When someone asks how a bank makes money, the response is: by granting loans and investing in securities. While that is true, many people do not know that the biggest source of profit for banking entities is commissions. It can be said that banks and savings banks charge commissions for absolutely everything.
Commissions are established by each entity, so consulting the Bank of Spain will ensure that a series of requirements are met and comply with the law. These requirements must be necessary and respond to a service provided. They cannot be satisfied by another product contracted by the client, must be communicated to the clients, published, and given to associates within the bank. The requirements cannot be abusive, and clients cannot be charged for transactions made due to failures or negligence of the entity. Fees cannot be charged if they do not appear in the contracts and cannot exceed certain limits, for example, 1% in the cancellation of a variable mortgage.
Applicable bank commissions
The fees normally applied regarding a money transfer, keeping accounts, withdrawing money from Automated Teller Machines (ATMs), having cards, studying and/or create a loan, canceling a loan, and having an overdraft account.
It is difficult to avoid fees, so the only thing we can do is compare different entities and look for the lowest commissions. Although, in theory, the fees must have a degree of flexibility, consumers often do not find themselves in a strong position to negotiate them with the bank. For example, if you need a loan and Bank X grants it to you, then you may not feel able to demand that one fee be reduced or entirely removed. In Spain, it seems that clients tend to be tolerant and not combative when accepting the fees imposed.
Average annual expense
According to a study by Consumer magazine, the annual commissions can cost a person between $40 and $210. This can quickly add up when considering most individuals have a checking account, a credit card, and a debit card and make an average of six transfers.
Additionally, when you complete the credit card application process, you must often pay the relevant opening fees without considering mounting debt in addition to paying any partial or total early cancellation fee. Similarly, if there is a bank that lends money at a lower rate or with less initial fees, it seems inevitable that adding a mortgage later will cost even more in relevant fees.
Entities that do not charge bank fees
Lately, the media has made many announcements regarding banking entities that claim not to charge commissions.
While this seems like a dream come true, it only seems to reason that any fees or annual commission will be incurred if the fine print of Terms & Conditions is thoroughly read. For example, several commissions, including Account Maintenance, are not charged to creditworthy clients or shareholders but are charged to individuals with lower credit scores. Similarly, an Account Maintenance fee might be waived, but other fees regarding mortgages may still be charged.
Other banks may not charge a wide range of fees, so you open more accounts with them. When you trust them with your payroll, insurance, mortgages, accounts, cards, and pension plan, they earn more from your accounts than charging small fees.
In addition to lending and investing in securities, banks and other financial institutions rely on commissions and fees as a main source of profit. These institutions are not going to eliminate fees but can reduce or waive non-financial commissions, including account maintenance, account transfers, and card issuance and renewal. Take time to research fees between institutions and select accounts and credit cards that meet your needs but are not costly.
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