Confusion in the Clouds

“Where can I bank?” I’ve been repeatedly asked this question and told, “I like having my credit card, auto loan and savings all at the same institution.” I say, “don’t keep your money where you owe money.” The response is something like, “well what about my car loan?” Or, “can’t I just have a credit card linked to my bank account.” No. For your piece of mind, no.

It’s like the facts are covered in clouds, all hazy and buried from view. There is a reason the banks offer incentives for tying together different account types. It is because they want easy access to your money if something goes wrong with the credit card, line of credit or loan you may have with them. Your finances may look rosy today but its best to prevent potential problems in the future. If you look there is a clause in the fine print that allows the bank to take your account funds if you fall behind with payments to them.

The PROBLEM is – if you are on the edge just making your monthly payments and something happens to cause you to fall behind, that helpful institution may just help themselves. In many instances they have a right to offset your debt with your cash. Even if they make a mistake and you eventually get it corrected, you will be without those funds for at least 30 days.

What kind of problems could happen? You could become ill, your spouse could become ill, you could have cut backs or lose your job entirely, to name a few.

The only certain way to protect yourself from this happening is to keep your cash (checking and savings) accounts in a different institution from the bank that has your auto loan, credit card, credit equity line, and any other obligations you’ve incurred. Banks don’t care about you. They aren’t people, they are institutions. For additional bank tips see this article.

[This discussion grew out of the previous blog warning of Wells Fargo and Wachovia’s account freezing practices.]