Friday, October 28, 2005

CONSUMER ALERT: Bank Charges Interest to Save You Money!

I stand in stunned silence at the latest ad campaign from a national bank. The idea is that when you accumulate your "spare" change, you save money. Let's say your coffee-la-de-da, costs $3.10. The bank will charge your credit card $4.00, depositing the "change" into your checking or savings account. Sounds great, right? WRONG! Oh gullible one!

Let's do a bit of math. I will be charitable and say your credit card interest rate is only 20%. Those temporary teaser rates work out in the Banks favor, trust me. After all the fees and add-on charges, they get you for around 20%. (This also takes into account the "average daily balance" nonsense.)

$**.90: Your "saved" change.
$-*.18: Interest at @ 20% on $.90 - you owe.
$**.72: Your theoretical financial increase. ($.90 - $.18.), You have to pay something for this service.

But wait... It's worse then that!

$*4.00: Actual charge to your credit card.

$**.80: Interest @ 20% on $4.00.

$**.90: Your "saved" change.
$-*.80: Your total interest @ 20% on $4.00.
$**.10: Your actual financial gain!

You lucky dog! You put in $.90 and get back $.10!
Such a deal!

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