. They point out that when
interest rates go up, borrowing goes down. When that happens, deposits
pile up, profits fall and there is very little incentive to attract
more deposits by offering higher interest rates. So while the spread
may be larger, the banks say their actual income is not. They also
point out that their costs of doing business remain the same whether
they're making new loans or not.
But even that explanation is a bit simplistic. Banks now
broker mutual funds and other, more lucrative outside investments. So
even if customers do move their savings, the banks still make money if
they handle the transactions.
Then there are the "nickel and dime" charges and penalties the
banks collect on bounced checks, late payments, ATM transactions and
checking-account service fees. Multiplied by millions of customers,
these fees add up to billions of dollars every year.
These fees don't just cover the banks' costs, either. The
penalty for bouncing a check varies from around $10 to as much as $25
per check. That's nine times the bank's average cost of processing a
bounced check. In addition, many banks charge those who deposit bad
checks an additional $3 penalty per check -- about twice the bank's
actual processing costs.
Bankers don't deny they're charging more than their costs for
bouncing checks. Those penalties, they say, are intended to discourage
people from writing checks against insufficient funds. If you don't
want to pay the penalty, then don't write bad checks. Or, apply for
overdraft protec- tion on your checking account. That way, if your
account is short, the bank kicks in the money and charges you interest
on the loan.
The bottom line is that while banking may be profitable, it is
still a highly competitive industry. Banks want your business. So, if
you believe you're being overcharged, underpaid or ripped off, shop
around. Find out what terms other banks are offering. Ask about their
interest rates and fees for service. And when you find a better deal,
go for it.
If you have questions or comments, please write to David
Horowitz at 72662,1775. COPYRIGHT 1994 CREATORS SYNDICATE, INC.
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