General Banking Advice

I was a banker for roughly 3 years at a major nationwide bank. In the past year (while the economy has gone in the shitter), I've had a ton of people ask me for advice in certain banking matters...getting fees reversed, improving their credit score, getting loans, etc... I've helped some people with all of these issues, so I thought that I'd throw some of this stuff out there for you guys that are maybe hitting the same walls.

Overdraft fees:

As a general rule, you’re going to want to go into the bank and actually speak with someone on these. Phone bankers usually have stricter limits on what they can reverse than actual bankers, and the red tape that you’ll have to go through with them is usually more arduous.

Also, never lose your temper when trying to get an overdraft fee reversed. Remember that you’re dealing with a human being that’s trying to do their job

If it’s a legitimate bank error: These can be handled via the phone bank if they are pretty easy to prove. Otherwise, go into the bank and have documentation/proof ready. Be friendly and show the banker that you deal with WHY it was a bank error (teller deposited the funds into the wrong account, a payment got mis-applied, etc…) and it should be fairly straightforward. Fees caused by a bank error were ALWAYS reversed quickly and painlessly, and we usually got the customer in and out of the door quickly. Remember that these things happen (they are human, after all). Don’t be an asshole about it…if the bank really inconvenienced you over the matter, let them know about it in a nice way and they will probably do whatever they can to make things right. Talk to the manager if necessary but BE COOL.

If it’s your error: The bank is under no obligation to help you if it’s your error. They may or may not reverse fees as a courtesy (they will typically take a look at your relationship with the bank…number of accounts, average balance, length of time as a customer, number of fees waived in the past year) and make a determination.

DON’T DO THIS: Don’t do what most customers do and yell, scream, or make threats, especially if it’s your error. I can guarantee that you will get NOTHING reversed. As soon as you take the asshole approach, you’re done. If you piss off the banker, you WILL be escorted out of the bank.

I’ve had people say variants on the following to me:
- ‘You bastards always do this to me. You always overdraw my account and hit me with fees.’ Excuse me…the bank doesn’t overdraw your account, YOU DO. And, more than likely, you don’t keep a ledger or follow your accounts online, do you? Gee, I guess I can’t help you, sir.
- ‘The ATM said that I had money in the account! Why did you overdraft me?’ Because you withdrew funds from your account that were there to cover the checks that you had written. Remember those? They cleared the next day, and you took out the money that was there to cover them.
- ‘You cleared the check too fast! The money would have been there the next day!’ Oh, so you knowingly wrote a check for insufficient funds and committed fraud…is that correct?

DO THIS: Sit down in front of the banker and be cool and friendly. Say to the banker ‘You know what, I goofed. I thought that I had money in there but I was wrong. I thought (insert reason) but I was wrong. Is there anything that you can do to help me out?’ I guarantee you that THIS approach will get the banker to actually TRY and get you some fees reversed. If they have any discretion at all in the matter, they will be on your side. Admit the error, don’t make threats. I can say this from personal experience AND from talking with other bankers: This approach works. You be surprised how few customers USE this approach, however.

If a third party caused your error: The bank may or may not help you. For example, if you gave someone a check and future-dated it and they cashed it early, that’s not a bank error. Dating something for the future MEANS NOTHING in modern banking. If someone else’s error caused you to overdraft, the bank will (more than likely) direct you to collect any fees from them. As a courtesy, they might reverse some of the fees depending upon your relationship with the bank, but I wouldn’t count on it (see the previous section).

Getting a Loan:

Most of what I’ve written below may seem like common sense, but you’d be surprised just how unprepared most people are when they ask for a loan.

Banks typically look at the following information for a loan:

1. Credit Score
2. Debt to Income ratio.
3. Relationship with the bank.
4. Collateral.
5. Employment History.

CREDIT SCORE: That’s a separate issue that I’ll cover later. Obviously, you want a high credit score.

DEBT TO INCOME RATIO: The bank wants to make sure that you can cover the loan payments. Banks differ on what they will allow for this, but typically you don’t want to be too financially obligated with existing payments. The bank will usually want to know what your gross monthly income is; once they get this, they’ll run it against your credit report to see what’s out there. If your obligations are too high, they’ll either decline your application or ask you if you can get a cosigner on the loan.

RELATIONSHIP TO THE BANK: If you have everything at the bank (accounts, mortgage, car loan, equity loan, etc…) they will be much more apt to give you another loan. Always try your principal bank(s) first. They may offer you rate discounts for your overall relationship with the bank, so check them out.

COLLATERAL: This can be your house, a car, a speedboat, an IRA, etc. A secured loan is easier to get approval on (and will get better rates) than an unsecured loan.

EMPLOYMENT HISTORY: Is your job stable? Have you been there for at least 2 years? How long have you been in your career? All of these factors will affect your loan. If you’re a job hopper with an inconsistent career and source of income, you’ll probably get declined (or get a shitty rate).

Before you apply for a loan, know the following:
Addresses for the past 5 years
Employers for the past 5 years

Have some paystubs (and possibly tax information) at hand, in case they ask for proof.

Managing Your Accounts:

From my experience as a banker (and from my own personal experience), people tend to spend all of the money that they have in their primary account. If you’ve got $1000 dollars in there to last you for 2 weeks, you’ll spend it down to $50. If you’ve got $2500 in there, you’ll still spend it down to $50. It seems to be our nature.

I’ve worked with people that make over 500K a year that are totally fucked in their accounts, and I’ve worked with people that make 40K that have everything in order, no unreasonable debt, and money on the side. What usually separates them is what they do with their money and how they separate their funds into different accounts.

Most people that have their shit together do the following:

1. They actually figure out what their monthly expenses are. They spend time, usually a few months, actually tracking their spending. They monitor exactly where every cent goes: rent/mortgage, car payment, utilities, gas, food, entertainment, Starbucks, etc…

2. They look at their spending and figure out if there’s any fat that they can trim. Most people are pretty shocked to find out that they drop $300 a month on lattes.

3. They determine what their absolute necessity is to live each month (the essentials only) and then they add a specific dollar amount to cover the extraneous stuff.

4. They create multiple accounts:
- First, to cover the essentials (mortgage, utilities, food, credit cards).
- Second, to cover entertainment (movies, dates, gas, lattes)
- Third, for what I call ‘holy shit’ money.
- Fourth, for a specific spending account (Christmas, for example)
- First Savings, for your actual savings that you never plan to touch.
- Second Savings, for a goal (Vacation, for example).

5. They Use their accounts in this manner:
- Have a checkbook ONLY for the First account. Pay your bills out of this account using either checks or online banking/billpay. This should have your highest average daily balance. Set up overdraft protection for this account by linking it to either a savings account, a credit card, or a line of credit.
- Have a check card for the second account. This is your operating money, and I include gas in here because you will probably swipe it at the pump. Use your online banking or a ledger to monitor this account. Have overdraft protection for this account as well.
- Have $25-$50 per paycheck go into this account. This is ‘holy shit’ money that you can tap into whenever the first or second account needs an influx of cash (you have an emergency payment to make , like a car repair).
- Have $25-$50 per paycheck go into this account. Have a check card for it and use it to pay the specific need that it’s designed for (annual license for work, Christmas, etc).
- Have $50-$100 go into this first savings account. Never touch it in case of emergency. This is your nest egg.
- Have $50-$200 go into this second savings account. This is for a goal, like a car down payment or a vacation.

5. They alter their direct deposit from work so that funds go into these separate accounts. If you can’t do that many DDs, set up automatic transfers to send the money into those accounts every 2 weeks (or whenever you get paid).

6. Monitor their accounts online.

Doing this will really help you manage your funds, pay stuff off, and grow your money. I've seen it work, and it works for me.

Improving Credit will be next; I'll try and get to it today.

I'm happy that you guys are finding some of this useful. This is really just stuff that I learned as a banker - believe me, I've seen some really messed up stuff from all income and age brackets.

You pay $9 per month for checking? Tell me why, please. Is there a minimum balance requirement? Is it a high risk account, due to past behaviour or credit issues?

Where I used to be a banker, most of the accounts had fees and multiple ways to waive those fees. There was quite literally no limit to how many accounts a person could have (I personally have 4 checking and 3 savings accounts with the same bank).

Consult with your banker. Tell him/her what you want to do and they should be able to create a checking package for you that will meet your needs without any fees. Unless you have a big issue (closed accounts, charge offs, etc...), this shouldn't be an issue. If it IS an issue, consider changing banks.

All things being equal...If you're banker has set you up correctly, you should NOT be paying any fees for your accounts themselves.

One other thing on opening up new accounts: Usually, a credit check is run for any account opening. If you're going to be doing multiple accounts, try and do all of them at the same time so that it's only one hit on your credit. For my bank, this was certainly the case.

Online billpay is absolutely the way to go. When you make the payment, the money is withdrawn out of your account then and there. You generally don't have to wait for the funds to clear your account (the recipient to cash the check), so it's easier to manage your funds. Most overdraft issues that I encountered were from people that wrote checks and then spent down the account (in the float period) so that there was insufficient funds to cover the checks.

RE: ING

Great rates, but make sure that you have easy access to your funds. When I was a banker, customers still had issues getting the funds transfered to their regular accounts in a timely manner (they'd request a withdrawal from ING, then they'd have to wait a few days for the money to show up in their account).

Personally, I like having ready access to my funds NOW. Unless they've resolved this issue, I'd keep at least some of the funds in your regular bank so that you have emergency access to it WHEN YOU WANT without having to wait a few days. Also, keep in mind that savings accounts can generally be linked as overdraft protection to your checking accounts; you won't be able to link it to your ING account for protection.

Talk to a banker at Chase and see what you can do to get set up in a fee-free account. For the record, I did not work at Chase, so I cannot comment on their fee structure. Seeing that you live in TX, I'd shop around for a different bank (hint: my bank has branches there) and see what the best deal is.

Also, talk to your employer and see where they bank (or look at your paychecks). Many banks offer special programs to people that bank in the same place as their employer.

Renn: Regarding your Credit Card and building credit, you're doing the right thing for the most part. I'll go into greater detail when I address credit, but what you want to do is this:

To build credit:
1. Use it every month for $25-$100. Use it for gas, for example.
2. Pay it down to $20 each month, carrying that small balance over to the next month. The interest on $20 is negligible.
3. Every 5-6 months, totally pay it off.

This shows the following to the credit bureaus:
1. You know how to use the card.
2. You can make payments on time.
3. You can carry/manage a balance. It's THIS part that people don't know about.

Another thing on Credit Cards: Don't go over the 20% mark if you can avoid it. If your limit is $5000, try not to go above $1000. If you do, try and get it down below $1000 as fast as you can. That 20% mark is big in factoring your debt/income ratio. When you get above that 20% mark, you are considered to be more financially at risk.

I have no experience with Credit Unions, sorry. Some of my customers loved them, some did not. I'd rather say 'I don't know' than give you incorrect advice on them.

I don't believe that it will affect your credit scores. Truth be told, how the 3 main credit bureaus arrive at their scores isn't a transparent process. The information that I've learned comes from dealing with the underwriters and loan processors at my bank, as well as via conversations with other financial officers.

An increased limit will effect your debt/income ratio. With a higher limit, the more debt that you could theoretically take on. Make sure that your income justifies your limit, or you could be putting yourself at risk to being declined on a loan. It's not uncommon for people that are applying for loans to be asked/told to close some excess cards in order to improve their debt/income ratio.

You might have to get a secured credit card. I've opened up tons of them for people: people with NO credit (immigrants, students), and people with bad credit. Typically, if you use the secured credit card properly for a year, the bank will graduate you into an unsecured credit card.

Be aware, each time that you apply for a credit card is a hit on your credit; this effects your score, temporarily. You DON'T want to go into the bank and apply for a card and have it show that you've had 15 credit inquiries in the past month. You will probably get declined.

A short version on fixing credit: Plan on it taking about a year.

- Pay everything on-time and get all of the 30/60/90 day lates off of your record.
- Get a full credit report and go through it with a fine-toothed comb. Dispute anything that you can.
- Whenever possible, SATISFY creditors rather than SETTLE with them. Satisfied means that you totally fulfilled your financial obligation with them, and this looks better for you. When you settle, that means that you didn't totally fulfill your obligation but gave them enough to get them off of your back.

I'll go more in-depth later on.

This is personal opinion: I refuse to pay any annual fees on any cards. Any rewards that I earn must be free - paying for free rewards is as ridiculous as it sounds. There are too many credit card companies in competition right now to haggle over fees.

It can be a factor, yes. If you have a credit card with a $10,000 limit on it, you could potentially got $10,000 in debt...if we approve your loan and you subsequently spend 10K on hookers and blow, will you still have sufficient income to be able to make your loan payments? An awesome credit score and a long history of making payments on several trade lines will help to offset this problem, but loan underwriters really do consider this kind of thing when determining your approval AND your rate.

Oddly enough, I was a banker when you opened that thread.

Credit:

The big one. The three big credit bureaus are Equifax, Experion, and Trans-Union, and they keep their methodology secret. Because each one is different, you’ll frequently have different scores from all three sources.

What I’ve been able to determine from my experience, my conversations with underwriters, and my conversations with financial planners, is that many different factors go into your credit score, and they are all weighed differently by the different bureaus.

Positives:
-Paying your bills on time: You don’t want to have any 30/60/90 day late payments on your record, if at all possible. Any of these within the past 1 year can really hurt you. After a year, they’ll still have an effect, but it won’t be as strong.
-Multiple trade lines: There are essentially 2 kinds of credit, installment and revolving. Installment credit refers to a loan (fixed timeframe, fixed dollar amount, fixed payments) or anything similar. Revolving credit refers to a Credit Card or a Line of Credit (Not necessarily a fixed time frame, money that can be borrowed and paid off repeatedly, minimum payments) or something similar. A balance of the two different forms over a period of time will significantly raise your score.
-Properly handling those credit lines: Use them, make payments for them on time, carry balances on them (even small ones), don’t exceed 20% of your limit too frequently, and pay them OFF totally a couple of times a year.

Negatives:
-Delinquent payments: This stuff shows on your credit report, so don’t think that it isn’t looked at. One or two 30 day lates aren’t too bad, but 60/90 day lates within the past year will kill your score and chance at getting a loan.
-Bankruptcy: You’re essentially dead in the water for 7 years.

Rebuilding your Credit:
-Get your credit report: Get a FULL, thorough one. You’re entitled to get this once a year without it being a hard hit on your credit. Go through it with a fine toothed comb and really look at what your history is. It should be eye-opening.

-Look for things that are outstanding or charged off. You should consider contacting those parties and paying them off so that they say ‘Satisfied’. You could also try and settle with them (make them an offer for partial payment), but ‘Satisfied’ looks better than ‘Settled’.

-Make sure that your major bills are taken care of: NEVER be late with utility payments, and always make your mortgage and car payments on time (or within the grace period).

-If there is something on your report that is in error, DISPUTE it. If it’s in dispute, the item in question does not count FOR or AGAINST your score.
oI was told this item specifically from my loan underwriters. I had a customer who wanted to do a home equity loan that couldn’t because of one item on their report. He explained that it was something erroneous on his report (which was clean otherwise), so I told him to put that item in dispute. He did so and came back a week later, and I was able to get the loan approved for him.

-Try for a secured credit card. You’ll need about $300 in cash in order to get one, and there may be an annual fee, but they do wonders to rebuild your credit. Most banks will offer them. You secure the credit line by putting up your own cash in escrow (essentially, you’re using your own money to buy things, using the card as a conduit). Use this card correctly over the course of a year, and hopefully the bank will graduate you from a secured card to an unsecured card.
oI did this for people all the time. It was great to call up the customer after a year and tell them that they could move to an unsecured card.

-Use your new credit card correctly: Every month, use it to buy gas. Get it up to between $50 and $100 each month. When your payment is due, pay it down to $20 (carry that as a balance). Do this for a few months, and then pay it down to $0. The interest that you’ll pay during this time will be fairly insignificant, but it will show the bank AND the credit bureaus that you can handle a card correctly.

-After a while, try for a small secured loan (maybe around 3K against your car). Make your payments ON TIME, and then pay it off a few months early. Having a perfect secured loan that is paid off EARLY does wonders for your score.
oI paid off my car loan about 5 months early, and then I paid off my guitar loan about 2 months early. My score did a MAJOR jump.

-Be patient, and be consistent. You’re looking at a good year-long process to get your credit back (longer if you’ve had major issues). Make every payment on time, no matter what.

Paying Off High Balances on Credit Cards:

- Be sure and make your payments on time, regardless of the amount.
- If your payment record is good with the particular credit card company/bank, give them a call and see if they can lower your rate. Most people don't realize that the customer service number can be used in this way; they only use it for complaints. There may be an offer that you qualify for that will lower your rate (permanently or for a year), so give them a call.
- If you have multiple cards that have high balances and/or high rates, pick ONE of them and devote all of your funds to that one. Make minimum payments on the others and burn that one down to ZERO. Having that card paid off can have an impact on your credit score, which may in turn enable you to negotiate a better rate on your other cards.

Overdraft Protection:

You want and need this. Link up your checking accounts to a bank Credit Card, a bank Line of Credit, or a Savings account. Try to get a form that doesn't involve a fee, but get something set up regardless.

Overdrafts (especially if they are excessive in frequency) CAN count against your credit.

Why are the overdraft fees so expensive? Because you'd overdraft all of the time if they weren't. If the fee was only $5, you wouldn't even blink at it. They are punishingly expensive to encourage you NOT TO FUCKING OVERDRAFT. If you are overdrafting, you are spending the bank's money, not yours...and they're going to charge you for it.

You can piss and moan all you want about overdraft fees, but you are essentially borrowing money WITHOUT ASKING from the bank. Instead of asking permission beforehand, you are asking for forgiveness afterwards. Guess what, that forgiveness comes with a pricetag.

ATMs:

For the most part, ATMs aren't handled by the bank (even if their name is on it). They are serviced by intermediary parties that operate like banks: They process your transaction and take on a certain amount of risk to get your money to (or from) your bank.

What does that mean for you? That means that you don't want to make large deposits (especially checks) into an ATM. The ATM servicing company doesn't have access to your banking history, just your balance. As such, they might impose a hold on your deposit that the bank wouldn't have. If you're relying on those funds clearing into your account fairly quickly, you may be out of luck.

Many people have been stuck with week long holds for checks deposited into an ATM; I've seen it happen. As bankers, we'd have to wait for the check to get scanned and processed before we could look at it, verify it, and release the hold on it. Sometimes, this would take days to resolve and severly inconvenience the customer.

The one advantage of depositing into an ATM is that, for the most part, their business day cut-off is 6pm rather than 3pm. If your deposit is small, or it's not out of your usual pattern of deposit activity, you should be fine.

Considering that he's dealing with stocks, I'd either take his advice or put it into a bank that is FDIC insured.

Internet Purchases:

If you buy shit online that comes out of your primary checking account, stop. Open up another checking account that has a balance of zero that has no connection to any of your other accounts. If/when you make purchases online that withdraw from your checking (like PayPal), transfer that money FROM your primary account TO your internet account via online banking.

I've dealt with plenty of fraud cases where account information gets out there, and I've seen checking/savings accounts get wiped out because of it. Having this internet only account limits your risk.

Hi Diva:

I'd whittle those down to just one or two. Keep the ones that have been open the longest, as that will help your credit history the most (longer credit lifespans).

Regarding your second question: Applying for a credit product is a HARD HIT on your credit score. A HARD HIT drops your score by a few points each time, but those points are recovered after a few months. I'm assuming that you're closing those original cards after you transfer the balance to the new one, so you're probably offsetting any harm to your credit score from these hits by maintaining a good payment history. From what I understand, it's the people who keep doing this balance transfer and don't close the original card or pay stuff off that REALLY get into trouble.

I'm certainly not an expert on this particular subject, so you may want to consult with a professional on this. Any advice that I have to give is purely from personal experience, observation, and consultation with coworkers.

If you have a question that you don't want to bring up here, feel free to PM me and I'll answer it to the best of my ability with total discretion. I've already had a few of you PM me and I'm happy to help. If I don't know the answer, I'll freely tell you that 'I don't know'; I won't purposely pull an answer out of my ass.

These are simply tips to hopefully improve your banking experience. Don't ever be afraid to go into your bank and sit down with someone to go over your accounts.