Skip to content Skip to navigation

Banks - Now Stupidity is Automated

« previous next »

It's been a while since I've had a good bank rant.

Once upon a time banks had a pretty simple business model: borrow money at a relatively low interest rate, lend money at a higher interest rate, make money off the difference, know as "the spread." In those days banks encouraged saving, since what customers had on deposit (i.e. money individuals had loaned to the bank) directly influenced what the bank could then lend back out and make a profit from. A century ago the average person did not and could not get a bank account because small deposit account because the overhead on managing a small account exceeded what could be earned. Ordinary people used cash and the necessity of keeping commonplace goods accessible for cash purchase kept prices down. Loans were issued by loans officers that made individual, human decisions based on actual face-to-face conversations with the recipient of the loan. Sometimes the loan officers would actually go out on a limb and lend money to someone who, just looking at the numbers, would appear to be a bad risk but had some esoteric merit that went outside of the pure math of it. There was in fact an allowance in the system for the occasional mistaken hunch by a loans officer.

Around half a century ago that began to change. Credit cards - those happy little permanent floating lines of credit were this first real undermining of th old system. In addition to the money made from the interest on these loans, the banks also made money off charging the merchants for the privilege of accepting the cards. Transaction fees were born.

As computers infiltrated the banking system and made it easier and easier to keep track of the minutiae of each and every account, transaction fees proliferated. Small deposit accounts became profitable for the banks because every little transaction that used to be overhead that came out of the spread could now be automatically changed for. The person behind the counter ceased to be a teller (i.e. a person who counts money) who understood what they were doing and made their living based on their knowledge, accuracy and encouraging you to save more money, earning a steady wage. Instead they became salespeople with next to no actual knowledge interested only in selling you more "services" that you would be charged for and earing commissions in the process. What the tellers used to do, largely just receiving and handing out money, is now the realm of the ATM, the automated teller machine.

Even more fun now, is that a great deal of the lending decisions are made by the computers (which, based on what I saw in my personal experience on the inside, I can attest are lazily and frighteningly sloppily programmed) with no consideration for human factors and the bigger picture, which is what precipitated this rant.

I opened a letter today that congratulated me on the management of one of my credit cards (call this "Card #1") and that as a "reward" my credit limit had been increased by a rather substantial amount. This made me laugh since last month I had received quite the opposite letter regarding another credit card (call this "Card #2") with the same bank - my credit limit had been reduced because for missing a couple of payments. What had actually happened is the payments for Card #2 had been applied to the wrong card. Despite calling in and attempting to explain and correct the mistake the automated systems made their decisions in isolation, unable to see what was going in a larger context.

For me, though, the pleasant irony is the increased limit on Card #1 exceeds the amount of credit I had "lost" on Card #2, and Card #1 has an interest rate much lower than Card #2. Any attempt I have ever made in the past to decrease the limit on Card #2 and increase limit on Card #1 proportionally into order to maintain the same amount of available credit at a lower interest rate failed with confused shoe-salesmen-types protesting that such a thing "could not be done" with no explanation for why not. Seems all I really needed to do all along was just make the same slip-of-the-mouse mistake in paying off my balance two months in a row.

Oringinal post: