The proliferation of automatic teller machines (ATM’s) prompted criminals to find ways to put them to their own use. One New York City bank, for example, placed pairs of ATM’s in the lobbies of its branches, along with a telephone linked to a clerk who answered questions about the new machines. A depositor wanting to use an ATM would often find another “customer” already present, talking on the phone. Before the depositor finished his transaction, the other person would say that the clerk had just told him the depositor’s ATM was malfunctioning, but the other was working. Unsuspecting, the customer would take his card from the first ATM and move over to the other.

The phone user would then surreptitiously watch the customer punch his personal identification number into the second machine and make a note of it. When the depositor had completed his transaction, the thief would say that the clerk wanted the depositor to insert his card in the supposedly malfunctioning ATM so that bank officials could figure out what was wrong. In complying, the depositor would activate the ATM — enabling the thief, once the depositor left, to use the victim’s identification number to withdraw money from his account.

This scam cost New York bank patrons many thousands of dollars before it was discovered. At first the bank refused to ‘ take responsibility, contending that it was up to its customers to exercise due caution in the use of the automatic tellers. New York State’s Attorney General disagreed and threatened suit against the bank under the Electronic Funds Transfer Act. The bank finally agreed to make restitution to the victims, and to pay interest on the funds fraudulently withdrawn. The bank hastened to adjust the machines so that it was no longer possible to work the scam. But all banks in the United States may not have taken this precaution, so beware…

Some people search out a bank about as seriously as they look around for a mailbox or trash can: the nearest one is fine. But it really is not wise to be overly swayed by convenience. It’s always helpful to have a bank branch reasonably handy to your home or place of business, but what you should look for is a bank whose staff is the most knowledgeable and responsive to your needs.

In comparing banks, if you like the idea of being able to get cash or conduct other financial business at odd hours, or wherever you happen to be, you may want to consider a network: either one owned by a large institution or one shared by a number of smaller banks. An interstate network enables a customer of any of the member banks to use other members’ ATM machines for any routine banking transaction, including depositing or withdrawing money. The holders of one main credit card have their own growing system: they can draw cash or travelers checks from 24-hour machines at more than a thousand locations around the country at airports, supermarkets and banks. An increasing number of savings and loan companies and credit unions are also making use of electronic tie ins.

If you expect to be depositing your paychecks, pension or dividend checks, or conducting other business regularly in person, observe the lines at the counters during peak hours when everyone else is apt to be doing the same thing — from noon to 3 P.M. on Fridays, for example, particularly those falling on major paydays around the 15th and 30th of the month. If the lines look intolerably long — there can be more than a half hour wait at some big-city banks — you might find faster, less harried service on Tuesdays or Wednesdays, generally the quietest days of the week. Or you can inquire if the bank will arrange for automatic deposit of your checks so that you do not have to go there at all.

Read more: Criteria when Choosing a Bank

In looking around for the financial institution that best serves your purposes — assuming there is more than one commercial bank, savings institution or credit union to choose from where you live — first determine what you really want to use it for: savings, checking, a credit card, online banking, a personal loan or home mortgage, stock purchases or a combination of several or all of these. Compare each bank’s offerings and policies on minimum balances and fees.

On the other hand, don’t overlook the length of time each holds different kinds of checks deposited in your account before permitting you to draw on the funds they represent. Most banks clear a local check immediately or in a day or two, but others can take as long as 10 days; in a few instances out-of-town checks have taken as long as three weeks to clear.

Banks have claimed that they maintain waiting periods in order to prevent losses on bad checks, but critics have pointed out that only about 1 percent of all checks passed turn out to be no good. Moreover, banks can get credit for checks from the Federal Reserve usually within 24 to 48 hours, then invest the money to make more money for themselves, a strategy known as “playing the float.” In effect, depositors are giving the bank free loans of their money for days or even weeks. Public and legislative pressure has already forced banks to cut down on their holding time, but it still pays to compare. Ask also if a bank officer can give clearance to make needed funds immediately available in emergencies, or to cover checks written against deposits you were given to believe had already been credited to your account.

If there is a chance that you will need a personal loan or a new mortgage within the next year or two, by all means inquire now about a bank’s rates and policies. Many banks will give their depositors preference over others, particularly when loan money is tight. If you are a good customer — and if you ask — you may even be able to get a preferential rate as much as 1 or 2 percent lower than that offered outside applicants.

In picking a bank, it is well to bear in mind two facts of financial life. One is that bankers, especially when they are parting with depositors’ money, like to deal with someone they know. The second is the Golden Rule of 80-20: some 80 percent of a bank’s income, on average, derives from 20 percent of its clients — so it pays the bank to be particularly cooperative with that ctop one-fifth. Putting those facts together before starting to deal with a bank at least starts a customer on the right track. To the two banker’s canons you might add one of your own: banks need you at least as much as you need them.

Read more: Shopping for a Bank

Part Two

Increasingly, banks and other financial service companies are merging and maneuvering toward regional networks and “one-stop shopping” for all a consumer’s financial needs, with the result that old distinctions among financial institutions are becoming blurred. In addition to different kinds of checking and savings accounts, money market accounts, certificates of deposit, loans, credit cards and 24-hour cash machines, more and more financial institutions are offering such services as automatic check depositing and bill paying. A few are even offering discount stock brokerage services, some types of insurance and a host of other enticements.

Both banks and brokerage firms, trying to intrude on each other’s traditional territories, have been pushing comprehensive accounts that combine banking and brokerage services. In return for depositing some specified minimum in cash, or a combination of cash and securities, and for the payment of an annual service fee, a customer gets the following: a high-yielding money market fund (into which all idle cash in the account is periodically swept); check-writing privileges; the buying and selling of stocks and bonds; a credit or debit card for cash withdrawals or purchases and a line of credit against which to draw. If present trends continue, some industry observers see the day when banks will be able to offer an even wider range of services, including data processing, all kinds of insurance and the buying and selling, as well as financing, of real estate.

In all, banking has become a decidedly lively, if sometimes bewildering, affair. In today’s financial landscape, the choices are not only broader and potentially more rewarding, but often far more complex than in the past. It pays not only to shop around, but to look carefully at the fine print behind the glowing offers and to ask questions if you don’t understand. What services are actually rendered, and at what actual total cost? How much do any hidden fees and charges add? How long do advertised interest rates apply, how often can they change and to what index, if any, are they tied? Perhaps most important, which basic services and which extras do you really need, and which can you easily do without — or get elsewhere at a reasonable price if the need arises?

Financial institutions are not charitable organizations, and what they lose in one area they have to make up for somewhere else. Higher rates offered for savings may be reflected, eventually if not immediately, in higher rates demanded for loans. Some bank services that were provided free in the past are already carrying new charges in order to pay their way. Fixed rates may have to yield to more realistic, variable rates on loans and credit cards — indeed, they are already doing so, particularly in the area of real estate loans.

Go back to the Part One

Part One 

Scarcely a decade ago, banking was still a relatively cut-and-dried business. Except for your convenience, it didn’t make much difference which bank you dealt with: interest rates, loans and other services were pretty much the same.

All that has changed. Today, thanks to continuing government deregulation and superheated competition among all sorts of financial institutions, banking is in the throes of a revolution and important changes are taking place constantly. “What you have now is a free-for-all,” says one industry analyst. “Virtually any kind of business can go into bankling, while banking is making important inroads where it has been forbidden before.”

The battle to woo customers, especially those with good incomes and/or substantial amounts of money to invest, can be followed in online advertisements and broadcast commercials every day. One institution upstages another with higher interest rates, more lavish “free gifts” or more tempting promises of attention from your “personal banker.”

Many institutions offer their clients “instant access” to their money through conveniently located, 24-hour machines and online access. These electronic conveniences provide cash on command, even on a deserted street at 2 a.m. when you’re broke and need money for a taxicab to get home. Some banks, indeed, make it clear that they prefer their less affluent depositors to use the machines regularly, even during banking hours — so that the banks can reserve the costlier services of human tellers for those with enough money on deposit to maintain “express” or “priority service” accounts.

Go to the Part Two

The most common fallacy : Cheap credit cards is an easy way to borrow money.

At the first glance, inexpensive credit cards seem to be an easy way of borrowing. But for some people they can be a far too easy way to get money and, in despite of common sence, a very costly one. It is quite a usual practice that credit card issuers apply interest rates three times as high as the bank’s current annual interest rates.

How do banks calculate interests on credit card accounts?

This point turns to be fairly confusing, particularly when you are trying to choose between competing offers from credit card issuers. One and the same credit card may deal with as many as three or four different interest rate quotations. First of all, your credit card account will be charged monthly on the outstanding balance. On average, the interest you have to pay every month fall between 0.75 and 1.5 per cent. It sums up to the annual interest rate spread of 9 to 18 per cent. Though you can find credit cards with both cheaper and more expensive interest charges most of them will vary within this narrow range.
Sometimes the issuers of cheap credit cards apply very low or zero introductory interest rates. Low rates are used as an enticement to attract new customers and are usually valid only for a short term. Not longer than for one year. Be very careful with such appealing proposals for the next reasons. As a rule the attractive introductory rates don’t cover the transfer of outstanding balances from other credit cards until you have paid them out. And once the introductory period is over the interest rate may grow dramatically.

What other hidden gimmicks may credit cards conceal?

Credit card issuers may charge various annual or monthly fees. Depending on the banking institution, these fees can range from nothing to more than $150 a year. Some credit cards issuers may offer you lower interest rates for higher fund turnover. In other words, the more money you spend on the card, whether you pay it off or not, the lower interest rate you will be charged. All these altering charges can be quite confusing. It brings certain difficulties determining the resulting annual percentage rate (APR) quotation, the legally required percentage rate specification which is designed to show you the factual cost of borrowing. So not always you know exactly how much you will pay for the conveniences of credit card utilization.