Considering how much you rely on banks to safeguard your money, the relationship between you and your financial institution should feel like the close bond between old friends or trusted family members. After all, when conducting business with banks, you’re putting faith in their ability to protect your assets.
A point easily forgotten, however, is that a bank is still a business — a reality they can’t necessarily be faulted for. With this in mind, the duty falls on you, the customer, to uncover what banks don’t want you to know.
Many of these “banking secrets” are, in fact, no secrets at all, but that doesn’t mean banks are exactly posting flyers in bank branches about certain facts they’d prefer customers didn’t know. Find out how you can save money in your dealings with banks, and protect yourself from ending up with the short end of the stick.
Here’s What Banks Don’t Want You to Know
#1. A bank’s right of setoff lets them take money from your account without notice.
A “right of setoff ” is one of the biggest banking secrets on the list that can pummel your finances to the ground. It often occurs when you have a deposit account and a loan at the same bank.
Also referred to as a banker’s lien, a right of setoff grants the bank the right to access funds in your deposit account automatically and without notice if you default on your loan.
It may seem ridiculous that banks have the power of setoff, but it actually makes sense. When you deposit money in the bank, you are essentially lending money to your bank with the promise they’ll pay you back when you ask for it (see How Do Banks Make Money? for more on that). Upon taking on a loan — whether an auto loan, personal loan or mortgage loan — you’ve established a mutual debtor-creditor relationship.
Why should the bank pay you back your money (i.e. your deposited funds), if you can’t make good on your promise to repay them? It is very likely that your loan’s terms and conditions identify this stipulation in fine print.
The best thing to do to avoid a right of setoff is to make timely payments toward the loan — avoiding default is the only 100 percent guarantee that you won’t lose money via a setoff. If you’re still concerned about your money, transfer your funds to a third-party bank. Setoffs only apply to deposit accounts within the same institution that funds your loan; in transferring your money, the bank cannot automatically withdraw your money, and will instead have to seek out legal action to claim your funds.
#2. You can negotiate credit card rates.
Credit card rates vary greatly between creditors — some offer introductory rates as low as 0% APR while others soar past 20%. Plus, many credit card companies offer alluring incentives to win your business, like rewards programs, frequent flyer miles or cash back.
Let’s say you’re faced with two competing credit card offers — one with a low interest rate of 10%, and one that offers rewards points with a slightly higher interest rate. Call the card company with the rewards program.
When speaking to the representative, make sure your tone is indifferent. Explain that you’re on the fence about applying for their credit card, because you received a better offer from their competitor at a drastically lower interest rate. The service representative will likely tout the rewards program, but stay firm — yet courteous — in focusing on lowering the credit card rate.
I played out a similar scenario with my own credit card company. After only five minutes of conversation, the initial 19.99% APR offer I received in the mail dropped to 12.99% APR. The call took all of seven minutes (I was on hold for about two minutes), but the savings were well worth it.
#3. Bank fees are also negotiable.
The 2012 World Retail Banking Report survey found that 62 percent of U.S. consumers do not plan on leaving their bank anytime soon, but that doesn’t mean banks can get away with just anything. Fifty percent of respondents surveyed said that bank fees would prompt them to switch to another bank — the second highest trigger cited in the report.
It’s for this reason that bank fees, even if you are in the wrong, are just as negotiable as credit card rates.
Did you miscalculate how much money you had in your checking account, and write out a bounced check? Call your bank immediately to contest the charge. By contest, I don’t mean deny it, rather, plea your case to have a bounced check or overdraft fee removed by leveraging your loyalty to the bank.
Note your years of devoted business with the bank, itemize all your accounts (i.e. checking and savings account, car loans, mortgage loan, etc.) you’ve kept with the institution and highlight your good record with the bank (assuming you haven’t defaulted and the fee you’re asking to remove is a first-time offense). The most important part is not to let up — stay polite and don’t take no for an answer.
What banks don’t want you to know is that most institutions will gladly waive a $25 overdraft fee if it means keeping your business.
#4. Debit cards carry higher liability.
When standing at the checkout counter, you’ll often hear the cashier ask, “credit or debit?” when you have your Visa or MasterCard debit card in hand. While the debit option gives you the convenience to see the transaction process almost immediately, you’re putting yourself at greater risk.
Credit cards and debit cards have differing liabilities associated with them.
By choosing the credit option and signing for your purchase, you are protecting yourself from fraudulent activity under Visa or MasterCards liability terms. With credit card fraud, your maximum liability under federal law is $50, according to the Federal Trade Commission. And in most circumstances, like with a Visa transaction, you’ll have zero liability on unauthorized charges.
Debit cards are another story, however. When you encounter fraudulent activity with debit cards, timing is essential in determining the maximum out-of-pocket liability you’re responsible for. Your ultimate liability depends on your unique situation, but if you’ve lost your debit card you have to report it lost within two business days to limit your liability to $50. But reporting a lost or stolen debit card, or contesting fraudulent charges beyond two days, may hold you liable for a maximum of $500.
Whenever possible, opt for a credit card purchases to limit the financial blow, in the event of fraud.
#5. Bank tellers are not financial experts.
Bank tellers are your first point of contact with your bank, but what banks don’t want you to know is that many of them don’t even have a financial background of any kind. You’d expect that the person managing your transactions is finely attuned in the ins and outs of handling financial accounts, but that’s usually not the case.
While some bank tellers may indeed have some financial knowledge, most are straight out of high school or are still college students.
Kelli Gilpin worked as a bank teller for United Bank and Trust in Michigan after high school. “Did I have a financial background? Hell no! I didn’t even like math in school!”
Upon taking on the position, Gilpin shares that the requirements were “very minimal,” essentially those who were simply able to learn as they go and acknowledge customers at the window were brought onto the team.
“Did I meet those requirements? Yes,” said Gilpin, “But are those really the right requirements for being the first line of contact for a person’s financial affairs, questions, and concerns? Of course not.” Fortunately for Gilpin, she has since continued on to work in the financial services industry for over 20 years.
According to the 2012 World Retail Banking Report survey, the number one cause for switching to a new bank, at 53 percent of responses, is poor customer service. If you’re not getting the response or answers you’re looking for from a bank teller, move up the ranks and speak to a supervisor or branch manager. Likely, an unsatisfactory service experience can get you additional benefits like added rewards points onto a bank credit card or a reimbursement on a statement.