“Yes, we can do that for you.” This is the standard reply of most bankers during initial conversations about taking out a real estate loan. News flash: they may be lying to you. They may not be able to get you exactly what you need, when you need it, after all. So, to close on that real estate property in Miami Dade, you lean on a hard money lending company.
Unfortunately, this is only one of the many misleading statements that banks make. While most banks, however, are actually honest and transparent about finances, the main purpose of banks remains unchanged: to make money by lending you money. So, sure, they do help you. But their primary concern is to earn and some aren’t above telling you, well, half-truths or even untruths.
Don’t believe it? Perhaps the examples of fibs below will jog your memory.
Half-truth #1: Free Checking Accounts
You may have seen banks advertising “free checking” but are they actually free? It turns out they’re not. In an interview with Bankrate in 2015, Pew Charitable Trusts’ former director of consumer banking Susan Weinstock said that most times, checking accounts are only free if you have a direct deposit.
“The direct deposit has to be a certain amount of money. If you stop meeting those parameters, then all of a sudden, your free account is no longer necessarily free,” she explained.
Half-truth #2: Keeping a High Checking Account Balance = Good Financial Practice
As we’ve established above, banks often require you to maintain a certain balance in your checking account. This only great for banks since checking accounts don’t generate much interest. If you keep your money in a savings account, it means your bank has to pay more interest. That’s why they’d rather you keep your balance in your checking account.
The actual better practice is to have a comprehensive budget. This way, you can keep your needed budget in your checking account just enough to cover your expenses and put the rest in your savings account. You end up making a little extra on the interest your savings account makes.
Half-Truth #3: Opening a New Credit Card Improves Your Credit Score
Let’s say you’ve maxed out your previous credit cards. Your bank might advise you to open a new one to help your credit score. This is true only to some extent. Opening a new credit reduces your debt to available credit ratio.
What your bank may not tell you is that opening a new credit card could hurt your credit score. Lenders will have to look at your credit information if you apply for a new card. This leads to a drop in your credit score, whether you’re approved or not. The age of your credit cards also plays an important part in your credit score. The longer your experience with credit cards is, the better your credit score will be. But a new card can reduce the average of the age of your credit.
Half-truth #4: Bankers are There to Advise You
Bankers are essentially salespeople, not advisors. There are banks that require their bankers and tellers to sell a certain number of products and services to customers. When bankers successfully reach their quota, they may be paid commissions. Bank employees may urge you to open new accounts or avail of their services even though you don’t need them. At times, they’re not above telling you half-truths so that they meet their sales quota.
All of these aren’t meant to discourage you from going to banks and trusting them. Just be sure to have your eyes wide open and look out for dubious claims like the ones stated above.
