Way back in my third post I spoke of the the zeroeth law of banks: they are not your friends. Maybe at one time in the mythical past, banks were trustworthy institutions that gave out lollipops and kept your doubloons secure in an airtight vault. No longer. Many banks are now borderline evil.
Then there are things our grandmothers wouldn't recognize as banks. CitiGroup, Bank of America, Goldman Sachs, Lehman Brothers, Washington Mutual. These mighty financial institutions appear to operate like banks. Make deposits, earn interest, withdrawal funds and apply for loans, but banks they are not. They are extra-legal cartels whose sole function is to steal your money--legally, ha--and convert your tax dollars not into supertrains but into more creative ways to steal your money.
Competition is cannibalistic. Our Treasury Secretary used to work at Goldman, so of course they got tons of TARP money. But Lehmans and WaMu were given the shaft, and put in the feeding pool so the other sharks could devour them.
It's a scam. It's legal. And they're in charge, regardless of which political party is in power. e.g. our current Vice President (while a Senator) wrote the new bankruptcy law that was supposed to make it harder for regular Janes to file for bankruptcy. It backfired spectacularly, and now people just walk away from their debt (houses, credit cards, etc. They can't confiscate what they already own, hehehe). So the banks again went crying to Uncle Sam to give them relief, and the Bush administration gave them shittons of money because they got their fee-fees hurt. Waa.
Where does that leave us? We're not born into banking, or have Ivy League degrees (Trivia! can you name the last President not to graduate from an Ivy League school?) We were born into the class of people who do all the work and pay their taxes so that maybe our kids can go to a decent public school if there's money left after the bank bailouts and B-52 bombers.
The banks are not your friend. Don't treat them like one, and you won't be disappointed when they try to steal your money.
1) Bank local. Find a credit union. Smaller is better. You don't have to keep all your money with your CU, but don't hesitate to use their checking and savings for keeping a lot of your money safe. Their rates are better, and when you call them up on the phone with a problem, you're talking to your neighbor, not a call center in Georgia. Obviously, FDIC insured banks only. If you can't join a credit union, marry someone who can.
I follow a blog that watches what banks get 'eated' by the FDIC on Friday (and it's always on a Friday). Credit Unions come up rarely. Regional banks come up often and never the big banks. For a great story of how the FDIC takes over a bank, I recommend act two of this This American Life episode.
2) No fees. Ever. You do not need to pay your bank for the privilege of keeping your money safe. If any account requires a fee, don't open it. Interest should acrue, even at a low value. They should pay you for the privilege of being able to squander your money on high-risk mortgage derivative products.
3) Do not let them sucker you into buying identity theft protection. They are required by law to do it anyway, so don't give them $12.99/mo. to do what they already have to do. When fraud is found against your account, call them, explain the fraud, tell them to reverse the charges, and when they say "would you like fraud protection insurance so this doesn't happen again?", tell them, "no, you authorized a transaction in my name without verification, that's your problem, not mine."
4) CDs can be fun! But in today's market, interest rates are so low you might need to take out a one year CD to make it work your while. If you can sock $1k away (or more) for a year, try a CD. I've pulled money out early from a CD, and the penalty was about half of my interest, so I didn't lose any money, and it was readily available when I needed it.
I don't want to endorse any specific bank, but I like how ING Direct handles their CDs. Interest is paid into my regular savings account and is available for immediate withdrawal. For balance, let me say that their rates used to be better, and I've found CDs at Bank of America with competitive, shorter terms rates. However, at Bank of America the whole sum was locked up tight until the CD matures. My CU has lousy rates right now (and too many fees) so I'm sticking to the bigger banks until my CU wises up.
5) Money market rates are in the toilet right now. I'm barely earning any interest on mine. I should move it to a CD.
6) I've always found the best car loan rates at my CU. It doesn't come up often, but don't take out a loan where there are penalties for early payments. That's just stupid and I have no idea how it's legal to tell people that they can't pay off their debts ahead of schedule. If you have a little extra to pay off your loans, do it. Every time I've bought a car, I've taken out a four year loan and repaid it in half that time.
7) Bank online if you bank supports it. Stop paying for stamps and don't feel bad for the post office, as other than my local carrier, I despise USPS personnel. I DO NOT WANT STAMPS OR 2-DAY DELIVERY! WEREN'T YOU LISTENING?! JUST MAIL THE FRIGGIN' PACKAGE. NO, I STILL DON'T WANT STAMPS! ARGH! Breathe, Vincent, breathe...
Sign up for as many ebills as your utilities allow to reduce the amount of paper that you later have to recycle. Seriously, unless there is a dispute, are you going to read the bill? Online is archived forever. Banking can be green. Kill bits, not trees.
8) Dispute all fees. As with credit cards, the fee or finance charge should be fought to the bitter end. This came up recently with a discussion with a friend of mine. It can be time consuming to fight every fee (I'm going to wall over $15. You'd think I had better things to do with my time). But every time you let a bank charge you, a fairy loses its wings. And is then eaten by a banker. If the bank won't reverse the charge, tell them to liquidate the account immediately, send the check to you, and then you can go open up a new account at your local CU.
Now that we've saved all this money, what to do with it? Save it! Next up: How to buy less stuff!