Say goodbye to traditional free checking

Originally posted by Aggie Man

Originally posted by adjensen
Well, I think that there's plenty of blame to be passed around. Sure, people who can't afford a mortgage shouldn't be taking them out, but banks shouldn't be loaning money to people that they know can't pay it back, and count on unsustainable real estate growth to cover things when the bill comes due.

Agreed; however, does it not come back to PERSONAL responsibility? Do Christians make excuses when they sell their soul to the devil? Sure there was the lure, but to take the bait is up to the "fish".

I am standing strong on personal responsibility...sorry!

Oh, I'm right there with you. But there is a certain element of the population, much larger than most would like it to be, who don't understand most of these financial concepts and are gullible enough to be convinced by someone, whose job it is to generate more revenue in the mortgage business, that things will all work out.

Spend ten minutes reading any Internet forum and you'll probably be able to identify a number of people who could be swayed that a $500,000 mortgage on a $480,000 property, with initial payments of $1,000 a month, followed by a balloon payment in 5 years of $100,000 will be covered with a simple refinance or equity loan at that time, because the trend from 2000-2008 demonstrates that your house will be worth $750,000 in five years. Real estate always goes up, you know?

Not saying it's not people's responsibility to not be idiots, just saying a slick salesman in a field that most people don't understand is just as much to blame.

Originally posted by iamcamouflage
reply to post by Modern Americana

 

My wife and I experienced this just the other day. We went into a Chase bank to open a local account(we are credit union members in a different city). And the checking account required 5 debit charges a month in order to avoid fees.

The other strange thing was a scare tactic by the representative to push us towards online banking. She told us that it was dangerous to send checks through the mail because if someone gets the check, they can use the account/routing number to pay for bills and such over the phone. I called BS on her saying that there is no way a company would take a routing number as a form of payment. But she assured me they would. I also told her that this sounds like a bank security problem but she claimed it was the fault of the companies for taking the routing number as valid payment. And I asked why would that be legal? She had no answer.

My theory is that banks are trying to get rid of checks because online banking is cheaper. I imagine that it is quite costly to sort and process all of that paper. But it was really weird to me that she was using these scare tactics.

My wife and I said we should try paying for a bill with simply a routing/account number from a check to see if it works. I havent tried it yet but I cant imagine that any legit company would take this as a form of payment.

I've been tangentially involved in the electronic side of banking for about twenty years, as a result of writing software that ran ACH transactions, so I've been to a bunch of conferences over the years, and even 20 years ago, I can tell you that banks HATE checks. With a passion.

There are security issues, but the real gripe is that they are expensive and a nuisance to process. Things may have changed lately, though I doubt it, but if I write a check up the local gas station, if the gas station uses a bank other than mine, they'll take it to their bank as a deposit, then that bank has the responsibility of sorting all those pieces of paper by bank, then sending it to an intermediary bank (nearest one is about 80 miles away) which processes it all and then sends the checks out to the bank on which they are drawn.

That's all just for taking care of the pieces of paper -- moving the money is a bit easier, on a par with any other electronic transaction. But you can see that it's kind of expensive to deal with checks.

Debit or credit transactions, on the other hand, shift the cost of processing to the person receiving the payment -- the gas station pays anywhere from one to four percent of the transaction amount to cover the fee for processing (which is why gas stations often offer "discounts for cash or check.")

However, there is a security risk associated with checks -- with your routing and account number and software, someone can forge checks pretty easily. I'm the Treasurer for my church, and we had three forged checks come through in August -- payroll checks cashed in Chicago, with everything on the check incorrect, apart from the routing and account numbers. But Walmart cashed these three checks, and it wasn't noticed until I reconciled the bank statement at the end of the month. We got our money back, the next day, but it was a nuisance, and demonstrates the security risk that they went on about.

Originally posted by scoobdude
To the accountant:

I think the part you missed about money being created is in regards to what you used to be "fractional reserve banking". It used to be they only had to keep 10% of cash on hand. Wiki has a good explanation for under the section: "Example of deposit multiplication" and "Money creation"

I hope this clears up what the others were trying to explain. I also believe that recently they no longer even have to keep the 10% on hand.

Depends on what you mean about "on hand", but, yes, there are still reserve restrictions, but it's a sliding scale based on how much money you're dealing with. Very small banks have no reserve restrictions, but there is obviously a practical need to keep cash on hand, unless the banker wishes to play George Bailey and pay depositors out of his own pocket.

A couple points about your conclusion, though. First, this is the only way that banking COULD work. If they had to keep 100% reserves, they couldn't loan anything out. One can argue about the reserve percentage, and I think ten percent is a bit low, but it can't be full. Secondly, regardless of what the limit is, banks are able to maintain their own reserves, so long as it doesn't go below the limit. If you're conspiratorially inclined, here's a Federal Reserve report from 2009 complaining about banks keeping too many reserves, but if you read it, you'll see a bit of the logic in the whole thing. www.ny.frb.org...

Finally, money isn't really "created", because the money deposited is effectively out of the system. If I put $100 into my bank account, and they borrow you $80, the amount of money in the economy has actually gone down by $20. When I go back to get my $100, they don't "create" the money, they just (accountingwise) shift the $80 liability to another depositor.

It all works out (and, as I said earlier, the fact that there is little inflation in the US should be sufficient evidence that money can't be created arbitrarily,) until everyone wants their money, the proverbial "run on the bank", and that's where it would all fall apart, were it on a grand enough scale. One bank, the Federal Reserve will step in a manage it. Every bank? Well, that's where my furry friend from Texas' plan seems a good one.

reply to post by adjensen


That is exactly what I figured. Banks are doing whatever they can to get away from processing checks. But I was surprised with the scare tactics. I also get what you are saying about forging a check but this bank person specifically said that people can steal your check and then use the routing/account number to pay for bills online and over the phone. This in my mind is complete BS, there is no option with any online payments that i have ever seen to enter a routing number to pay for things. And while I have never tried it, I cannot imagine that any company would accept a routing/account number from a check as a valid form of payment.

The bank could just be honest and say checks are too costly for us, so in order to keep banking costs down, we are recommending that you take advantage of online banking and bill pay.

Its funny because I do use online banking/bill pay I didnt need the hard fear sell to get me away from checks. I just dont like being lied to and it was clear that she was lying to me and when I called her on it, she had very few answers to my questions.

reply to post by iamcamouflage


I'm trying to remember the exact circumstances, but you can, indeed, use nothing more than a routing and account number online to pay for things. I know that Paypal takes it (they prefer it, actually,) but there's a bit more than just giving them a couple of numbers and hoping for the best -- like I said, I can't remember exactly what it required, but I think they sent a couple of minor transactions through for like ten cents and I had to log in and tell them what the amounts were, so that they knew I had access to the account.

There's also something called (colloquially, though I'm sure that someone has a trademark on it) "echeck" which turns your paper check into an electronic transaction at the cashier terminal.

Both of those use a different system than your credit card does, called "ACH" for Automated Clearing House, which is what I wrote software for way back when. Banks prefer ACH, because it's their own system, overseen by the Fed, and costs are minimal. There's also EDI, which was a big deal a long time ago, not sure its current status, and that supplemented ACH by allowing you to send non-financial data through the system, like an invoice or list of products.

At any rate, bottom line is that, whether they're playing it up or not, there is a definite security risk to being free and easy with your routing and account number information -- I'm no longer authorized to access the ACH system, but if I was, it's child's play to create a transaction that would pull money out of your account with those numbers, because an ACH "pull" doesn't require permission on your end to do it.

The difficult part, of course, is putting the money someplace that I can access it and cover my tracks before you realize I've cleaned you out. And if I did get away with it, I'm not sure what the liability limits for you would be, unlike credit/debit cards, which have a $50 limit, subject to some restrictions. But, because the ACH network is a restricted system, you're in greater danger of simple check forgery which, like I said, pretty much any simp with a printer and a local "check cashing happy" Walmart can pull off.

reply to post by adjensen


Thanks for the great information. You have been very helpful. I just found it interesting how much fear she was putting behind checks and the dangers, while pushing for online banking which is also subject to dangers and potential abuse and security lapses.

There are phishing scams with banks and the one i have seen that is more common is with ebay. You get an email that looks like its ebay saying you need to log in. You do it from the email and they get your email and password, then they try that password on your paypal. A lot of people use the same password for both, which is a terrible idea.

Anyway its just funny that they push online banking as though its 100% secure. There is no such thing as 100% security. Like I said she could have just said, checks are expensive, we are going to eventually move away from them, and that they recommend using online banking.

Originally posted by Aggie Man

Originally posted by PETROLCOIN

Originally posted by Aggie Man
Of course, I pay my bills & mortgage on time...go figure.

Not everyone can. No one wakes up one day and says "You know what, I'm not going to pay my mortgage on time. I don't feel like it." or "I don't feel like paying my electric bill. Go ahead and shut the lights off for a few days. Maybe I'll feel like it later." Some people just can't do it. Between these corporations firing and laying people off and these corporations jacking up their prices, interest rates, and hidden fees, it only causes people more struggle. They are the cause of this, not us.

Right, I know that. But why get feathers ruffled when one can't pay their mortgage? Foreclosure has always been the name of the game. It's part of the mortgage "contract". Why bash on BOA, when ALL banks foreclose on those that can't pay. Why should those that are delinquent on their mortgage get a "free pass"?

Banks are not the cause. People's desire for material things (living on extended credit) is the cause. Interest rates...hidden fees...these are excuses used by those that live on extended credit and impulsively buy the newest gadgets just to keep up with the Joneses . I suspect that folks that have consistently been living within their means aren't having this problem. Sure there are layoffs, and that sucks; however people should think about employment issues before making large purchases. For instance, My wife and I purchased a home. Before we purchased it we thought "hmm, what if one of us were to lose our job...how will we pay the mortgage". Solution: we bought a home we could afford on just 1 salary...definitely within our means.

I'm sorry that people are going through this crisis. However, it's not BOA's fault. It's entirely the individual's fault. I know it's a pipe dream, but I sure do wish people would own up to their mistakes and face them head on, accepting responsibility for their actions.

edit on 21-10-2010 by Aggie Man because: (no reason given)

In other words had you and your wife purchased your home based on just one salary...
Then somehow (in this prosperous economy) both of you lose your jobs
(and with that the ability to repay your obligations) I assume we can all tell you

"tough, do you expect a free pass?"

Isn't it so easy to *judge* other people when you are more fortunate than them?


Why is it that your contempt for people that don't own up to their obligations
can't be directed at the banks for

-creating money out of thin air
-creating obscene loans/interest rates
-and somehow using the person's signature as a promise to pay?

You say the banks aren't the issue?
This goes against what our forefather's had said.

What sort of consequence should there be if a person cannot pay their debt?