We don’t hear the word free spoken honestly much anymore. But it’s a word we’ve come to embrace and cherish in this day of increasing everything – especially when we drive past the gas pumps and think seriously about getting a third mortgage on our home just to purchase some petrol. So when we hear Free Checking, what is the first thing we think? “Yeah, whatever dude.”
This word free has almost become a myth because, as my Daddy always said, if it sounds too good to be true then it probably is. Oh, we all still have a glimmer of hope that maybe, just maybe, one time it will sound too good but actually is everything we thought it could be. In all this madness, the last place we think free could be found is at the bank.
In a competitive economy like ours, it should come as no surprise that the almighty dollar still rules with an iron fist. However, our good friend Adam Smith wrote about an “invisible hand” and how market place competition can bring prices down. Such is the case with banking and the ever-present scramble over high profits found in money management.
Banks make their money the old fashioned way, they use what is yours and pay you bunk for the privilege. Financial institutions take the money on deposit, loan it out for a higher rate than they pay you back and what is left is the yield, or profit. And if your money sits there long enough, they can actually invest it if it isn’t being loaned out and once again use the difference in what they pay back as the profit. Sounds great, huh? Well, let’s get to the good part.
The competition for your money is actually quite fierce. So now, we see a lot of banks offering more free stuff, especially the offer of Free Checking. And here is the kicker… it really is free. There are some caveats of course, i.e. direct deposit, but most large banks simply say, keep your account in the positive and you’re free as a bird. Honestly, most of us don’t need the extras that come with the premier checking accounts anyway. The lure of interest on checking is appealing, but rates really aren’t good enough to justify paying a fee of $7-$20 dollars a month at this point. Free checking is really all we need to manage our money and pay the bills. Many don’t realize that free is really out there and continue paying monthly maintenance charges. So I urge everyone to test the waters and find something that maybe, just maybe, would be good enough to be true.
Posted by logan in Banking, Finance, Manage Your $