Skip to main content

View Diary: Credit unions score 40,000 new accounts on Bank Transfer Day (109 comments)

Comment Preferences

  •  The one- or two-day float on 50,000 SS deposits x (3+ / 0-)
    Recommended by:
    Gordon20024, BYw, Involuntary Exile

    12 months would be an annual loss of income that I think most banks would notice.  

    I don't believe the "small accounts cost us more than they earn us" spin.  The big banks are not operating as public service institutions.

    As offensive as our adversaries can be, it is always the people on our own side who drive us crazy.

    by Mayfly on Wed Nov 09, 2011 at 04:08:56 PM PST

    [ Parent ]

    •  And you shouldn't believe.... (3+ / 0-)
      Recommended by:
      deepeco, SCFrog, Involuntary Exile

      That small accounts cost more than they earn.

      A large bank, like BoA or Wells Fargo, does its account processing on large computing systems, which they either own outright (and thus have depreciated since they've purchased them, resulting in a tax credit), or rent, which can again result in a tax credit.

      Smaller accounts generally have a small number of credits and debits, often less than 10 a day (most likely less than 5 a day, unless you're out shopping).

      Given that the marginal transaction cost of processing a credit or debit card is extremely low (the banks are still making a significant profit at the $0.21 rate), the statement that they accounts aren't worth keeping is silly.

      Let's say that you've got an average monthly balance of $1000.  In a given month, you make 40 transactions.

      --2 of those are direct deposit, which you aren't charged for, but cost the bank, say, 8 cents to process.

      --10 of those are direct pay using the bank's website.  Again, you're not paying a fee for them, but they cost the bank 40 cents to process.

      --The remaining 28 transactions are, for this example, debit card uses.  Again, you're not charged, but the location you use the card at is.  To the tune of 21 cents per swipe, but it costs the bank 4 cents to process.  That's 17 cents per transaction profit, for a total of $4.76 profit.

      Subtract from that, the 48 cents from the other transactions, and that's $4.53 profit to the bank, for the account.

      Now, because they technically only need to keep $150 of your money on hand (though they lump all the accounts together), they've loaned out $850 at, say a 16% APR.  They make, in the first month, $11.33 in interest.

      Multiply that by the number of accounts, and no...  small accounts don't cost more than they earn.

      You know what, Stuart, I LIKE YOU. You're not like the other people, here, in the trailer park.

      by Mithras Angel on Wed Nov 09, 2011 at 04:43:53 PM PST

      [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site