Bank fees, commissions and interest

Bonjour opportunity! Bonjour wisdom! ‘The spirit of prophets is subject to prophets, for GOD is not a GOD of disorder, but of peace.’ (1 Corinthians 14:32-33) GOD is not the author of confusion. Do not assert what you have not verified. Do not take what you cannot pay for. Do not promise what you cannot give. Do not give what does not belong to you.

“ Faithful are the wounds of a friend; but the kisses of an enemy are deceitful.” (Proverbs 27 : 6, KJV)

" Love not sleep, lest thou come to poverty; open thine eyes, and thou shalt be satisfied with bread. It is naught, it is naught, saith the buyer: but when he is gone his way, then he boasteth. There is gold, and a multitude of rubies: but the lips of knowledge are a precious jewel." (Proverbes 20:13-15, Segond 21)

GOD wants us to manage our finances well. Good financial management is not just about increasing our income and multiplying our sources of income. It is about aligning our priorities with GOD's guidance, respecting His principles (following His teachings), making good use of our resources (gifts, talents, time, provisions) and honouring Him through our decisions. This means avoiding unnecessary losses, avoiding unnecessary debt, being generous for the Kingdom, showing the love of CHRIST by giving to others, ensuring a good inheritance for our descendants, working with integrity, ethics and excellence, saving, investing and diversifying our sources of income.

Fees and interest are the main sources of income for banks and financial institutions. Fees are the prices charged by a bank or financial institution for carrying out a transaction, providing a product or service, or dealing with operational irregularities or payment incidents. Some services are free of charge at certain banks. In reality, institutions charge fees for a range of services with thresholds. Services that appear to be free are services that are charged for/included in a package.

The fees are divided into two groups. First, fees related to transactions and services provided. Second, fees related to payment irregularities or incidents. A payment incident or irregularity corresponds to the bank's refusal to honor a payment transaction due to insufficient funds.

Examples of fees related to transactions and services provided

•  Account and securities maintenance fees, fees for a package of services, credit card fees, fees for online banking services;

• Transfer fees, fees for cash withdrawals from another bank's ATM, checkbook delivery fees, bank check issuance fees, check cancellation fees charged by the issuer;

• Fees for issuing or reissuing documents, estate management fees;

• Fees for reviewing loan applications, fees for managing inactive accounts;

• Fees for purchasing foreign currency, cash withdrawals abroad, loan repayment interest, fees for acquiring financial securities, etc.

Examples of fees related to irregularities or payment incidents

• Debit account interest or late fees, intervention fees,

• Fees for rejected checks, rejected direct debits, and transfers not executed due to insufficient funds,

• Advance notification letter for bounced checks, notification letter for unauthorized overdrafts,

• Fees for bank card cancellation by the bank, garnishment fees, or administrative seizure from third-party holders, etc.

In finance, interest is the remuneration for a loan, generally in the form of a periodic payment from the borrower to the lender. For the lender, it is the price of temporarily foregoing liquidity. For the borrower, it is a cost corresponding to anticipated use of the funds.

It is tempting to think that fees and interest are not important and only worry about them when the amount is significant. It would be a mistake to think this way. You should not wait until the day before buying a property, making your first big investment, or facing a crisis (job loss, bankruptcy, excessive debt, stock market crash, natural disaster) to think about it. It is important to know how much you have in your accounts, how much your accounts cost you, and what you can do with your accounts.

I'm in favor of diversification, but with wisdom. Diversification isn't done for the sake of saying you've diversified your investments, that you have accounts at different banks, or showing off your credit cards in an attempt to appear wealthy. That kind of attitude only impresses those who are ignorant. Having multiple accounts or credit cards doesn't mean you're rich. The top three reasons for diversification are: reducing risk exposure, accessing more opportunities, and improving your value chain. These aren't the only reasons, but they are the top three.

One or two accounts for expenses, two or more accounts for saving and investing (personal savings, life insurance, securities accounts and other investments, specific project savings, family or children's savings or investment accounts, cryptocurrency, etc.). You need to look at the price. But also, the offer, the quality, your needs, and eventually, your aspirations. A service that appears inexpensive may turn out to be very expensive. Conversely, a service that appears expensive may turn out to be very advantageous. Take the time to get informed and think it through. Earning money honestly is good. Avoiding unnecessary losses is also good. Sometimes financial institutions charge very high fees on their investments, without this being offset by the quality of management and investment performance.

A very common mistake is to think that a bank overdraft is a zero-interest loan. The overdraft facility is free, but the overdraft itself is not. An overdraft is a loan at a pre-agreed interest rate. Interest is calculated from the first day, regardless of the amount. If you are overdrawn every month, you may want to consider applying for a loan at a better rate, repayable in nine fixed monthly installments. In total, this will cost you less than the accumulated interest and fees on your overdraft. Be careful, however, not to take out loan insurance if it is not really necessary.

Questions

1. If you have an overdraft facility, how much is it for and how many days are you allowed to use it? What interest rate or fees will apply if you exceed the limit?

2. If you have an outstanding loan, how much does it cost you? What is the interest rate? How much is the total interest? How much does your debt cost you (interest, insurance, and other fees)?

3. If you own securities (financial title), how much are the quarterly management fees?

4. How much interest do you earn on your savings?

5. What are the guarantees of your insurance contracts and how much do they cost?

6. Are fees being deducted from your account without you knowing why?

7. What are the benefits of your credit card? Do you really need it? Are you making good use of these benefits?

Example 1

• You want to invest regularly in the stock market over the long term.

  • For now, you are a student and don't have a large income. But that's relative. A student who is fed and housed by their family can save 5 to 10 times more than a student who is entirely self-sufficient or a recent graduate starting their career. Let's assume that for now, you can only invest small amounts and that you only want to invest in securities from companies in your country or your country's economic zone. You want to take as little risk as possible. You prefer to put your investments on autopilot. You are willing to let your bank invest for you. You will therefore choose the minimum service at the minimum rate.

Example 2

• You want to invest regularly in the stock market over the long term.

• You are not the student in the first example.

• You are not an expert, but you are well informed. You know the difference between different financial securities. You manage your own finances. You want to invest small amounts internationally at a reasonable rate. You want to diversify your portfolio and monitor your accounts using a powerful tool. You want simple and clear pricing.

• First, you need to compare your needs with what is on offer, then compare prices, and finally make a choice.

• If your only criterion is price, you risk choosing an offer that does not meet your needs and constantly paying fees for services that are not included in the package.

Example 3

• You want to invest €3,000 over 12 months, or €250 each month. You want to divide this €250 between two portfolios containing two to ten financial securities. Let's assume you are in France.

  
  

• Institution A charges a 3% fee on each of your payments and a 3% management fee on your entire investment per semester. In addition, this institution does not allow you to buy foreign shares below a certain amount. This means, for example, that if you want to buy shares in a company based in South Korea or the United States, you can only do so from €1,600. With this institution, it is impossible to invest €50 every month in small companies with high potential.

• Institution B charges a 1% fee on payments within Europe and 2% on payments outside Europe. It charges a 3.5% annual management fee on your entire investment. In addition, it allows you to invest internationally. While this may not be in every country in the world, you still have the opportunity to invest in promising companies.

• Institution C charges 0% on your payments and 2% in annual management fees on your entire investment. It allows you to invest internationally, in more countries than institution B. However, you can only invest in large and very large companies. These are companies that have proven themselves and are known to be solid, but their growth and dividends are low.

• Which institution will you choose?

• Now let's assume you have $3 million. Which institutions will you choose? Will you invest part of it with institution B and part with institution C?