Banks & Credit Union: Comparing Interest Rates and Fees
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The paper argues that banks should modify the high interest rates they charge and the unfair fees that are conveniently hidden in the nearly illegible fine print, and reveals that these elevated rates and unreasonable fees were put into place to help offset their losses during the "Great Recession". The paper compares the structure and operations of both banks and credit unions and relates that credit unions provide better rates to their members. The paper contends that the U.S. government should implement tighter regulations as well as larger penalties on bad practices of financial institutions, and asserts that banks have plenty of ways to generate revenues without increasing rates or adding fees.
In the Government's Interest
In the Government's Interest
From the Paper:"The banking system plays a fundamental role in the US economy as the financial intermediary between depositors and borrowers. This process is called financial intermediation, which involves taking in monetary deposits, in essence borrowing the money, and then giving it out as loans. Thus, the US economy and its banking system are closely interrelated with each other because where economic activity goes, the banking system usually follows and vice-versa. Case in point was when the banking system enabled a credit bubble that later popped, which caused the collapse of the housing market and overall economic activity in the U.S. to decrease so much that it went into a recession.
"A bank is a privately owned, for-profit financial institution that above all else accepts deposits and lends out money, this is a central source of income for all banks. Basically, a deposit is money that clients leave in the bank for safekeeping and to collect a small amount of interest on his or her deposited funds. On the other hand, money that is borrowed from a bank and lent to one of its clients is called a loan, the bank then receives a portion of the loan's principle typically each month as well as collecting interest on that loan until its maturity or paid-off. A bank generates the majority of its revenue from the interest spread, which is the difference between the interest that is paid on a client's deposit and the interest collected from a client's loan. For instance, let's say a bank pays a 0.97% interest rate on its certificate of deposit (CD) and charges an interest rate of 4.52% on a home loan, the spread between the two will be 355 basis points or 3.55%. Furthermore, a bank can satisfy personal, business, educational, and investment needs by offering a loan."
Sample of Sources Used:
- Bodine, A. (n.d). How Do Banks Work?. Retrieved from http://www.ehow.com/how-does_4564209_banks-work.html
- Callahan, A. (2009). Credit Unions in the Modern World & Current Economy. Retrieved January from http://www.creditunions.com/
- Cussen, P. M. (2009). Tied Of Banks? Try Credit Union. Retrieved from http://www.investopedia.com/articles/pf/08/credit-union.asp
- National Credit Union Administration. (2009). Comparison of Average Savings and Loan Rates at Credit Unions and Banks. Retrieved from http://www.ncua.gov/DataApps/Documents/CUBNK200912.pdf
- National Credit Union Administration. (2009). Federal and Community Credit Unions. Retrieved from http://www.ncua.gov/
Cite this Persuasive Essay:
Banks & Credit Union: Comparing Interest Rates and Fees (2013, August 12) Retrieved May 30, 2020, from https://www.academon.com/persuasive-essay/banks-credit-union-comparing-interest-rates-and-fees-153651/
"Banks & Credit Union: Comparing Interest Rates and Fees" 12 August 2013. Web. 30 May. 2020. <https://www.academon.com/persuasive-essay/banks-credit-union-comparing-interest-rates-and-fees-153651/>