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Based on my research, I can conclude that banks are very beneficial to consumers, but they are also dangerous to an uninformed consumer. They are beneficial because they offer a lot of important services. Some of these services include chequing and savings accounts, credit cards, investment options, loans, lines of credit, mortgages, and safety deposit boxes. Each of these services has benefitted consumers in a variety of ways. Chequing accounts and safety deposit boxes allow people to store their money and valuables in a secure location, making these items less likely to be stolen. Investment options and savings accounts let people grow their wealth, ensuring that they still have enough money, even after inflation. Loans and lines of credit have allowed people to take opportunities that they couldn’t have taken without sufficient financing. So many businesses have been created thanks to a loan, and without banks, many of them wouldn’t exist now. Mortgages have given people an opportunity to buy a house or an apartment when they need it, instead of when they’ve finally saved up a few hundred thousand dollars. Banks have benefited every one of us, and they are highly important to today’s economy.
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However, there is a dark side to banks as well. One must remember that they are still businesses, and businesses exist to make money. If someone isn’t careful, they could lose a lot of money at the hands of the bank. First of all, banks always ensure that they’ll earn a fair amount of money from you. One example of this is of open term mortgages. Open term mortgages are mortgages where the borrower can pay off the debt whenever they want within the term, meaning they could even pay off the debt a month after they’ve taken out the mortgage. But, if a borrower is able to pay off a debt whenever they want, banks won’t make as much money in interest off of them. So, banks have found a way to compensate for that – by increasing the interest rate. The interest rate for a 1 year fixed rate open term mortgage at Scotiabank is 6.5%, 0.46% higher than the interest rate for a 10 year fixed rate closed term mortgage. That is quite a lot of interest paid, and the only way to avoid paying that interest is to pay off the entire debt in a short period of time. Of course, this is impossible for most people. In fact, they’ll probably be unable to pay off the mortgage in a year, and will be forced to convert to a closed term mortgage. As a result, they would have to pay more interest than if they had chosen a closed term mortgage in the first place. This is very dangerous to uninformed consumers, who may blindly choose an open term mortgage simply because it gives them more flexibility.
Another example is of service fees. One commonly used service is overdraft protection, and it ensures that a cheque is still processed, even if it’s written for more than what one has in their chequing account. In that case, the chequing account would then have a negative balance. Overdraft fees are a common type of fee, and they must be paid when one writes a cheque for more than what they have in their bank account. Currently, CIBC’s overdraft protection fee is $5.00 for each day the account is overdrawn. In addition, there is a 21% interest rate on overdrawn amounts. This spells bad news for anyone who frequently has an overdrawn account, especially if they’re unaware of all the fees they have to pay.
Another example is of service fees. One commonly used service is overdraft protection, and it ensures that a cheque is still processed, even if it’s written for more than what one has in their chequing account. In that case, the chequing account would then have a negative balance. Overdraft fees are a common type of fee, and they must be paid when one writes a cheque for more than what they have in their bank account. Currently, CIBC’s overdraft protection fee is $5.00 for each day the account is overdrawn. In addition, there is a 21% interest rate on overdrawn amounts. This spells bad news for anyone who frequently has an overdrawn account, especially if they’re unaware of all the fees they have to pay.
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Fortunately, banks provide a lot of information, and that information is easily accessible. There is nearly everything one needs to know about all of the bank’s services on their website. There’s information about interest rates, service fees, minimum and maximum limits, monthly fees, and more. In order to attract customers though, the banks don’t include some information on their website. I had a particularly difficult time finding out the interest rates for personal loans and lines of credit. Although there was a page named “Rates for Loans and Lines of Credit”, not a single interest rate was seen on the page. However, I was able to find out the interest rates by speaking to a bank representative.
Therefore, it can be concluded that banks are highly beneficial to our society, but can also take advantage of uninformed customers. Fortunately, there is always a way to get information about the bank’s services, and if a customer takes the time to learn about these services, they’ll be able to manage their finances without a problem.
Therefore, it can be concluded that banks are highly beneficial to our society, but can also take advantage of uninformed customers. Fortunately, there is always a way to get information about the bank’s services, and if a customer takes the time to learn about these services, they’ll be able to manage their finances without a problem.