Friday, December 14, 2007

Banks DON'T want to help you

OK, this is a bit of a rant but I'm a bit frustrated with banks right now.  They have all of these cute commercials about how they want to help you achieve your goals.  The truth is that they don't.  They don't want to help you, they want your money.  They'll say and do whatever they need to get it but that's what they're really after.

Bank policies are based on how much income they get from their customers.  They will charge you for anything they can get away with.  There are fees for everything.  They also encourage you to borrow money for anything you want.  I recently saw an ad for a medical credit card encouraging customers to use their credit to get plastic surgery.  This is a card that charges about 17% interest.  Oh and that's another thing: interest.

It seems to me that interest rates are backwards.  Those that need money the most seem to be charged the highest interest rates while those that already have a lot of money are charged less.  That doesn't seem right.  However, it's business.  It's all about risk.  Those who don't have a lot of money are a greater risk so, by charging higher interest, banks insure that they make their money back sooner.  That way if a lender can't finish paying, the bank has a greater chance of having already made back what it loaned (which won't stop it from bleeding every last penny it can from the borrower).

Credit card companies are the worst.  They start by charging huge interest rates and then it gets better.  If you miss a payment (or are just a little late) they reserve the right to bump your interest rate up to as high as 30%.  A company that really wanted to help would work with borrowers that are having financial difficulties.  Instead, credit card companies charge you more fees and higher interest as though their goal is to make sure it takes forever to pay off your balance.  Oh wait, maybe that is their goal...

I guess the moral of this rant is never to trust a lender.  So remember, always read the fine print, understand the terms, and don't borrow unless you have to.  Above all, be very careful.  Banks are NOT trying to help you, they're trying to profit from your needs/wants.  

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