What makes bank of america so bad

Part II: How Bank of America makes its money The fact that Bank of America is no longer among the most esteemed companies in the United States hasn't gone unnoticed by the executives in the megabank's corner offices. A recent ad campaign provides a case in point. Designed to humble the bank in the eyes of consumers, one of its commercials depicts a time lapse of multiple generations of a single family. The patriarch gets married, buys a house, and has children and grandchildren.

Indeed, the only constant is Bank of America, lurking omnisciently in the background. The problem is that the image of a small, personable lender that cares about each and every one of its customers is simply at odds with reality. Bank of America isn't just any old bank. It's a behemoth, one of only four lenders that today make up an oligopoly in the banking industry. When expressed in dollars, the magnitude and breadth of Bank of America's reach is almost unfathomable.

This is not to say that Bank of America is simply a carbon copy of its too-big-to-fail brethren. A purported 8 million are designated as "preferred," meaning that they generate more money for the bank via higher deposit balances and product usage, while the remaining 40 million customers are classified as "retail. A strategy like this, which exposes Bank of America to the masses, has both its benefits and detriments. The primary benefit is its ability to acquire vast sums of deposits from savers across the country.

And the best part is that these funds, once acquired, are effectively free. In the third quarter of this year, for instance, it paid all of 0. The value of this franchise becomes clear once you consider that these very same funds are then loaned to borrowers at significantly higher interest rates. In the third quarter, Bank of America charged borrowers an average rate of 4. Known as interest rate arbitrage, this is the very essence of a traditional bank's business model. But if this sounds too good to be true, then you're onto something.

In short, the process of acquiring as opposed to holding deposits is expensive. It requires a sprawling branch network, colossal call centers, sophisticated mobile and online banking platforms, and thousands of ATMs spread across the continent. It's so expensive, in fact, that most large banks actually lose money on the typical customer account. What's the best way to grow the business? One way to do so is to charge upfront account fees. Indeed, since Washington Mutual, the former savings and loan colossus acquired by JPMorgan in , introduced free checking in the mids, this approach has been a nonstarter.

The banking industry has thus been forced to become more creative in its attempt to offset these losses. Much like the fees that spawned in the wake of Southwest Airlines ' and other discounters' disruption of the airline industry, Bank of America has gravitated toward less transparent means to recoup the deficit. Instead of baggage fees, it charges overdraft and non-sufficient funds fees.

As opposed to charging you for a can of soda, it takes a tiny proportion of every debit or credit card transaction that it processes for customers. But far from solving Bank of America's problems, this strategy has merely fueled a new class of headaches.

Over the last few years, the bank, along with the industry in general, has found itself in the regulatory and legal crosshairs over the litany of fees it charges customers and the way in which it does so. It's been sued for its overdraft policy of reordering customer transactions in order to maximize overdrafts and forced by regulators to change it, prompting the bank most recently to consider offering a new type of account which prohibits overdrafts altogether.

Debit card interchange fees are now capped by the Federal Reserve. And it's been admonished for its treatment of mortgage and credit card holders. All told, Bank of America has rung up tens of billions of dollars in legal and regulatory expenses for various fee-based transgressions.

The result has been to refocus Bank of America and its peers on the traditional method of revenue growth, which, not unlike your local McDonald's "Would you like fries with that? The initial priority of any bank is to acquire new customers, which is typically accomplished by offering free checking accounts. On Wells Fargo's second-quarter conference call, its CEO said that he "dreams about checking accounts.

It's how banks get their foot in your door, after which the objective becomes to get you hooked on additional, and many times fee-based, products. Moynihan touched on this in a presentation he gave in Discussing Bank of America's colossal deposit base, he noted,. We are going to maximize this franchise in everything we do, including, importantly, maximizing the value of the Merrill Lynch transaction, and sending every customer we can into [our] team of 15, financial advisors.

This also includes getting Bank of America customers signed up for credit cards, mortgages, and car loans. As he mapped out two years later,. Trust, helping them borrow on a short-term basis using their card or on long-term basis for their home or their car. If you're a current Bank of America customer, then you're well aware of this push.

Hardly a week goes by that a BankAmericard application isn't in your mailbox or you aren't contacted by a Merrill Edge representative seeking to advise you on one thing or another.

Beyond this, the cost of maintaining its massive footprint obliged Bank of America to double down on cutting expenses. Well-designed online and mobile banking tools complete the banking experience. But easy access and a solid digital experience come at the price of hefty fees and weak savings rates. Bank of America also offers the Advantage SafeBalance account, which can help frequent overdrafters. Being enrolled in the Preferred Rewards program also helps you dodge the monthly fees.

See more details at Bank of America's offer page. And see more bonus options at NerdWallet's list of best bank bonuses. It offers a potentially useful Keep The Change program, which rounds up debit card transactions from your linked Bank of America checking account to the nearest dollar and transfers the difference to your savings account. You can use NerdWallet's rates tool to compare CD rates at other institutions. The annual percentage yield is a flat rate of 0. It is backbreaking work and very costly, but the goal was to create a working farm that will serve as our legacy.

We moved to the outskirts of Atlanta and my wife and I raised our daughter while I worked in and around the restaurant industry on the technology side. Fast forward 30 years and I am still happily working to support the restaurant industry, but I saw that we needed a way to keep the family connected and revert to a simpler way of life.

The farm was that path and we have been blessed ever since. But…that is where the rest of the story begins. This is my harrowing saga of getting the loan funded but then getting it illegally seized by the bank without due process, explanation, or cause. Now, we see financial institutions reaping billions of dollars in fees for processing loans to only their "best" customers. But to add insult to injury, for small business owners like myself that did get funded, there is another trap looming right around the corner.

On June 26, Bank of America sent a letter stating that they closed my account without any explanation and that "Our decision to close your account is final and may affect your ability to open an account with us in the future.

Knowing that this had to be a mistake, I called Bank of America and faced the gauntlet of customer no-service options with a variety of messages stating that "We are experiencing high call volumes. When the first "real" employee answered, I was given a gruff answer that my accounts were closed… And?

The representative struggled to explain why — reading cryptic notes on screen stating that there was "a mismatch in the data" on my account and it was flagged. There was no answer so I asked to speak to a supervisor who also treated me as a likely criminal. Finally, she did agree to submit my account back to the analyst for "further review. Of course I fully expected that someone would call me back and tell me that it was all just a mistake but when I asked about this, the supervisor laughed and said no and that I would simply have to call back tomorrow.

And to wait on hold again to continue this abusive treatment? But I did call back 24 hours later and waited on hold again only to be told that my account was closed and that it was still under review. Obviously, I did not find this to be an acceptable answer so I asked to escalate it further. Finally, though not surprisingly, the vast majority of readers who chimed in continued to unload on the bank in the most recent piece. So, what's the point?

Is the point that both I and the vast majority of our commenting readers take perverse pleasure in kicking Bank of America while it's down? Do the comments I quoted above reflect nothing more than the collective opinion of a vocal minority?

Are the readers that took the time to share their experiences just a bunch of freeloaders who are unjustly blaming the bank for their own, preventable travails, such as buying a house at the peak of the market, taking on a second or third lien, or agreeing to an inappropriately structured mortgage? While all of these are legitimate questions, they nevertheless miss the primary issue here.

What people should be asking themselves, and particularly those who defend the big banks like Bank of America, is this: Are the nation's largest lenders intentionally exploiting their overwhelming market share by acting as economic predators? And are they doing so despite the fact that they owe their very existence to a massive multibillion-dollar bailout from taxpayers? No reasonable and informed person would disagree with the contention that banks play an important role in society.

Indeed, many historians believe that robust and advanced financial institutions were the reason that a tiny island nation like Great Britain was able to become a world power.

And few people would disagree that American consumers should be more responsible with their personal finances -- though, this somewhat goes against the domestic consumer engine that's fueled the U. At the same time, however, when a group of irresponsible, and now fabulously rich, financiers plunges the economy into the second-worst economic downturn since the Great Depression, from which taxpayers footed the bill to protect said financiers' jobs, I don't believe it's unreasonable for the average American to feel that banks should be more deferential in the way they treat customers.