I was absolutely livid. So much so, in fact, that had I the necessary fuel for a fire, I might have started a riot right then and there. I squeezed the fantasy for every drop of mental faculty I could muster. Just picture it: A quiet haven of java sippers, engulfed in the exploding flavor of petroleum glory and dynamite fallout. Watch in horrified awe as every stuck-up, mug-totting ground bean lover took a punch to the face from the heat wave of a Molotov cocktail dance party that would make Mardi Gras look like a hospice nursing home.
I wanted one of those banker douche bags to show up for a carmel latte, so I could piss in his gas tank, fashion a makeshift fuse, and blow his damn Ferrari off the map. I wanted retribution, acts of contrition, and fire—lots of fire. Some people think about shooting the bad guys of the world—I don’t. I don’t believe in killing people. Destroying things works just as well, and fire goes a long way in convincing people you’re serious.
This all started when a few friends and I decided to meet at a local coffee shop to work on our respective projects: grading papers, editing photos, or just good ol’ fashioned “pretending to work.” As for me, I was writing what I’d hoped would be the conclusion of a very riveting short story that probably should have been a novel by now. It must have been the 47th time I had read the last sentence of the story so far, when I began searching for more purpose. I decided that checking my online bank statement would be a great way to feel productive through an act of subterfuge that resembled budgeting.
And, that’s when I saw it. There, in the endless pages of virtual calculations, was a obscure $12 “monthly maintenance fee” from Bank of America. In the calmest voice possible, I echoed inside my mind: “12 dollars, for what?” All banking transactions happen automatically, and, to the extent of my knowledge, require no such industrious acts of mankind that might warrant the charge. Twelve dollars may be an acceptable fee for YEARLY maintenance, but not MONTHLY. Now add up $12 a month of maintenance fees and multiply that by millions of banking customers—that’s a few billion dollars for a whole lot of nothing.
As sure as I’m sitting here drinking this beer, I can tell you: I might be drunk, but I’m certainly not stupid. The private sector has gotten so good at making money out of nothing, that more than half of the population can barely identify how money is skimmed off the top of our their hard-earned paychecks by corporate America. One well-known Americanism says: “You can’t get something for nothing.” And yet, as markets mature, become saturated, and condensed into fewer and fewer “big dogs”, the players at the top have become experts at finding ways to take the little bit extra off the top, with the illusion of providing a service that either isn’t provided, isn’t necessary, or, when it is provided, it’s done so at a fraction of what they charge you to perform it.
So, without further delay, let us look at a few ways that the top brass make money from nothing.
You know exactly where this is going. You’re hanging out at the 711 and you realize you need a little cash—maybe you’re looking to pay a friend back for lunch the other day, you need coins for the parking meter over the weekend, or you’re just looking to buy a lottery ticket (you can’t use plastic to buy lotto tickets). So what do you do? Have no fear. There, in the back of this convenient store, is a shiny little box that says ATM in glowing letters right off the Vegas Strip. It gives you money (at least about as much as you have in your bank account). But, there’s a catch: your transaction costs a fee. The most common fee is around $2, but it can be up to $3 depending on the profile of the location. While it seems like a small price to pay for convenience, if you do the math right, the result spells out: “SUCKER”. You see, the average person withdraws between $20-$60 from these machines. People often use a debit or credit card for purchases more expensive than that, so it’s pretty rare that someone is withdrawing 1000’s of dollars from a convenient store ATM (most of them have a withdraw limit anyway, in order to prevent their cut from being too small of a percentage). So how much are they charging you exactly? I went up to AP Calculus in High School, but it doesn’t take a genius to derive the daily interest rates on common withdrawal amounts. Here’s the breakdown:
$60 at $2 a pop = 12%
$40 at $2 a pop = 18.25%
$20 at $2 a pop = 36.5%
The funny this is that: interest is usually accrued on money borrowed, but this isn’t a loan; this is your own damn money! Be careful and think smart. The next time you decide to grab some quick cash, drive the extra couple of miles to your bank instead, because at 36.5% interest rate, you’re paying more than a third of your withdrawal just for some machine to LEND YOU YOUR OWN MONEY.
Over Draft Protection
If you’re a middle class citizen like I am, you know what “Over Draft Protection” means. It means that the bank is gonna save your a*s when you spend more money than you have in your checking account right? Well, sort of. Actually, there are two main ways to “protect” yourself from overdrawing.
The first is by linking your checking account to a beefier savings account you’ll have to open up (an account on which you’ll pay maintenance fees should it have less than $2000 in it). (Feel free to Roll your eyes along with me Folks)
The second way is to setup a credit card from which to borrow the difference of your expensive transaction. Now, while both services seem reasonably useful, here comes the rub:
In the first case, where you allow the bank to transfer money from your savings to cover the difference of a big purchase, they are going to charge you a $10 fee just for moving your OWN money (You can move your money online for free, but for some reason, when they do it, it costs ten whole dollars). Let’s get even more ridiculous shall we?
In the second case, where one borrows from a line of credit, if you happen to overdraft your checking account, and therefore borrow on the credit card, not only will you be paying the interest on the amount borrowed, you’ll also be paying a $10 transaction fee. Oh, and did they mention the $30/year maintenance fee for your credit card? But, here’s the kicker folks, these rules don’t apply to everyone. No way. That’s not the American way. The American way is to reward the rich, and punish the poor. If the sum of all your accounts add up to $10k or more (and not a penny less), they wave the $10 fee. The middle class are too busy paying for medical fees and college degrees to have $10k in their bank accounts.
And so, you can see, the system is set up to ensure that those with the least money, pay the most. (The minimum monthly balance necessary for BOA to waive the $12 monthly checking account maintenance fee is $1,500). I just want to be clear: I’m not suggesting that banks shouldn’t charge for services. However, there’s no way you can convince me that it’s necessary for banks to double-dip (interest fees on an overdraft credit card + an overdraft fee for the transaction, $12/month for checking account fees + $14/month for savings account fees + $30 a year for credit card membership). There’s zero financial risk taken on by a bank if I have $1499 in my checking account, instead of the $1500 minimum. How can such fees be justified? Wanna know what else is crazy?
You only need $25 to OPEN a checking account.
Nice one Bank of America; I see what you did there.
Paying for the Mistakes of Corporate America
Before the FDIC got at the throats of banks for automatically enrolling members in Overdraft Protection, they were making a killing. I remember once getting a call from my girlfriend (who was basically computer illiterate when it came to online banking), and she told me that somehow she owed the bank $400 and she didn’t know why. I brought her down to the bank and pretty much yelled at them for taking advantage of her. Apparently, what happened is that the bank automatically enrolled her into overdraft protection just by opening up the checking account, and due to some confusion with her new job’s direct deposit, she was overdrawing her checking account daily. Rather than her card simply being decline, the spending triggered her overdraft protection, which then charged purchases to the back-up credit card they signed her up for. When all was said and done, they took her for a ride. She had to fork over the $400 plus interest from proceeds of her minimum wage job.
Later on the FDIC cracked down on banks and pretty much made it illegal for them to automatically enroll members in overdraft protection, unless they specifically asked for it. But, here’s where things get absolutely insane.
Due to the billions (yes BILLIONS) in lost revenue caused by the ending of these overdraft protection scams, the banks issued statements that members who chose overdraft protection would be subjected to increased fees due in order to “recoup” losses caused by the FDIC crackdown. Recoup losses? For what? You practiced unethically and took advantage of people; why should banking customers have to offset losses banks sustain for market misconduct? That’s like if some deli owner started charging more for sandwiches because he’s gotta pay off a bail bond for tax evasion. Any money accrued under such practices later deemed ILLEGAL by law is not the responsibility of the consumer to cover. Raising prices to maintain revenue streams that existed under shady banking scams is absolutely ludicrous, and that’s market manipulation that skims money off the top of hard working middle-class Americans for absolutely no reason.
The Illusion of Choice
As Internet access and data usage on smart phones have become more and more ubiquitous, the market has had to change along with the technology. One of the easiest and most prevalent tactics that private companies use to make money out of nothing, is to offer choices that put the customer at a huge disadvantage. The trick is to offer options that appear to benefit consumer needs, when in reality, they are calculated packages that create a situation that guarantees that customers will have to pay more money for less service. So, for example, when it comes to AT&T’s data packages, data consumption is separated into three separate tiers that make it nearly impossible for consumers to use what they pay for. The data pricing tiers are as follows:
300mb for $20/month
3GB for $30/month
5GB for $50/month
Let’s start with the first tier, which, if you know anything about megabytes and gigabytes, is an absolute joke. Just sending a few picture messages, some light web surfing, and maybe downloading a song or two, would easily put you over 300mb. Any person technologically savvy enough to want a smart phone, will undoubtedly burn through those 300mb in about two weeks or less. That means a whole two weeks of “Cha-Ching” for AT&T, as you merrily surf the web and rack up a bill thicker than the ones that never pass through Congress. So, what do you do? Upgrade of course! At 3GB you definitely have a lot more wiggle room. And, with the prevalence of free Wifi in most areas, it’s not likely you’ll consume the entire 3 gigs. I myself have the 3GB package, and I’ll tell you, as an avid smart phone user, I usually only get through about half of my data allowance each month. Now, try to imagine where others users fall in that scheme: most likely, even further between tiers. If someone goes over their plan just by a little bit, they’ll upgrade to a plan that is certain to be more than they’ll ever consume (5GB). It’s easy to how data packages are perfectly spaced so that no matter what your consumption habits are, you’re virtually guaranteed to either use less service than you pay for, or pay overage fees. In this way, AT&T will always take more money from you than the services you consume.
Punishing the Faithful
Like most Apple product releases, an iPhone release event has become akin to the second coming of Christ himself. So, it’s no surprise that the iPhone 5 was no different. One of the key features of the iPhone 5 legacy was that Apple’s world famous FaceTime video chat app would no longer be limited to usage on Wifi networks; people would be able to use FaceTime over the 4LTE cellular network. Of course, this great freedom had a catch—and a hefty price tag implication—for those who wished to see their family and friends without worrying about where the nearest hotspot was: video and voice chat uses a LOT of data. And so, with the elimination of Unlimited Data packages, the data tier pricing of 300mb, 3GB, and 5GB, made it EXTREMELY likely that consumers were going to go over budget, and that AT&T would see those overage fees roll in like no body’s business.
In the heat of all this anticipation, there was a glimmer of hope for the loyal many who had been with AT&T since Unlimited Data packages were offered. If you had entered a contract with the wireless giant before their data packages changed, you could KEEP your unlimited benefits package for as long as you stayed with the company. This meant that, (speculatively speaking), if you were, indeed, grandfathered into an Unlimited Data package, you would be able to FaceTime on 4LTE until the cows came home and never pay and extra CENT. YES! Success! But, just as the loyal few began dancing in the golden valleys below, the clouds rolled in, and AT&T said: Not so Fast! Those with Unlimited Data plans were told that they had to forfeit them in exchange for one of the new shared data plans in order to use FaceTime over the 4LTE network. BAM! Basically, AT&T just slammed the door in the face of its most loyal customers.
Warrantees and Insurance
Having faith in your own product is an important thing, but just in case you’re wrong, you better slap a warranty on there just to put the consumers’ minds at ease. Most well-made products come with innate warranties honored by the manufacturer. However, in the past decade or so, store chains have gotten really sneaky about capitalizing on warranties by offering them through the store front. The most common approach is to offer you a warranty at the check-out line. They do this for three reasons:
A.) Just simply offering the warranty gives the consumer the impression that no innate manufacturer’s warranty exists. (Apple emphasizes 2-3 year protection plans even though the products themselves already come with an innate 1-year warranty).
B.) You’re more likely to purchase a warranty at the register in order to speed up the completion of your transaction and to avoid embarrassment by turning down a “obviously Good Deal.”
(To bait you into this, store clerks make outrageous claims that would make anyone feel dumb for not purchasing, such as: “If anything goes wrong, no questions asked, we’ll replace it for two years. You’ll get a brand new one even if it’s only a cosmetic blemish.”)
C.) You’re more likely to forget you bought a warranty with the store (it’s usually printed on the receipt).
In addition to offering you a warranty you’ll probably never use, there are usually other stipulations that prevent consumers from actually getting something for their money. Sometimes stores require that you register the product’s ID number online, essentially “sign up” to be eligible for the warranty. Other times, they might ask you to pay shipping and handling costs to send the product to be replaced. As you can imagine, most people either forget, or simply don’t want to bother with the foot work. And so, the result is that the store makes money for doing nothing. That would be like if I told you to hold on to my $50 bill, but that if I accidentally forget about it or can’t get back to you, you could just have it.
Contracts and Cancellation Fees
Before we get into this one, ask yourself two questions:
A.) Why would someone cancel services?
B.) What’s the purpose of cancellation fees?
The answer to the first question is easy: people cancel services when they are unhappy with a service provider. So, when Verizon’s Internet and wireless charges shoot up, and people are not willing to pay those monthly fees, they’ll think twice before switching providers. Verizon wireless can charge up to $350 for a contract cancellation.
This, naturally, leads us into the answer to the next question: The purpose of a cancellation fee is to keep customers paying high monthly fees that seem tolerable in comparison to the costs of cancellation. This also means that big companies like Verizon can skimp on customer satisfaction too, leaving little room for flexibility and creating the opportunity to charge small nominal fees each month without worrying about if customers are going to jump ship about it. Let’s face it: without cancellation fees, you better have awesome service and damn good customer service, unless you want customers to bail by the thousands.
If you think about it, though, this is market manipulation at its finest. Rather than customers responding purely to product preference and satisfaction, they’re responding to monetary penalties set up by companies who mean to control the natural behavior of consumers obeying the laws of economics. True free markets respond to products that meet needs—supply and demand—not penalty fees for greedy corporations.
The Bottom Line
This article only features things that I personally know about. But, as you might imagine, the countless other ways in which corporate America picks your pockets are even more subtle and damaging to middle class wealth. I stress the middle class because that’s precisely who these schemes target: a wealthy bank account never gets charged a monthly maintenance fee, and wealthy persons are less likely to drop a wireless company when monthly fees go up. The moral of the story is: Watch your pockets and stop giving your money away. You may not be able to save every dollar from these money making schemes, but you don’t have to get caught with your pants down every single time. Have some dignity.