I would guess in this case even if the account hadn’t earned interest the same thing would have happened. The account would have had $0 in it, but since it was still officially open it would have started to incur fees and go into the red.
Same with US banks, or mine anyway, Zelle for my Bank of America account, and just about every bank has free auto bill pay to like utilities and credit card bills etc.
To the extent some bank doesn’t have that, or people don’t use it, I think it’s because they, the customers don’t want to use it, not some mysterious quirk banks. Again I get paid rents and people could just do with Venmo, I believe that would fall under free P2P case, and if so fine with me. And once your bank account is linked to Venmo why is that ‘wow’? It’s pulling up an app, bank app or Venmo app, what difference does it make?
But a lot of people just don’t.
The US banking system never developed anything like the “giro” payment model, where someone “pushes” money from their account to someone else’s. Nearly everything is, at its core, based off of checks, which are an authorization for a third party to “pull” money from your account.
There are various companies that try to provide a “push” function, but they’re hindered by not being universal, not being compatible with each other, and often requiring a separate account.
Thought I posted this already- but apparently not. One problem is so many different apps- I’m not interested in having Zelle for my son, Venmo for my daughter and Popmoney for a third person. Second, Americans for some reason have a problem with giving out their bank info for other people to receive or send money - even though it appears on every check they write.
We are told that phone transfers (especially if they are going thru public wifi) are inherently unsafe and you’d be a fool to put your account number out there using a bank’s app or their website. I use my credit unions website with great reluctance but it has its uses, but only thru a hard connection to my router, never wifi.
That’s another thing, I don’t want all these utilities having a copy of my bank account number. They’d be just another big corporation who months down the road will admit that millions of their records were hacked because they skimp on security (or have none).
Maybe hackers are just setting their sights on US companies because we hear about these breaches quite often. Doesn’t that crap happen in Europe?
It does, we’re by no means immune to bank fraud. But we are protected - I recently had £4000 taken from my bank via fraud (by someone phoning the bank with a bunch of my verbal security details, not via online banking). The money was returned to me immediately the fraud was identified. A pain, for sure, but not a disaster.
You do know that your bank account number is at the bottom of every check you send to them, right?
…and what can someone do with a bank account number anyway, other than send you money?
As pointed out upthread, people tend to use the same bank for deposits and lending. When people open a current account with some bank, they are statistically likely to go to the same bank for loans. That’s one way, the major way, that the banks make money.
Also, of course, the banks finance those loans with deposits. Most of that financing comes from larger accounts - fat savings and current accounts. Not so much from £1,000 accounts. Banks also make investments, for example buying gilts (government securities) from the Bank of England. I believe gilts are liquid enough that most banks use them to make interest from their money “kept on hand”.
The banks also make money off overdraft fees, for those who can’t manage money.
You may not realize this but merchants pay their bank a small percent of many transactions. So businesses with current accounts (all businesses) pay their bank a little off the top every time you tap to pay, either directly or through the company that provides the machine. More significantly, the merchants also pay the bank that issued your card. That’s why banks want you to use their own cards. You don’t see the fees, but ultimately the cost is passed on to you through slightly higher prices.
~Max
I just paid my real estate taxes by echeck. One I found my lot ( which didn’t require any sign in) All I needed was the routing number and the the account number for my checking account. I renewed my sons car registration - same thing. I needed a certain amount of his info to identify the registration being renewed, but after that, just the routing and account number. I could easily have paid my bill from my son’s checking account and vice-versa. Or I could use your routing and account info to print checks with check printing software. Sure, you will eventually get the money back after I make the checks with my name and your account info and drain your account- but in the meantime, while the investigation is going on, you can’t use that money.
As has been said, that info is at the bottom of every check anyway- but yeah, there are things that can be done with it.
A checking account very well may be where you would keep PART of your emergency fund. But anybody who keeps it all there is asking for trouble.
Even before direct deposit, the various electronic payment systems, and so forth became available – i.e., when every family either got paid by check or paid many of their bills by check – there were some people who just would not accept personal checks–it was too easy to get scammed that way.
Despite the economic definition of a checking account as a “cash equivalent,” it’s not precisely equivalent. It’s trivially easy to imagine a realistic scenario in which cash will be much easier to use than a checking account.
No, they don’t.
The big banks mostly do, but smaller banks and credit unions quite frequently do not.
I have accounts at a medium-sized regional bank and a smaller local credit union. The credit union has no bill pay features at all. The regional bank does have “Internet Billpayer”; however, that doesn’t necessarily mean electronic payment. They have relationships with certain companies (such as the local utility), but for other vendors “Internet Billpayer” means you tell them who to pay and they print and mail a paper check.
Do they keep your balance on a big ledger with quill pens?
So true. I get people all the time asking why we sent a statement days after they did the “internet bill payment”.
“Don’t you take internet bill payments instantly?”
“Naw dude, you tell the bank to pay over the internet and they mail a check.”
“That’s not how my bank does it. I’m paying $X/mo for internet bill payments.”
“Your last three payments were by check from ‘Y Bank Automated Bill Pay Services’. I do checks on Tuesdays, so I’ll waive any late fees until Tuesday OK?”
~Max
Am I right in thinking that the US - compared to the UK anyway - has a very fragmented retail banking system, with many smaller regional operations still holding a good proportion of the market? If so, it must be an absolute nightmare trying to implement new systems across the whole sector.
That’s not just smaller banks- my checking account is with Citibank, and if I want to pay my Geico bill or my BOA credit card or my electric bill through online bill payment, they will be mailing a paper check.
I don’t know whether smaller banks hold a good proportion of the market , but in 2017 there were about 5000 FDIC insured commercial banks in the US. ( not branches, banks - there were 78,774 branches) That doesn’t include another 5000 or so credit unions and it may or may not include savings banks and “savings and loans”. ( I couldn’t tell) Some of the banks are very small- there’s a savings bank in my neighborhood that has only a single branch.
I've gotten the impression from this board that there are not nearly as many banks in other countries * - in fact, the impression I've gotten is that all of Europe possibly does not have as many banks as the US.
- People have mentioned being able to do things that are inconceivable to me, like making a deposit at a bank where they don’t have an account. I suspect that’s a lot easier to do in a country with 100 banks than one with 10K
I think you meant to write, “like making a deposit into one’s own bank from another bank where they don’t have an account”.
I’m sure any ol’ American bank would be glad to take your money without crediting an existing account.
~Max
Yes, definitely. There has been a lot of consolidation since the regulations changed to allow big national banks, but there are still huge numbers of small local (not necessarily even regional) financial institutions, and even the largest banks don’t have a nationwide physical presence (Wells Fargo has the most branches, and it’s completely nonexistent in big swathes of the country, though it’s possible to bank with them without ever seeing an actual branch).
I do not have usually more than $100 in cash at any one time. In the past twenty years I have had problems with this precisely zero times.
I am having a hard time imagining a scenario in which I need to pay for something more than $100, I can’t go to an ATM, they won’t take a check, a debit card or a credit card. A place like that will go out of business in no time.