Banks Need More Analysis
For the past two years I have been
going through analysis. It has not been enjoyable. Many dark, hidden
elements have emerged, causing considerable pain.
I long for the early days, before analysis, when
life was so much simpler. And coincidentally, so much cheaper.
Iím talking, of course, about the
"analysis" of business bank accounts.
Actually, my former bank began analyzing
commercial accounts about 10 years ago. That means that instead of
charging a flat service charge, they look into exactly what the account is
costing them and charge the customer for the amount.
My business checking, which previously had cost
about $15 a month, suddenly cost about $300 a month. So I switched banks
to one that did not analyze accounts.
That was 10 years ago. And I got another eight
years of free rides with my new bank before they realized I was costing
them a bundle each month.
Two years ago they announced they were going to
begin analyzing accounts. I would have switched banks again but I couldnít
find one who hadnít seen the light. So I reluctantly began analysis.
Last month I was charged over $800 for a
crummy checking account. These are the escalating costs of small business
Ė costs, which were non-existent in years past, which are helping to
sink small businesses today.
Itís difficult to argue with the banks. They
also are running a business, and they claim that servicing an account
costs them a certain amount which they are forced to pass on to the
"Donít you want our business?"
the customer will ask.
"Yes," replies the banker,
"but we donít want to pay for it."
Good argument. What is more difficult to
understand is the charges they nail you with. My account analysis
statement orders me to pay 12 cents for every check written
(understandable) and 8 cents for every check deposited (not
When I asked my banker how they can charge me for
putting money into their bank, he shrugs and says thatís what it
costs to process the check.
In fact, not only do they charge me for the
contents of my deposit, but they smack me with a $1.25 cost for each
deposit package, thereby getting me both ways.
There are a couple of other line items,
including "currency in/out" and "FDIC assessment,"
which add to the total. Then there is the last line, which always makes me
chuckle. It reads "Account Maintenance Charge -- $13.00."
Not to worry, though. Banks rationalize these
charges by informing their customers that it is a trade-off. The bank
credits you with income for your average daily balance for the month,
allowing you to offset the costs of services.
Then they cut down your balance by deducting the
average daily float (around 10 percent of total) and then another 10
percent off for "reserve requirements." But no matter, because
when you receive the whopping 3.18 percent annualized interest itís
clear the money lost from the deductions wouldnít cover the cost of a
I havenít put it down to pen and paper yet, but
I think I would require an average daily balance of $1.3 billion to cover
the costs of services.
So what do you do? Like anything else, you shop
around. From what Iíve found, the rates for checks paid, checks
deposited and other incidentals are distressingly similar among major
banks. But there are differences.
For instance, my bank doesnít actually handle
our deposits. They use the "cash vault services" of another bank
which bills my bank, which bills you know who.
I have since found out this charge, and it is
substantial, can be eliminated by using a bank which handles their own
Also, the income that is credited to offset the
cost of services is worth looking into. Some banks donít deduct from the
average daily balance and pay a higher rate of interest.
In essence, once I started looking into this in
line-by-line detail, I found out my bank was making up for all the years
it had neglected to analyze my account.
So do I switch banks again? There are
others out there which will cost less, but thereís also a sense of
loyalty to my bank, which has been with me though lean times.
Then again, my bank canít lower their
charges Ė theyíd lose money. Iíll probably just do them a favor and