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Yet another reason not to bank with BofA - Life is strange... — LiveJournal

Sep. 23rd, 2007

10:04 am - Yet another reason not to bank with BofA

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I had some bad experiences with Bank of America many years ago, and have not banked with them since. The sum total of my impression of those experiences was "they cannot be bothered to care about me, even when their mistakes have cost me substantial money and time." And then there's the time they bat-and-switched me for a mortgage loan that ended up costing me more than $3k more than it was originally advertised to cost.

Things I have heard from other people have bolstered my feeling that they are big, uncaring and venal (like most banks), but with an added anti-customer-service veneer that appears to be unique to them. This, seen today in the SF Chronicle (apparently taken from one of those multi-page fine-print "update" folios that come with a credit card bill, is yet more fodder for the "venal" tag:

"I noticed in the latest notices to Bank of America credit card holders, buried in at least five pages of changes, was an announcement that in calculating its variable interest rate it would now be based on the highest of the three previous months (prime) rates as published in the Wall St. Journal, as opposed to the last month's rate."
I mostly bank with a couple of different credit unions. They are not as smart, capable or flexible as the big banks, but they are also not as bent or venal. I suspect that all of these differences, both ethical and functional, are because the two types of entities have different goals. It is simple: banks are chartered to make money for their shareholders, while credit unions are to be non-profit entities that serve their designated communities, whether those are communities of association, trade group, or region / community.

Here is a good example of a credit union goals and mission statement, from here:

To provide a full range of personal, affordable financial services to our community. Our goal is to stimulate the economic and community development of our area. Our mission is to be competitive,convenient,cutting edge and concerned.
And yes, deposits with credit unions are insured, by the NCUA (not by the FDIC, as with banks). But not all accounts from either type of institution are insured, be careful of the distinctions between types of accounts.

Have a great day!


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[User Picture]
Date:September 23rd, 2007 07:12 pm (UTC)

The problem with any business is how big you have to be (as a percentage of their business) to get their attention, and whether the tone of customer service (set by the CEO) is a good one or not. The basic handling of money has essentially no proprietary aspects at all - in principle, regulation notwithstanding, anyone can do it, so banking is hugely competitive, and the banks have to avail themselves of any opportunity for profit.

You're exactly correct w.r.t. the incentives set by a non-profit vs. profit-seeking entity, and the banks are keenly aware of this also: they've been pushing for taxes on the credit unions precisely because the credit unions have the ability as a result of their non-profit status to offer better rates of interest to depositors, and lower rates of interest on loans. The banks want to level the playing field before the bulk of the general public figures out that the CUs have this built-in basic competitive advantage, and take their business there. The main trouble with CUs is that they're supposed to be limited access - available only to employees (and their families) of various institutions, though that seems to be breaking down over time (which is exactly what the banks are afraid of).

Amusing coincidence: I got called for a phone survey on this very topic (banks versus CUs) just the other day. It was difficult to tell who commissioned the survey from the questions, but if I had to place a bet, I'd bet on it being commissioned by the banks, seeking to guage public understanding of this issue.

As for credit cards, that's another extremely competitive business: if you don't like the rate being offered on one card, go find another. BankRate.com will be happy to help. The thing is: credit card debt is extremely expensive, so the smart way to use credit cards is to have two with staggered closing dates, use each card for only two weeks immediately after its closing date (rotate them in your wallet), and pay them off in full every billing cycle!

If you use credit cards in this way, you have several advantages:

  1. you get to borrow money at 0% interest for about a month and a half (maximizing your own deposit interest rate returns).

  2. you can shift your CC business to any other card offering a better deal at any time.

  3. you don't care what the interest rate on the CC is because you're never paying interest. Your concerns are on annual fee, other fees, and whatever rewards or "cash back" programs they have.

One more thing: never, ever take cash out of a credit card. The CC issuers see that as a sign of possible debtor insolvency, and the interest rates for cash are positively punitive.

Personally, I've got a BofA credit card, and I've been pretty happy with them; the one time I needed them to be flexible (I was in Australia and needed a quick credit limit increase), they responded immediately and positively. This, however, does not necessarily make me disposed to do any additional business with them; I know their rep. I've been a Wells Fargo customer since they acquired First Interstate Bank over a decade ago, and I'm just about done with them; I'll be posting about that in my LJ shortly.

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[User Picture]
Date:September 23rd, 2007 08:31 pm (UTC)
I've been lucky to have had no real problems with BofA, but I think that's mostly because I live in Tucson, where you can still get pretty good customer service. Ted theorizes that customer support is good here because it's a cheap place to live, so people aren't bitter about their heinous commutes or resentful about their over-privileged customers.

That said, I don't have a BofA credit card, nor have I ever taken out a loan from them...
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