Can You Trust the Big Banks? Should You Move from Wells Fargo?
Wells Fargo committed fraud. It is plain and simple. You might even say that Wells Fargo committed identity theft. What else would you call it when a bank opens up unauthorized accounts in customer’s names.
Wells Fargo’s scandal resulted in the bank paying $185 million in penalties for opening roughly 2 million consumer deposit and credit card accounts without customer authorization. In addition, they face numerous lawsuits as well as regulatory investigations.
The results of their illegalities are showing up in their business. This CNBC article had this to say about their latest reporting:
- “Mortgage referrals from retail banking were down 24 percent in September from August.”
- “Customer visits with bankers, account openings and applications were down on lower referrals, marketing activity and product offerings.”
- Openings of consumer checking accounts fell 30 percent in September from August, and 25 percent from September last year. Credit card applications declined by 20 percent.
Wells Fargo is not the only bank ripping off people. Just google Bank of America, Citibank, JP Morgan Chase and the word ‘fines’ and you will be amazed at the list of news stories that come up showing the number of times these banks have violated something.
The biggest problem with the big banks is accountability. When the consequences are not terminal, these banks take advantage of the system. Sure they get fined. However, that is something that they can absorb. Reputation which is initially hurt gets rebuilt over time. They basically get away with murder and they live to stay in business.
What if the penalties were so great that there was the chance they could go out of business? After all, what these banks are doing should result in the kind of fines that would question their survival and make them respect the system of law in this country. Who is truly holding them accountable? Even though the politicians put their angry faces on, behind those masks they know that they will take care of the banks. Isn’t that funny that the problem always comes back to the politicians.
So, should you stay or should you go? Well, rest assured Wells Fargo will be on their best behavior at least until they get out from under the microscope which might take a few years. Personally, I don’t want to do business with anyone I can’t trust and I don’t trust the big banks.
Should you stay or should you go? Let me answer with my own personal experience. I bank with a regional bank by the name of TBank (www.tbank.com). I know my banker and she takes great care of me. Just the other day, one of the bankers saw a transaction that was about to hit my account and called me to make sure it was real. You won’t get that at the big banks. My cousin is another great example. He owns a bank in South Texas and is an incredible banker. He takes care of people, does the right thing, believes in the hand shake deal, and values customer relationships. These are the qualities you look for in a bank and the people who take care of you.
Filter your big bank relationship through that litmus test and then decide if you should you stay or you should go.
How to Design the Life You Always Wanted
Bob discusses design thinking and how it can impact your financial life.
One Step That Could Improve Your Credit Score
Everyone is focusing on credit card debt as it marches towards the 1 trillion dollar mark and a new all-time record high. Credit card debt would join the “I trillion dollar plus club” along with auto loans and student loan debt.
What people should be paying attention is non-revolving debt. This is debt that is paid back in installments. It sits at a record 2.69 trillion and there are tons of companies making these loans with tons of money to lend. It appears that the consumer is borrowing like crazy.
How could this be good for your credit score? Credit card debt is much worst for your credit score than non-revolving debt and it is because of the credit utilization ratio (CUR). The CUR is the ratio of credit limits and debt. In other words, how much of your combined overall credit card lines of credit have been used and represent debt?
For example, say you have 10,000 of credit lines through credit cards and you have 2,000 worth of debt. Your CUR would be 20% which is considered healthy. However, if it were 3,000 or more then it starts to have a negative effect on your credit score. The CUA can have a big influence on your credit score. A CUR over 30% starts to negatively affect your credit score.
The strategy is to take out a non-revolving installment loan and consolidate your credit card debt. You are probably paying high interest rates and the interest rate on the non-revolving loan probably won’t be much better. However, it could have a big impact on your credit score. Let’s go back to the above example with 4,000 debt and credit limits of 10,000. After the consolidation your total debt stays the same and has the same effect. However, your CUR went from 40% down to 0%.
Of course, credit score improvement is not guaranteed since everyone’s credit profile is unique and the overall scoring system is complex. However, interest rates are high across the board on all consumer loan debt and non-revolving debt is not that tough to get right now. The key would be to keep those consolidated credit cards open and most importantly to not use them again.
When Do You Get Rid of a High Mileage Car?
Ask Bob Question
I am a home health nurse and do a lot of driving. Before starting this job in January, I bought a 2016 ford fusion car and have since put 23k miles on it. My question is because its’ a new car how do I maintain it with all the driving that im doing and how long should i keep this car before trading in due to the amount of mileage I am putting on it before the value is so depreciated?
Here are a few things to consider:
First, religiously stick to the owner’s manual when it comes to maintenance. A well maintained car will last you a good 200,000 plus miles with today’s technology.
Second, when it comes to value it depends on the car. So, you have to do some research. High mileage cars are seen more as a negative when it comes value. However, a well maintained high mileage car with records can be a little higher in value. You can use a site like www.autotrader.com and compare similar Ford Fusions in the area and all over the country with high mileage and see what type of reduction they are experiencing off of the original retail price (which you can look up that information online as well). For example, take a Fusion purchased in 2013. Find the original car price and then check for a 2014 model with say 30,000 miles on it. How much depreciation are you seeing in similar situations? Then go to 2015 and repeat the process. By going through this process you can start to see a trend. Plus there is a point where the percentage of depreciation all of the sudden widens from year to year. If your car model has been around for a long-time, you can test out earlier models and get an idea if the trend repeats itself.
Since you might be buying cars more frequently, I would always buy one that is a year old with 3 or 4,000 miles on it. Ideally, purchase a dealership loan car or car that just hasn’t sold where the warranty hasn’t started yet. This way you won’t have to experience the automatic depreciation.
There are situations that will increase and decrease the value of a car. Make sure you are not pricing that into your research. Obviously, certain features and packages effects the prices. Condition of the tires could effect the value. Also make sure your comparison example is not a car that has been in a wreck. Finally, it makes a difference whether the comparison car has an extended warranty or not. That does add value to the car.