Past and Future of Banks & Banking II

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