I am very grateful for my local credit union. Six years and they haven't fucked me over once.
Why is everyone a bank?
61–70 of 258 posts
Re: Why is everyone a bank?
#62Looking at the situation in Sweden, I would say the cause is the bank themselves. Banks here are currently trying to remove every aspect of the banking industry that is not a digital service. Offices are a cost center. Physical money are a cost center. Talking with customers is a cost center. By shedding all those cost centers the bank can focus on the parts that make most money and raise stock value.
Google, Apple are likely looking on and discovering that digital products is something which they too can do, and their size allow them to jump into the same market. All the parts of the banking industry that would prevent them is exactly the same parts which the banking industry is removing.
Re: Why is everyone a bank?
#63Earlier quoted context omitted.
> I have had to come up with a dollar amount worth several months of expenses on very short notice (same day, life is unpredictable). That seems like a perfect use case for using a credit card to cover the expense and then pay yourself back when your money moves out of the savings account. I have trouble imagining a case outside of a hostage situation where you would need access to your emergency fund same day.
Two examples: Auto purchase where there was an issue with the banking partner of the vehicle manufacturer. Another is a real estate transaction. Bailing friends out of jail is always cheap (~$500), but not everyone takes credit cards (no chance for the first two scenarios). Fundamentally, I should not have to explain why I would desire immediate access to my own cash reserves at a moment's notice to excuse broken fin…
I don't think the question is so much asking "why", but rather "what" does "access to my own ... reserves at a moment's notice" even mean in a debt-based financial system?
Writing a check is instantaneous, but you obviously don't mean that.
If you're talking about wires and the like, then what you're really paying for is the sending institution taking on liability if there turns out to be a cascading problem.
Re: Why is everyone a bank?
#64Another answer: because regular banks are awful to deal with. They don't have nice APIs to just move money around. They apply velocity limits at surprising times. They can terminate your account suddenly for opaque reasons. They charge high regular fees and even higher "gotcha" fees if you make a mistake. They can take back money sent to you for up to 90 days, but often can't get back money you sent to crooks even if…
Is that American banking? In the UK I can't say I've ever experienced such issues. I do bank to bank transfers fairly frequently.
Yes, the American banking system is just ridiculously bad. I remember studying abroad in New Zealand (in 2004!) and marveling at how EFTPOS was universal, everything was chip & pin, and funds transfers could easily be done online (and often clear the same day!). The cashiers would look at me strangely with my American credit card, and they would always check the signature. (Which, it may astound foreigners to learn, most American cashiers do not. How do we prevent credit card fraud? We don't, in general. Fraud losses over $50 are reimbursed by the credit card company, if you report them, which makes it up out of exorbitant interest rates that they charge people dumb enough to carry a balance.) The U.S. finally got some of the security measures the rest of the world has (chip & PIN, for example) around 2017, and in many regards is still behind.
America has the downsides of being the first-mover and of being dominant. A lot of our system was built before modern computerization and then retrofitted for the bank's convenience (not the customer's), and because the U.S. economy & military is so dominant, the rest of the world has to deal with the U.S. financial system as it exists now. That means that there's very little pressure on existing U.S. retail financial institutions to improve, and a lot of regulations and institutional inertia keeping out new entrants.
It's much the same situation with Internet access (where our consumer Internet speeds are often 2 orders of magnitude slower than in much of the rest of the world) and in health care (where we spend the most but have one of the worst life expectancies of developed nations).
Re: Why is everyone a bank?
#65I've encountered several startups that have founded banks through American Indian Reservations, instantly creating an international money laundering vehicle, which they use as a tax haven for wealthy people while also being able to create money directly by loaning it to separate corporate shells. This may be "smart" but I steer away from anyone with this type of "strategic thinking" because they are playing with fire.
Re: Why is everyone a bank?
#66Earlier quoted context omitted.
Two examples: Auto purchase where there was an issue with the banking partner of the vehicle manufacturer. Another is a real estate transaction. Bailing friends out of jail is always cheap (~$500), but not everyone takes credit cards (no chance for the first two scenarios). Fundamentally, I should not have to explain why I would desire immediate access to my own cash reserves at a moment's notice to excuse broken fin…
Your examples seem like cases that can easily be handled by a checking account. > Fundamentally, I should not have to explain why I would desire immediate access to my own cash reserves at a moment's notice to excuse broken financial infrastructure. Yes, if you are investing in less-liquid assets to get a better RoI then you absolutely do. If you don't like the terms then you are free to keep your cash in your checki…
Most people are reluctant to accept large personal checks for one-shot transactions. Most people selling cars on Craigslist won't just take a personal check, for instance. It depends a bit on how reputable you look. You can't write one as bail, or to get your car out of the impound lot.
Re: Why is everyone a bank?
#67Another answer: because regular banks are awful to deal with. They don't have nice APIs to just move money around. They apply velocity limits at surprising times. They can terminate your account suddenly for opaque reasons. They charge high regular fees and even higher "gotcha" fees if you make a mistake. They can take back money sent to you for up to 90 days, but often can't get back money you sent to crooks even if…
> They can terminate your account suddenly for opaque reasons. Isn't one of the requirements for being a "bank" that you can't do stuff like that?
No, not at all, banks do that too.
https://money.cnn.com/2014/05/07/pf/bank-account-closing/
I once had a bank account closed for "suspicious behavior." The suspicious behavior was making too many transfers to one of my other bank accounts.
If you open a new bank account and deposit a lot of money, say over $10,000, then they almost certainly will freeze your account and you'll have to call up to unfreeze it. Sometimes you even have to go to a branch to unfreeze it.
Chase, specifically, is really bad when you're trying to transfer to/from new accounts
https://www.doctorofcredit.com/psa-dont-use-ach-pull-for-cha...
I open (and close) a lot of bank accounts to collect those signup bonuses. If you read forums dedicated to this then you hear stories of people getting their bank accounts terminated suddenly for opaque reasons all the time.
Re: Why is everyone a bank?
#68Earlier quoted context omitted.
Another reason is the horrible interest rates. Wealthfront and Robinhood are offering "bank" accounts that have 1.8% APY that is FDIC insured. If your business has a high turnover month-to-month, that money used to pay your bills can accumulate interest.
I bank with a shitty national bank (long story, need access to Zelle/P2P transfers). My emergency fund is 6 months expenses, low 5 figures. 150-200 basis points of interest annually is trivial when 1 or 2 wire fees ($20) to get access to those funds same day blows away all of interest gains over 6-12 months. If interest rate mattered to folks, more would move to providers offering higher rates (you see this sprouting…
If you have a checking account with the same bank you keep your emergency fund in then you can access the funds at any time with an online transfer and a check. (Discover & Ally offer checking accounts) It doesn't have to be your main checking account.
Re: Why is everyone a bank?
#69Earlier quoted context omitted.
> I have had to come up with a dollar amount worth several months of expenses on very short notice (same day, life is unpredictable). That seems like a perfect use case for using a credit card to cover the expense and then pay yourself back when your money moves out of the savings account. I have trouble imagining a case outside of a hostage situation where you would need access to your emergency fund same day.
Two examples: Auto purchase where there was an issue with the banking partner of the vehicle manufacturer. Another is a real estate transaction. Bailing friends out of jail is always cheap (~$500), but not everyone takes credit cards (no chance for the first two scenarios). Fundamentally, I should not have to explain why I would desire immediate access to my own cash reserves at a moment's notice to excuse broken fin…
People buy cars in Europe using debit cards, at least in the UK.
Re: Why is everyone a bank?
#70I was always wondering why Microsoft sunsetted MS Money and Google didn't built something like that. This is a treasure of information