Many people realize banks borrow money, i.e. CD’s, savings accounts, etc., and turn around and make loans from those funds. The savings rate is lower than the loan rate. This spread between the rates is just one way the bank makes money.
Another way banks make money is from deposits as well. Sure, savings accounts and CD’s are deposits, but so are free checking accounts. (I describe this in my book, Barking With The Big Dogs, got into the process much deeper than I do on my post on my website.) Free checking is generally free as long as you keep a balance. Therefore, the bank uses the money as well to make money.
I do not have a problem with the bank making money. After all, how could I make money from investing in the financial institutions (or any other business) if they do not make a profit? I couldn’t.
What I don’t like is a practice in making money, which happens, by holding my money longer than necessary and penalizing me when I could be using my money.
To explain, when deposits are made, money is not always available for immediate use. First the bank needs to protect itself to make sure other checks (deposits) clear coming into the bank. Next, this also protects me.
No problem so far regarding holding the money. In addition, on larger deposits, only a portion may be available for use and the bigger portion may be held for a week for example. Holding money in this fashion doesn’t really bother me since I know some funds are available and when the remainder of the money will become available for me to use.
However, I made a deposit and the portion that was supposed to be available along with the date the remainder balance was to become available didn’t happen. Yes, I had a receipt, but the bank decided to do something different…and didn’t tell me.
Where the story gets interesting is that I wrote some large checks based upon the information I was given. What I wasn’t given was notice the extended hold was put in place. My wife and I noticed something wasn’t right and called people we had written checks to and asked them to not deposit our checks until I found out what was going on at the bank.
When I went to the bank, I spoke with the branch manager. I explained I knew how banking works. She even said she didn’t want to waste my time, since I knew what I was talking about, and got right down to business.
The lady (at Chase) stated the “back office” decided to put an “extended hold” on my deposit and the initial amount to be used was not available. I was going to have to wait another week.
Therefore, I had discovered while meeting with the banker I had some NSF check fees. The banker stated Chase went ahead and paid the checks.
By now, I was not very happy at all. I showed the manager my receipt and a copy of the check I deposited. I told her the people who had assisted me in the previous transaction and assured me of what to expect. The manager stated Chase would pay on any check and refund the fees. I also demanded a letter stating the actions and errors that occurred or may occur are the fault of Chase, and not my own. I wanted this letter from the bank in case something negative showed up on my credit report and I needed a document to justify the transactions.
While sitting at the manager’s desk, she made call to see if my deposit from the previous week had in fact gone through and if the funds were available. Guess what, the money was there.
I stated that I knew what Chase is doing is floating my money. (Before electronic banking, people could float money using the time delay of the mail system. Not anymore. Only I wasn’t doing it, the bank was doing it to me.)
Instead of making it available when they said it was, an extended hold was placed so they could use the money longer. She smiled, but the smile was one of those “I just got caught” kind of smiles.
The manager requested a release, and guess what? My money was available within minutes. The manager also credited back may fees as mentioned.
Here is the kicker. Chase Bank put an “extended” hold on my money to use for a longer period of time while charging me NSF fees to earn money when the deposit had actually cleared and should have been in my account to begin with – or else they wouldn’t have paid my checks since I’m not set up for loans. Fortunately, I know enough about banking not to just to let things slide and wait another week…
…and Barking With The Big Dogs will let the fat cats know the game is up.
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