Your Overjoyed To Have Your Credit Line Raised BY The Bank But Beware – The Bank Is Even Happier

How many times have you been surprised by how much you charged on your credit card in the past month? Well that is what the banks want to happen. When you use that cards very few people keep good track of their total spending.

Banks are businesses, big businesses at that, and they count on you losing track of your balances and spending during the month. They actually love you to go (slightly) over your change limits so they can tack on that over-limit fee. This little slight-of-hand can be controlled with a little effort on your part.

How Banks Make Money

There are a few different ways that banks make the money that they need to operate. The first is though overdraft/overlimit fees. Many people have to deal with this kind of fee because they lose track of what they are spending. They might forget that they have used a credit card and then write a check that will bounce after they have ran a credit card. When this happens the bank can charge money on the account and they make that money for their business.

The banks have a whole menu of other fees for their loans. Mortgages most times have application fees, points, late fees, early payment fees – yes, they charge you if you want to give them their money back faster then originally agreed – besides the “regular” interest that you normally pay for the loan. It is no wonder banks make so much money. Remember the recent crisis had nothing to do with the banks normal operations, it was caused by the banks going into very risky areas of loans and financial instruments they should never have dealt with in the normal course of business. Many of these instruments made money only for the employees, by getting inflated an bonus, who push them, not the bank, and therefore not the owners (stockholders) of the bank.

The Banks Continue to Encourage You to Use These Methods.

Most bank fees are set at loansharking rates. They cover your $50 overdraft, and then charge you a $25-35 fee (50%+) to do so. If you are a few days late with a payment there is normally a 10% charge. That is 10% for say 10 days – i.e. 30% per month/360% per year!! When they do “cover” your overdraft remember they are not using their money to pay your check, but the money sitting in other depositors accounts which oft times the depositors receive no interest on, or if they do it is 2-4% per year.

The banks want you to use their cards – debit and credit – for all your purchases. This business plan encourages you to be very loose with your finances. A check at the restaurant becomes to easy to just put on the card and worry about it later. Gone are the days that we check our wallet to see if we had enough money to actually go to the restaurant. Enjoy now, pay later. We are all digging ourselves a whole that we may never get out from.

Banks and credit card companies all need to make a profit to stay in business. But you will notice that none of the credit card companies, nor the banks who didn’t dive into risky investments, have been heard to ask the government for handouts. With their basic business plan it is not hard to to come out at the end of the year with profits. Think of it – get $100 from a friend and give him $104 back at the end of the year. In the meantime you have used that $100 twenty (or more) times over for profit – this is the banks and credit card companies lot in life.