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Banks Are Now Accused of Cheating Customers Billions

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Re: Banks Are Now Accused of Cheating Customers Billions

#11

Post by lbwtaylor »

0cf8612b2e1e wrote: post #5

Who has the best interest rates for idle cash? I have been using Marcus, but it is not a huge burden to shop around.

I am a fan of fidelity. They have a cash management account with checking features. You can choose between a bank sweep at ~2.5% or a money market at almost 5%.

Edit: There are always non-checking accounts that do better than the above, but I think there is real value in focusing on your checking account -- if you have to move money back and forth to get good rates, is that worth the effort and what's the opportunity cost of the funds that sit in the low paying checking account.

Re: Banks Are Now Accused of Cheating Customers Billions

#12

Post by lotsofpulp »

loeg wrote: post #6

Relevant recent Levine article on this from last week: https://www.bloomberg.com/opinion/articles/2024-08-07/ai-com... > Cash sweep sweep > If you go to a bank and say “I’d like to open an account and deposit some cash,” they will happily open a checking account for you, take your cash, and pay you an interest rate that is, in round numbers, zero. [4] (My checking account pays 0.01%.) If you say “no, I want a savings…

> But if you utter the correct series of incantations, at least some banks will open a high-yield savings account and pay you 5% or more. You gotta find the right bank, though, and utter the right incantations. Sometimes it’s tricky

Searching the internet for “list of highest interest bank accounts” with the device in your pocket is apparently a tricky incantation.

Shopping an entire country’s investment options has never been easier, and still there are complaints.

Re: Banks Are Now Accused of Cheating Customers Billions

#13

Post by reaperducer »

Animats wrote: post #9
oostevo wrote: post #3

Key paragraph (from the original FT article): > The issue has arisen from idle cash sitting in customer accounts at brokerage firms and large banks, which “sweep” otherwise uninvested funds into interest-bearing alternatives in order to generate income. The SEC is looking into whether the firms steered those clients into sweep accounts that paid little or no interest, and whether the financial advisers at those group…

Yes. Before brokerages were part of banks, cash in a brokerage account was usually stored in a money-market fund, with whatever interest money market funds were paying. Once merging with a bank, cash was swept into an in-house bank account. This didn't matter much when money market funds were paying near zero interest. But the zero interest rate era is over. Except for demand deposits in banks, which pay well below m…

My parents instilled in me a mild distrust of banks. It's for this reason that I get my statements mailed to me each month, and each month I reconcile what's on the paper with what's in my spreadsheet.

Guess what? Every year I find a mistake in at least one bank statement. And it's always in the bank's favor. Sometimes it's a few cents, but once it was a few hundred dollars across multiple errors.

When I've told people this in the past, I've been dismissed with "Oh, I use Venmo instead of a bank, so it's always right," or "Oh, it's too hard to figure so that out."

I simply don't understand people who blindly accept what an app or web site tells them about something as important as their own money.

I know they don't teach balancing a checking account in high school anymore, but you should be able to add and subtract to get through life.

No, the computer is not always right.

Re: Banks Are Now Accused of Cheating Customers Billions

#14

Post by dmoy »

0cf8612b2e1e wrote: post #5

Who has the best interest rates for idle cash? I have been using Marcus, but it is not a huge burden to shop around.

For money markets, it's typically vanguard. Other brokers that are not bad for sweep include IBKR, Fidelity, Schwab, etc. But vanguard will always have higher interest on cash.

Marcus is FDIC insured savings though, which has slightly different implications. There's websites that compare current highest savings rates (nerdwallet, bankrate, whatever).

Going in the other direction, there are things like SGOV or Treasury-only money markets, if you live in a state that has higher income tax. Since the treasuries are exempt from state income tax.

Going even farther than that direction, there's muni bonds, funds, or money markets. At which point you're probably back to Vanguard for the best rates. (But again, not the same exact characteristics as a savings account)

Re: Banks Are Now Accused of Cheating Customers Billions

#15

Post by 0cf8612b2e1e »

lotsofpulp wrote: post #12
loeg wrote: post #6

Relevant recent Levine article on this from last week: https://www.bloomberg.com/opinion/articles/2024-08-07/ai-com... > Cash sweep sweep > If you go to a bank and say “I’d like to open an account and deposit some cash,” they will happily open a checking account for you, take your cash, and pay you an interest rate that is, in round numbers, zero. [4] (My checking account pays 0.01%.) If you say “no, I want a savings…

> But if you utter the correct series of incantations, at least some banks will open a high-yield savings account and pay you 5% or more. You gotta find the right bank, though, and utter the right incantations. Sometimes it’s tricky Searching the internet for “list of highest interest bank accounts” with the device in your pocket is apparently a tricky incantation. Shopping an entire country’s investment options has…

Just because it is possible to navigate through the dark patterns does not mean we should be comfortable with the situation. I do not have the time nor expertise in every facet of my life to know if I am getting a raw deal.

Re: Banks Are Now Accused of Cheating Customers Billions

#16

Post by bluecalm »

loeg wrote: post #6

Relevant recent Levine article on this from last week: https://www.bloomberg.com/opinion/articles/2024-08-07/ai-com... > Cash sweep sweep > If you go to a bank and say “I’d like to open an account and deposit some cash,” they will happily open a checking account for you, take your cash, and pay you an interest rate that is, in round numbers, zero. [4] (My checking account pays 0.01%.) If you say “no, I want a savings…

One data point: IBKR pays you 4.83% right now so I think it's quite good. Not the full interest rate but it's a reasonable in my view payment for their service. They also pay you for every day the cash sits in the account. You can also buy any market funds and pay very little for the transaction. Just 2 days ago they also told me that I paid enough in market data refresh request (they are very explicit that those are not free) to afford monthly subscription so they automatically switched me to monthly subscription again telling me it's only for that month so I don't need to cancel anything if I don't want to continue.

Meanwhile my bank didn't even offer any interest on significant amount of idle cash there. Instead they offered me their "currency exchange services" which have approximately 1000x higher fees that what I pay on my brokerage account.

My experience is that my brokerage firm wants to make money but also makes effort to be fair to me. Meanwhile my bank wants to sell me services which are all bad for me. The difference between them is like night and day. The banks are in business of skimming, confusing and deceive their customers.

Re: Banks Are Now Accused of Cheating Customers Billions

#17

Post by educasean »

reaperducer wrote: post #13
Animats wrote: post #9

Earlier quoted context omitted.

Yes. Before brokerages were part of banks, cash in a brokerage account was usually stored in a money-market fund, with whatever interest money market funds were paying. Once merging with a bank, cash was swept into an in-house bank account. This didn't matter much when money market funds were paying near zero interest. But the zero interest rate era is over. Except for demand deposits in banks, which pay well below m…

My parents instilled in me a mild distrust of banks. It's for this reason that I get my statements mailed to me each month, and each month I reconcile what's on the paper with what's in my spreadsheet. Guess what? Every year I find a mistake in at least one bank statement. And it's always in the bank's favor. Sometimes it's a few cents, but once it was a few hundred dollars across multiple errors. When I've told peop…

I see it less as an issue of blind trust and more of an opportunity cost I guess. While it does raise my blood pressure that banks can slip in these little mistakes that almost always favor them, I don't see myself ever investing as much time and effort as you did to verify the numbers every month.

Maybe once these AI agents get reliable enough, it might be a fun side project to automate the verification process.

Re: Banks Are Now Accused of Cheating Customers Billions

#18

Post by deathanatos »

diggan wrote: post #2

Original article: https://www.ft.com/content/de751907-c870-4b8c-b86b-317483f76... ( https://archive.is/wxqsC )

… this website, "FrankNez", has recently been spamming subreddits Reddit recently too, some off-topic from what is being spammed. (Their user there: https://www.reddit.com/user/OfficialFrankNez/, so you can see for yourself.) — e.g., an article "Kamala Harris Is Now Proposing Raising Crypto Tax To 28%" was cross posted to 13 subreddits and removed by moderators on at least 9 of them. It smells like it's just rehashing news for ad revenue.

To be clear: I don't think OP here is involved; their post history seems varied, so they may just have picked this up from somewhere else. I'd be curious to know how they came across it, because it might be a tad interesting to see how these things spread.

But these "as reported by" articles, just ditch that article and read the upstream source. 99% of the time, they add nothing of value, and are just plating it with ads.

(There's also https://www.reddit.com/user/BFA_Artist/ doing the same thing, just nothing but that site, spammed from an account that claims to be a person. Like … it smells. Nobody is like "man, I love this site's news. I'm going to spam everything they write to 20 subs". Came across that just trying to trace back by own steps…)

(I should also mention that normally for blogspam I'd sort of lean into a "flag and move on", but here there's the problem that I think the content of the underlying FT article — banks screwing customers w/ 0% interest rates on their savings when interest rates are high — is worthy of discussion here, and I don't desire to kill that with a flag…)

Re: Banks Are Now Accused of Cheating Customers Billions

#19

Post by beaglesss »

reaperducer wrote: post #13
Animats wrote: post #9

Earlier quoted context omitted.

Yes. Before brokerages were part of banks, cash in a brokerage account was usually stored in a money-market fund, with whatever interest money market funds were paying. Once merging with a bank, cash was swept into an in-house bank account. This didn't matter much when money market funds were paying near zero interest. But the zero interest rate era is over. Except for demand deposits in banks, which pay well below m…

My parents instilled in me a mild distrust of banks. It's for this reason that I get my statements mailed to me each month, and each month I reconcile what's on the paper with what's in my spreadsheet. Guess what? Every year I find a mistake in at least one bank statement. And it's always in the bank's favor. Sometimes it's a few cents, but once it was a few hundred dollars across multiple errors. When I've told peop…

Unless you hold a lot of money, you're at the mercy of someone actually caring to fix it, and if not an annoying and possibly expensive lawsuit

It's not I trust the bank, its just the times they've stolen under $500 from me they've more or less said 'fuck you deal with it' and after that I can just work to make the cash back a lot easier than I can sue for it. So I just closed my accounts and did that.

Fighting the banks over chump change sounds nice in theory or if you can start a class action but if not it's kind of like suing the cops, basically a wild goose errand for anyone but someone with a lot of time and a pro bono lawyer.

Re: Banks Are Now Accused of Cheating Customers Billions

#20

Post by mhb »

reaperducer wrote: post #13
Animats wrote: post #9

Earlier quoted context omitted.

Yes. Before brokerages were part of banks, cash in a brokerage account was usually stored in a money-market fund, with whatever interest money market funds were paying. Once merging with a bank, cash was swept into an in-house bank account. This didn't matter much when money market funds were paying near zero interest. But the zero interest rate era is over. Except for demand deposits in banks, which pay well below m…

My parents instilled in me a mild distrust of banks. It's for this reason that I get my statements mailed to me each month, and each month I reconcile what's on the paper with what's in my spreadsheet. Guess what? Every year I find a mistake in at least one bank statement. And it's always in the bank's favor. Sometimes it's a few cents, but once it was a few hundred dollars across multiple errors. When I've told peop…

What kind of mistakes are these? I've been reconciling my bank statements for decades and if it doesn't balance, it's been my mistake.
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