How does a bank make money off you? How to ensure they don't

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Topic Author
DualCitizen
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How does a bank make money off you? How to ensure they don't

Post by DualCitizen » Sun Sep 22, 2019 3:00 pm

I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota. But it doesn't work for me, because I'm a very boring investor who would never buy packaged Private Bank products. They never understood "no" as an answer. And they were never forthcoming that those products were designed to be better for them than for me.

So, I'm switching from their Private Bank to the bank's "Plus" account, which still carries many useful benefits for account holders (better support, free unlimited wires and checks, etc). Finally, I look forward to no more sales pitches for useless products. However, the Plus accounts require a $250,000 minimum account balance, which includes any investment accounts, so it doesn't have to be cash. That got me wondering, if I deposited $250,000 in cash, that would obviously be a sweet deal for them especially since they pay almost 0% interest. Therefore conservatively, they would be making thousands of dollars a month off my balance.

If I simply deposit a $250,000 holding of a non-dividend paying stock or commodity, however, is the bank actually making any money at all off me?

It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years that I'm looking for a simple way to prevent them from doing so at all, even if I deposit a load of assets there to meet the minimum.

sport
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Re: How does a bank make money off you? How to ensure they don't

Post by sport » Sun Sep 22, 2019 3:07 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years...
It seems that it actually is a particularly horrible bank. Why not try to find another?

Grt2bOutdoors
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Re: How does a bank make money off you? How to ensure they don't

Post by Grt2bOutdoors » Sun Sep 22, 2019 3:08 pm

Yes, the bank will still make money off of you. They could “lend” out your security to third parties for a small fee, they keep the fee and you are none the wiser. They have contracts with the third party that ensures they remain whole and therefore you remain whole. There are other ways too, but for you to “lock up” $250k with them, one has to wonder just what kind of service are you getting from them?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
DualCitizen
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Re: How does a bank make money off you? How to ensure they don't

Post by DualCitizen » Sun Sep 22, 2019 3:08 pm

sport wrote:
Sun Sep 22, 2019 3:07 pm
DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years...
It seems that it actually is a particularly horrible bank. Why not try to find another?
I have a dozen accounts with them, it's not worth the trouble. Better to just keep them in check.

grok87
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Re: How does a bank make money off you? How to ensure they don't

Post by grok87 » Sun Sep 22, 2019 3:09 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota.
i think you are a better person than me!

They may not be bad people but IMHO it is best, easiest and quickest to think of them as bad people every time they talk to you.
William Bernstein wrote:if you act on the assumption that every insurance salesman, mutual fund salesperson, and financial advisor you encounter is a hardened criminal, you will do just fine.
cheers,
grok
RIP Mr. Bogle.

arf30
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Re: How does a bank make money off you? How to ensure they don't

Post by arf30 » Sun Sep 22, 2019 3:09 pm

The easiest way to make sure is to hold your assets at a discount brokerage and just use the bank for basic checking.

Topic Author
DualCitizen
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Re: How does a bank make money off you? How to ensure they don't

Post by DualCitizen » Sun Sep 22, 2019 3:10 pm

arf30 wrote:
Sun Sep 22, 2019 3:09 pm
The easiest way to make sure is to hold your assets at a discount brokerage and just use the bank for basic checking.
That is what I'm doing, but the basic checking accounts charge for everything, so by getting the Plus account I don't incur any expenses.

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FrugalInvestor
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Re: How does a bank make money off you? How to ensure they don't

Post by FrugalInvestor » Sun Sep 22, 2019 3:11 pm

I'm very curious about why you feel the need to be a "private banking" or even a "plus" customer. Are there services you require that wouldn't be available otherwise?

I ask because I get everything I need - credit card, debit card, billpay, checking, etc. - and pay nothing. Am I missing something?

Edit: I just saw your response above. By setting up a minimal ($250/month I think) auto-transfer from my (external) investment account to my checking I avoid all fees.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

sport
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Re: How does a bank make money off you? How to ensure they don't

Post by sport » Sun Sep 22, 2019 3:13 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:10 pm
arf30 wrote:
Sun Sep 22, 2019 3:09 pm
The easiest way to make sure is to hold your assets at a discount brokerage and just use the bank for basic checking.
That is what I'm doing, but the basic checking accounts charge for everything, so by getting the Plus account I don't incur any expenses.
In my area, a number of banks advertise "no cost checking".

Topic Author
DualCitizen
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Re: How does a bank make money off you? How to ensure they don't

Post by DualCitizen » Sun Sep 22, 2019 3:13 pm

grok87 wrote:
Sun Sep 22, 2019 3:09 pm
DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota.
i think you are a better person than me!

They may not be bad people but IMHO it is best, easiest and quickest to think of them as bad people every time they talk to you.
William Bernstein wrote:if you act on the assumption that every insurance salesman, mutual fund salesperson, and financial advisor you encounter is a hardened criminal, you will do just fine.
cheers,
grok
Even their language in emails is funny. They don't ask if I want to meet to discuss their insanely complex, multi-layered, 60-page PDF investment product. No, they simply ask when we will meet to discuss it. Not if we should. If I don't reply, sure enough they will follow up two days later with an even more aggressive email. It's almost funny to watch.

Sconie
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Re: How does a bank make money off you? How to ensure they don't

Post by Sconie » Sun Sep 22, 2019 3:15 pm

Sometimes---frequently----the "game" is to get your assets into the institution, no matter whether they are initially making money off of you are not-----and then work at selling you/transferring you into more profitable products. Fidelity does this by touting their low cost, sometimes even subsidized, mutual funds, hoping/urging that investors will eventually transfer into their high cost offerings.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

HomeStretch
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Re: How does a bank make money off you? How to ensure they don't

Post by HomeStretch » Sun Sep 22, 2019 3:15 pm

A $250k balance for low-interest banking seems unusually high. What is it about their banking that you find appealing especially if they continue with the sales pitches? Is this a U.S. bank?

Do you require banking services above the “usual offerings” - checking/savings/mm accounts, safe deposit box, medallion guarantees, notary, ATM, cash/coin deposits, bill pay, free wires, etc.?

Many, many banks have lower fees for what I called the “usual offerings”. Most of the banks in my area offer it all for a minimum balance of $7,500 or less. The interest rate isn’t great so that means one pays a hundred dollars or less a year in the form of lower interest income for services

There are also online banks that have fewer services but usually better rates. There are also brokerages with cash management accounts like Fidelity or Schwab.

vtjon02
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Re: How does a bank make money off you? How to ensure they don't

Post by vtjon02 » Sun Sep 22, 2019 3:19 pm

When I used to live in another state I banked at Chase and eventually became a private bank customer. The perks were pretty nice. Pretty much zero fees and a very high level of service. I got a very favorable rate on a prior mortgage (something like a 50 basis point reduction off of advertised best rate). Zero wire transfer fees, atm reimbursements, no foreign access fees, etc.

The sales calls annoyed me so I went into the bank and told them that if they ever contacted me again to sell services/products that I would close my accounts and go somewhere else. They never contacted me again.

When I moved out of state I kept the account open. I now use Chase along with a local credit union and the combination gets me everything I need with zero fees and the convenience of local banking when I want it.

vtjon02
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Re: How does a bank make money off you? How to ensure they don't

Post by vtjon02 » Sun Sep 22, 2019 3:21 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:13 pm
grok87 wrote:
Sun Sep 22, 2019 3:09 pm
DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota.
i think you are a better person than me!

They may not be bad people but IMHO it is best, easiest and quickest to think of them as bad people every time they talk to you.
William Bernstein wrote:if you act on the assumption that every insurance salesman, mutual fund salesperson, and financial advisor you encounter is a hardened criminal, you will do just fine.
cheers,
grok
Even their language in emails is funny. They don't ask if I want to meet to discuss their insanely complex, multi-layered, 60-page PDF investment product. No, they simply ask when we will meet to discuss it. Not if we should. If I don't reply, sure enough they will follow up two days later with an even more aggressive email. It's almost funny to watch.
Have you considered asking them to stop contacting you for all issues unless it directly relates to your current account(s)?

alex_686
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Re: How does a bank make money off you? How to ensure they don't

Post by alex_686 » Sun Sep 22, 2019 3:22 pm

Grt2bOutdoors wrote:
Sun Sep 22, 2019 3:08 pm
Yes, the bank will still make money off of you. They could “lend” out your security to third parties for a small fee, they keep the fee and you are none the wiser.
What you are describing violates a whole battery of regulations that are audited frequently and would cause the bank brokerage license to be pulled.

They can lend out your securities if you go on margin. There is another execution, but you have to be a accredited investor and you have to sign things, and you are told what is happening and - in every case thar I know of - get a slice of the fee.

DonIce
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Re: How does a bank make money off you? How to ensure they don't

Post by DonIce » Sun Sep 22, 2019 3:33 pm

There are plenty of banks that offer the usual services without any cost and won't hassle you with ads, and require minimum balances from $0 to a few thousand. You should find another bank.

Grt2bOutdoors
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Re: How does a bank make money off you? How to ensure they don't

Post by Grt2bOutdoors » Sun Sep 22, 2019 3:39 pm

alex_686 wrote:
Sun Sep 22, 2019 3:22 pm
Grt2bOutdoors wrote:
Sun Sep 22, 2019 3:08 pm
Yes, the bank will still make money off of you. They could “lend” out your security to third parties for a small fee, they keep the fee and you are none the wiser.
What you are describing violates a whole battery of regulations that are audited frequently and would cause the bank brokerage license to be pulled.

They can lend out your securities if you go on margin. There is another execution, but you have to be a accredited investor and you have to sign things, and you are told what is happening and - in every case thar I know of - get a slice of the fee.
Let me clarify: when I wrote “Bank” I meant to say Bank holding company (BHC) will make the money. The BHC can have a broker dealer affiliate hold the actual account, ultimately the revenues are consolidated at the top for reporting purposes. No violation of any rules, especially if the OP has been provided with the necessary disclosures. No “bank” as in a traditional FED or state regulated bank would accept traditional securities and/or commodities as a deposit from a customer but a broker dealer affiliate certainly would. Ordinary customers usually do not distinguish who is providing the services to them (even having received the disclosures and signed various account documents) other than to believe as an example that say Chase is, when it could be one or more affiliates under the Chase umbrella which is the actual legal entity offering it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

fru-gal
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Re: How does a bank make money off you? How to ensure they don't

Post by fru-gal » Sun Sep 22, 2019 3:40 pm

I haven't read all of this, but I think you are not aware of how good credit unions are.

I have two checking accounts, both no fee.

I get nice CD rates (well, nice if you don't remember when they used to be 6%) mostly around 3% now.

No vultures are trying to get me do things with my money that I don;t want to do. When Citizens Bank repeatedly did that years ago, I transferred all my CDs out to credit unions when they matured. I have never had a credit union person descend on me like a locust.

I also try to keep the total amount at each credit union at $100,000 to $150,000 so I don't have to worry about exceeding federal insurance.

It is not hard to transfer accounts when they mature, it's just paperwork, maybe fifteen minutes per account, and I do do that to chase the current best rates.

HawkeyePierce
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Re: How does a bank make money off you? How to ensure they don't

Post by HawkeyePierce » Sun Sep 22, 2019 3:47 pm

Schwab and Fidelity have next to no fees on their banking products and in all my years as a Schwab customer I’ve never gotten a sales pitch.

Free checking, mortgage discounts, no minimum balances, no hoops to jump through to maintain that. I’ve never paid a fee to Schwab and I’m just a regular joe over there.

I’d switch.

Trader Joe
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Re: How does a bank make money off you? How to ensure they don't

Post by Trader Joe » Sun Sep 22, 2019 3:53 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota. But it doesn't work for me, because I'm a very boring investor who would never buy packaged Private Bank products. They never understood "no" as an answer. And they were never forthcoming that those products were designed to be better for them than for me.

So, I'm switching from their Private Bank to the bank's "Plus" account, which still carries many useful benefits for account holders (better support, free unlimited wires and checks, etc). Finally, I look forward to no more sales pitches for useless products. However, the Plus accounts require a $250,000 minimum account balance, which includes any investment accounts, so it doesn't have to be cash. That got me wondering, if I deposited $250,000 in cash, that would obviously be a sweet deal for them especially since they pay almost 0% interest. Therefore conservatively, they would be making thousands of dollars a month off my balance.

If I simply deposit a $250,000 holding of a non-dividend paying stock or commodity, however, is the bank actually making any money at all off me?

It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years that I'm looking for a simple way to prevent them from doing so at all, even if I deposit a load of assets there to meet the minimum.
Do you have a question?

Katietsu
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Re: How does a bank make money off you? How to ensure they don't

Post by Katietsu » Sun Sep 22, 2019 3:57 pm

Personally, I do not consider occasional emails to be aggressive marketing. But then, I do not really even read them but just skim it to make sure they do not contain important customer service notifications.

But, you have decided that your current situation does not work for you. Many people on BH transfer $100 k of investments to Merrill Edge in order to receive Preferred Reward benefits at B of A and ME. With this approach at ME, there are no fees. And as long as you manage your cash well, you are not giving up any earnings. Will your bank allow a similar approach with a no or low account maintenance fee?

hudson
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Re: How does a bank make money off you? How to ensure they don't

Post by hudson » Mon Sep 23, 2019 7:44 am

DualCitizen wrote:
Sun Sep 22, 2019 3:10 pm
arf30 wrote:
Sun Sep 22, 2019 3:09 pm
The easiest way to make sure is to hold your assets at a discount brokerage and just use the bank for basic checking.
That is what I'm doing, but the basic checking accounts charge for everything, so by getting the Plus account I don't incur any expenses.
You are probably OK staying with your bank. Consider calling the bank every time they do something you don't like.
Go for a supervisor or higher. Write a letter to the CEO and members of the board of directors telling them what you want. If they want to serve their best customer, they'll listen and fix your problems. If they don't, you can vote with your feet.
The best move I ever made was to a credit union. They don't care about profits; they serve the customer.

Independent George
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Re: How does a bank make money off you? How to ensure they don't

Post by Independent George » Mon Sep 23, 2019 8:10 am

What benefits are you getting from the 'plus' account that makes it worthwhile? I barely use any bank services these days, but I'm not a high net worth individual. Ally savings gives me a decent interest rate for the least hassle, and Schwab checking reimburses me for ATM withdrawals (and, once upon a time, they offered good interest rates on checking). Aside from that, the only other bank service I've ever used was a wire transfer on a mortgage refinance.

lazydavid
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Re: How does a bank make money off you? How to ensure they don't

Post by lazydavid » Mon Sep 23, 2019 8:20 am

DualCitizen wrote:
Sun Sep 22, 2019 3:10 pm
That is what I'm doing, but the basic checking accounts charge for everything, so by getting the Plus account I don't incur any expenses.
You have to give them $250k to get them to stop charging you for every little thing? That's beyond insane. My credit unions demand five dollars, and nothing, respectively, for the same. Hell if I jump through a couple of hoops (eStatements, direct deposit, 10 Debit transactions/mo, Credit Card, etc), one will give me over 4% interest on my checking account.

You should definitely switch, no matter how many accounts you have--and maybe you should consolidate a bit while you're at it. But you're just getting reamed right now.

livesoft
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Re: How does a bank make money off you? How to ensure they don't

Post by livesoft » Mon Sep 23, 2019 8:25 am

Basically, only chumps nowadays are paying any banking fees and using low-interest savings accounts. I guess that since there are fewer and fewer chumps that each chump gets more and more solicitations.

I am told that people in Chase Private Client get everything for free and can put the $250,000 qualifying amount into the "You Invest" self-directed brokerage and buy Vanguard Prime Money Market fund shares. Does that not still work?

Then ignore e-mail requests.

WellsFargo also has an associated WellsTrade self-directed brokerage that one can use for qualifying amounts.

BankOfAmerica has the associated MerrillEdge self-directed brokerage.
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Re: How does a bank make money off you? How to ensure they don't

Post by RickBoglehead » Mon Sep 23, 2019 8:28 am

You can easily setup your email to simply auto-delete any bank emails that aren't related to your account.

Many financial institutions allow you to turn off marketing contacts.

Many banks and credit unions offer free checking with no restrictions.
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mptfan
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Re: How does a bank make money off you? How to ensure they don't

Post by mptfan » Mon Sep 23, 2019 8:30 am

DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years that I'm looking for a simple way to prevent them from doing so at all,
The simplest way would be to stop doing business with them.

a_movable_life
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Re: How does a bank make money off you? How to ensure they don't

Post by a_movable_life » Mon Sep 23, 2019 8:49 am

DualCitizen wrote:
Sun Sep 22, 2019 3:13 pm
No, they simply ask when we will meet to discuss it. Not if we should. If I don't reply, sure enough they will follow up two days later with an even more aggressive email. It's almost funny to watch.
That's a standard sales technique. Job Hunting sites suggest it also. You "Ask for the meeting." My Manager is a Pharma speaker and he gives the reps the residents and attending's internal email addresses.

"Dr. when can we schedule a meeting to review this expensive medication."

Has someone suggested sending them, their manager a short email about "No more sales calls, or the money walks."

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Phineas J. Whoopee
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Re: How does a bank make money off you? How to ensure they don't

Post by Phineas J. Whoopee » Mon Sep 23, 2019 9:46 am

In addition to changing banks, I suggest a firm, polite no thank you, then don't further engage. Sometimes a second no thank you is needed when they try to move you into the objection handling phase. By no means give them a reason why you won't buy. They're trained to overcome objections. It's in their skill set.

It is the persistent salesperson who's being impolite.

No thank you.

PJW

milo minderbinder
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Re: How does a bank make money off you? How to ensure they don't

Post by milo minderbinder » Mon Sep 23, 2019 10:13 am

Katietsu wrote:
Sun Sep 22, 2019 3:57 pm
Personally, I do not consider occasional emails to be aggressive marketing. But then, I do not really even read them but just skim it to make sure they do not contain important customer service notifications.

But, you have decided that your current situation does not work for you. Many people on BH transfer $100 k of investments to Merrill Edge in order to receive Preferred Reward benefits at B of A and ME. With this approach at ME, there are no fees. And as long as you manage your cash well, you are not giving up any earnings. Will your bank allow a similar approach with a no or low account maintenance fee?
This is what I do. It works well and I get zero commission trades.

EnjoyIt
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Re: How does a bank make money off you? How to ensure they don't

Post by EnjoyIt » Mon Sep 23, 2019 10:22 am

We use chase private banking. I have $250k+ invested with them by holding VTI. I pay no fees for that privilege. They pay out dividends which I collect and reinvest at vanguard. I try and keep as little cash as possible in the accounts. I keep 1 month of business expenses and 2 months of household expenses in the checking accounts.

barnaclebob
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Re: How does a bank make money off you? How to ensure they don't

Post by barnaclebob » Mon Sep 23, 2019 10:41 am

Trader Joe wrote:
Sun Sep 22, 2019 3:53 pm
DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota. But it doesn't work for me, because I'm a very boring investor who would never buy packaged Private Bank products. They never understood "no" as an answer. And they were never forthcoming that those products were designed to be better for them than for me.

So, I'm switching from their Private Bank to the bank's "Plus" account, which still carries many useful benefits for account holders (better support, free unlimited wires and checks, etc). Finally, I look forward to no more sales pitches for useless products. However, the Plus accounts require a $250,000 minimum account balance, which includes any investment accounts, so it doesn't have to be cash. That got me wondering, if I deposited $250,000 in cash, that would obviously be a sweet deal for them especially since they pay almost 0% interest. Therefore conservatively, they would be making thousands of dollars a month off my balance.

If I simply deposit a $250,000 holding of a non-dividend paying stock or commodity, however, is the bank actually making any money at all off me?

It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years that I'm looking for a simple way to prevent them from doing so at all, even if I deposit a load of assets there to meet the minimum.
Do you have a question?
Try doing CTRL F for a question mark if you don't want to read the whole post next time.

cherijoh
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Re: How does a bank make money off you? How to ensure they don't

Post by cherijoh » Mon Sep 23, 2019 10:54 am

HomeStretch wrote:
Sun Sep 22, 2019 3:15 pm
A $250k balance for low-interest banking seems unusually high. What is it about their banking that you find appealing especially if they continue with the sales pitches? Is this a U.S. bank?

Do you require banking services above the “usual offerings” - checking/savings/mm accounts, safe deposit box, medallion guarantees, notary, ATM, cash/coin deposits, bill pay, free wires, etc.?

Many, many banks have lower fees for what I called the “usual offerings”. Most of the banks in my area offer it all for a minimum balance of $7,500 or less. The interest rate isn’t great so that means one pays a hundred dollars or less a year in the form of lower interest income for services

There are also online banks that have fewer services but usually better rates. There are also brokerages with cash management accounts like Fidelity or Schwab.
Don't forget about credit unions. My credit union requires a deposit balance of a whole $5 to stay active. :wink: They have 2 branches convenient to my house and ATM withdrawals are free at other credit unions in the state. There is no interest on checking and anemic rates on savings, but I have set up transfer mechanisms between VG and CU and between Ally and CU. I keep enough in savings to cover any possible snafus that might cause an overdraft. (I also have free overdraft out of savings into checking). Bill pay is free.

alex_686
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Re: How does a bank make money off you? How to ensure they don't

Post by alex_686 » Mon Sep 23, 2019 12:23 pm

For context, I used to work with stock loans at banks, margin at a brokerage, and securities lending. I have worked in operations, compliance, and audit with this issue.
Grt2bOutdoors wrote:
Sun Sep 22, 2019 3:39 pm
Let me clarify: when I wrote “Bank” I meant to say Bank holding company (BHC) will make the money.
To clarify, while this was once a common behavior in banks and brokerages - and every combination that I can think of - this is now a banned practice. Things happened more or less as you wrote about them. Banks and brokerage houses would accept deposits of clients securities, lend them out, hit a patch of trouble, declare bankruptcy, and tell their clients that "oops, we lost your stock". Reforms were made to ban this practice. I think it was back in the 70s but it was kind of before my time.

Now, when you have stock at a bank or brokerage house it is deposited into a segregated "Type 1" "Cash Account". Client assets must be kept separate from the broker's assets and can't be lent out. This is regulated and audited by The Fed, FINRA, SEC, FDIC/SIPC/NCUA (Depending on the institution - and yes, I worked at a credit union that did stock loans), and external auditors.

There are 2 exceptions which I referenced above. The first is margin. IIRC you can lend stock worth 135% of a client's margin balance. The other is that accredited investors can waive their rights. Now, why would you as a accredited investor waive your right to have you assets segregated and put into a more risky configuration? The reason I have always seen is cash, normally a share of the securities lending profits.

fru-gal
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Re: How does a bank make money off you? How to ensure they don't

Post by fru-gal » Mon Sep 23, 2019 1:23 pm

cherijoh wrote:
Mon Sep 23, 2019 10:54 am
Don't forget about credit unions. My credit union requires a deposit balance of a whole $5 to stay active. :wink: They have 2 branches convenient to my house and ATM withdrawals are free at other credit unions in the state. There is no interest on checking and anemic rates on savings, but I have set up transfer mechanisms between VG and CU and between Ally and CU. I keep enough in savings to cover any possible snafus that might cause an overdraft. (I also have free overdraft out of savings into checking). Bill pay is free.
My local credit unions generally offer higher rates on CDs than banks by a long shot, and are currently offering higher rates on CDs than Schwab and Vanguard offer on brokerage CDs.

In my area, at least, credit unions tend to belong to an association such that you can do business at credit union A that is intended for credit union B.

shess
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Re: How does a bank make money off you? How to ensure they don't

Post by shess » Mon Sep 23, 2019 1:39 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:08 pm
sport wrote:
Sun Sep 22, 2019 3:07 pm
DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
It's not that this is a particularly horrible bank, but they've tried to take advantage of me in so many ways over the years...
It seems that it actually is a particularly horrible bank. Why not try to find another?
I have a dozen accounts with them, it's not worth the trouble. Better to just keep them in check.
IMHO, you are looking at this wrong. When the guy at my brokerage is bugging my wife about how we need to sign up for various stupid investment programs, I give him a call and tell him that I have things in hand, and if he keeps bugging us I'm going to move our assets. When I went in to my bank for a medallion signature guarantee, the helpful cubicle person looked at our account and immediately launched off on a sales pitch about their brokerage and other services (and frankly lying about things), so I penned a letter to their regional VP about the experience and how I was unhappy about the changes in their service since I first opened the account.

Basically, this is your big opportunity to stick it to the man. Three strikes, and you're out! In fact, I think this is how most of the improvements in my providers has happened over time, I wasn't willing to move for a bit of yield or whatever, but give me a point of principle and I depart in righteous fury!

IMHO, you should inspect those accounts. My guess is that half of those accounts are the result of the bank taking advantage of you without you even realizing it. Banks totally rely on customers being too lazy to move when things change, so they screw around with their existing accounts slowly over time until you're in a zero-interest account paying $25/month plus $50 for checks, while they're offering a loss-leader account requiring lower minimums and fewer transactions to get zero fees. In fact, that's what got me out of the bank above - they started to charge me a monthly fee, and they couldn't change my account over the phone because it was too old or something (I literally couldn't believe their reasons, they made no sense). So I moved to Ally and am very happy with it (and, for all I know, that bank is happy I left).

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LilyFleur
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Re: How does a bank make money off you? How to ensure they don't

Post by LilyFleur » Mon Sep 23, 2019 5:21 pm

HawkeyePierce wrote:
Sun Sep 22, 2019 3:47 pm
Schwab and Fidelity have next to no fees on their banking products and in all my years as a Schwab customer I’ve never gotten a sales pitch.

Free checking, mortgage discounts, no minimum balances, no hoops to jump through to maintain that. I’ve never paid a fee to Schwab and I’m just a regular joe over there.

I’d switch.
+1

Broken Man 1999
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Re: How does a bank make money off you? How to ensure they don't

Post by Broken Man 1999 » Mon Sep 23, 2019 6:17 pm

Check out a credit union.

DW and I have checking accounts that are free if we sign up for electronic statements (haven't received a paper statement in a very long time) and have an auto deposit of at least $500 each month. SS benefits deposited cover that requirement. So, no fees assessed for our checking accounts.

I use my credit union account simply as a place to pay my monthly bills, usually via pulls from credit cards and long time customer relationships, and one remaining bill payee.

What tiny bit they might somehow make off of us they are welcome to keep.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Silence Dogood
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Re: How does a bank make money off you? How to ensure they don't

Post by Silence Dogood » Mon Sep 23, 2019 6:35 pm

OP:

Here is a litmus test:

If you start to experience cognitive decline, do you think your bank will start to take advantage of you?

If you are married and you predecease your spouse, do you think your bank will start to take advantage of your grieving spouse?

If the answer is yes to either, start switching to a different financial institution now.

ausmatt
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Re: How does a bank make money off you? How to ensure they don't

Post by ausmatt » Mon Sep 23, 2019 8:21 pm

As a current holder of a “plus” type account at a major bank and previous credit union member, I found the following worth the effort to maintain some nominal (I’m holding VTEB in the self-service brokerage at the bank):

1) much better online and app usability and features
2) ability to handle larger transactions and wires (which are free and I can do from the app) without tons of questions and issues (at the credit union)
3) dedicated banker line with people that know what they’re doing (instead of what seemed like college students at credit union)
4) lots of branches across US when needed
5) no fees on pretty much anything including atms WW
6) foreign wires without much hassle (unlike credit union which was a giant hassle)

While I do get the occasional email about moving up to their private client service, it’s not obtrusive.

It really just comes down to what services you need from the bank and any irritation (friction) factors.

Etrade just did something pretty cool where you can hold up to $1.25M in all FDIC insured account (they spread it across several banks in a clever way). So maybe consider that foèneront on your cash holding pref.

JBTX
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Re: How does a bank make money off you? How to ensure they don't

Post by JBTX » Mon Sep 23, 2019 8:22 pm

DualCitizen wrote:
Sun Sep 22, 2019 3:13 pm
grok87 wrote:
Sun Sep 22, 2019 3:09 pm
DualCitizen wrote:
Sun Sep 22, 2019 3:00 pm
I got tired of the incessant and very aggressive sales pitches from the Private Bank at my bank. I understand they are not bad people; they are merely trying to achieve their sales quota.
i think you are a better person than me!

They may not be bad people but IMHO it is best, easiest and quickest to think of them as bad people every time they talk to you.
William Bernstein wrote:if you act on the assumption that every insurance salesman, mutual fund salesperson, and financial advisor you encounter is a hardened criminal, you will do just fine.
cheers,
grok
Even their language in emails is funny. They don't ask if I want to meet to discuss their insanely complex, multi-layered, 60-page PDF investment product. No, they simply ask when we will meet to discuss it. Not if we should. If I don't reply, sure enough they will follow up two days later with an even more aggressive email. It's almost funny to watch.
Ask to be taken off their email and phone marketing list?

I'm kind of perplexed. I have BOA, and several other banks. Nobody is calling me or personally emailing me. Occasionally I get a generic marketing type email.

bluquark
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Re: How does a bank make money off you? How to ensure they don't

Post by bluquark » Mon Sep 23, 2019 8:25 pm

Sconie wrote:
Sun Sep 22, 2019 3:15 pm
Sometimes---frequently----the "game" is to get your assets into the institution, no matter whether they are initially making money off of you are not-----and then work at selling you/transferring you into more profitable products. Fidelity does this by touting their low cost, sometimes even subsidized, mutual funds, hoping/urging that investors will eventually transfer into their high cost offerings.
I assumed that was the game with Bank of America's Platinum Honors program, but they haven't been particularly aggressive at pitching me more profitable products since I signed up with them and simply dumped the minimum amount of funds into an ETF last year.

Meanwhile, I had a checking account with a local credit union and every two months like clockwork they sent me a letter trying to get me to buy into this one obviously useless product... some sort of disability insurance with very niche triggering conditions.

Scumminess varies, and it's not always who you expect.

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unclescrooge
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Re: How does a bank make money off you? How to ensure they don't

Post by unclescrooge » Mon Sep 23, 2019 9:48 pm

Phineas J. Whoopee wrote:
Mon Sep 23, 2019 9:46 am
In addition to changing banks, I suggest a firm, polite no thank you, then don't further engage. Sometimes a second no thank you is needed when they try to move you into the objection handling phase. By no means give them a reason why you won't buy. They're trained to overcome objections. It's in their skill set.

It is the persistent salesperson who's being impolite.

No thank you.

PJW
Most financial institutions listen when you tell them to stop calling you, it take you of their marketing list.

Just today someone from Personal Capital called to let me know I'm an engaged user of their (free) product/tools and inquire if I would like to set up a meeting to learn more.

A simple "no I'm not interested" buys me about 6 hassle-free months.

The only people who never listen are the good folks at Visa-MasterCard company who call weekly to let me know at my eligibility for a lower interest rate on my (non existent) credit card debt. :mrgreen:

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whodidntante
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Re: How does a bank make money off you? How to ensure they don't

Post by whodidntante » Mon Sep 23, 2019 10:29 pm

You can make sure a bank does not make money off you by:
1. opening the account in exchange for a large cash bonus
2. do that again

KyleAAA
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Re: How does a bank make money off you? How to ensure they don't

Post by KyleAAA » Mon Sep 23, 2019 10:31 pm

Why are we trying to eliminate the bank’s profit, again?

SQRT
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Re: How does a bank make money off you? How to ensure they don't

Post by SQRT » Tue Sep 24, 2019 9:32 am

I must be an exception here or maybe Canadian banks are less aggressive, but I’ve been retired for about 13 years and have very high balances with my bank (checking, savings, discount brokerage). They have contacted me only once in this period to try to up sell me to an advisor account. Needless to say, I refused. I pay absolutely zero in fees other than the occasional trading fee at the discount brokerage.

hudson
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Re: How does a bank make money off you? How to ensure they don't

Post by hudson » Tue Sep 24, 2019 9:42 am

I'm not against a bank making money if they are good stewards of your money and if they serve their customers.
The banks that I've been involved with....at least brokerages using the banks' names, have been bad stewards of my money and the service was dreadful. It took me months to escape.

I like William Bernstein's quote: viewtopic.php?p=4760872#p4760872

JackoC
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Re: How does a bank make money off you? How to ensure they don't

Post by JackoC » Tue Sep 24, 2019 10:24 am

You should want to get good value from what a bank or any other services or goods providers offers you. Whether or not they make a profit on it is irrelevant and seeking to prevent them 'making money off you' is the not the right goal.

If the question is what's a reasonable value proposition from a (normal commercial bank) I think our two main banking relationships which include checking offer us reasonably good value:
-with BOA/Merrill we keep a high enough total balance (over $200k is their hurdle) to get 'platinum rewards level' of the which the important features for us are 75% bonus on cashback from BOA credit cards (so 2.625%/3.5%/5.25% in various categories/cards) and no minimum balance on our basic checking account. Which, since it earns 0%, we keep at only few $100 balance. The stuff at Merrill is ETF's which are free to keep there just like they were when they were at Vanguard, moved over to get sign up bonuses from Merrill plus the CC cashback benefit. The only drawback is poor rate on cash on dividends once paid at Merrill, but I just move them out of there right away.

-with a local 3 branch bank that currently pays 1.75% on checking, no flaming hoops to jump through like X debits per month or a 'real' (as in paycheck etc) direct deposit, moving money from Vang every month satisfies them. That's our main checking account.

Otherwise we have accounts for CD's at various banks and CU's, just depending who had the highest rate (with acceptable Early Withdrawal Penalty) nationally in the appropriate maturity at the time.

I guess BOA/Merrill has loads of people selling loads of products that wouldn't be good value for us, but they don't aggressively bother us about it so it's not a problem. I mourn the death of trees and waste of electrons to generate junk mail/email from various CD banks and CU's as well as BOA, but I don't consider it a serious hassle to just have to throw away/delete junk mail/email. Calls are more of a hassle, but we don't get them, or the few we get are shunted to the landline nobody ever answers so again that's just deleting phone messages, not a big problem.

grok87
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Re: How does a bank make money off you? How to ensure they don't

Post by grok87 » Wed Sep 25, 2019 5:41 am

Sconie wrote:
Sun Sep 22, 2019 3:15 pm
Sometimes---frequently----the "game" is to get your assets into the institution, no matter whether they are initially making money off of you are not-----and then work at selling you/transferring you into more profitable products. Fidelity does this by touting their low cost, sometimes even subsidized, mutual funds, hoping/urging that investors will eventually transfer into their high cost offerings.
yep
RIP Mr. Bogle.

student
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Re: How does a bank make money off you? How to ensure they don't

Post by student » Wed Sep 25, 2019 6:13 am

JackoC wrote:
Tue Sep 24, 2019 10:24 am
If the question is what's a reasonable value proposition from a (normal commercial bank) I think our two main banking relationships which include checking offer us reasonably good value:
-with BOA/Merrill we keep a high enough total balance (over $200k is their hurdle) to get 'platinum rewards level' of the which the important features for us are 75% bonus on cashback from BOA credit cards (so 2.625%/3.5%/5.25% in various categories/cards) and no minimum balance on our basic checking account. Which, since it earns 0%, we keep at only few $100 balance.
I thought the top level requires $100k, and not $200k. https://www.bankofamerica.com/preferred-rewards/
JackoC wrote:
Tue Sep 24, 2019 10:24 am
I guess BOA/Merrill has loads of people selling loads of products that wouldn't be good value for us, but they don't aggressively bother us about it so it's not a problem. I mourn the death of trees and waste of electrons to generate junk mail/email from various CD banks and CU's as well as BOA, but I don't consider it a serious hassle to just have to throw away/delete junk mail/email. Calls are more of a hassle, but we don't get them, or the few we get are shunted to the landline nobody ever answers so again that's just deleting phone messages, not a big problem.
I am with BOA/Merrill and they have never tried to sell me anything other than maybe occasional mailings. But of course, I probably don't have enough assets to warrant their attentions.

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