Personal Finance 1st Edition by Jack R. Kapoor

Exercise 18

Evaluating Banking Services

“Wow! My account balance is a little lower than I expected,” commented Melanie Harper as she reviewed her bank statement. “Wait a minute! There’s nearly $20 in fees for ATM withdrawals and other service charges.”

“Oh no! I also went below the minimum balance required for my free checking account,” Melanie groaned. “That cost me $7.50!” Melanie is not alone in her frustration with fees paid for financial services. While careless money management caused many of these charges, others could have been reduced or eliminated by comparing costs at various financial institutions.

Melanie has decided to investigate various alternatives to her current banking services. Her preliminary research provided the following:

Mobile banking – allows faster access to account information, to quickly transfer funds, make payments and purchases. May include access to expanded financial services, such as low-cost, online investment trading and instant loan approval.

Prepaid debit card – would prevent overspending, staying within the budgeted amount loaded to the card. Cards are usually accepted in most retail locations and online. A variety of fees might be associated with the card.

Check-cashing outlet – would result in fees only when services are used, such as money orders, cashing a check, obtaining a prepaid cash card, or paying bills online.

Many people do not realize the amount they pay each month for various bank fees. Some basic research can result in saving several hundred dollars a year.

What benefits and drawbacks might Melanie encounter when using each of these financial services?

Step 1 of 3

There are various alternatives available to the investors. The advantages of mobile banking are as follows:

• Instant loan approval

• Faster access to account information

• Quickly transfer funds, make purchases and payments

• Allows online investments and fixed deposits

The disadvantages of mobile banking are as follows:

• There may be an issue of lost of privacy and security of data.

• As there is an ease of making purchase and payments, it may lead to overspending.

• The fees is little costly.

• Online scams are also possible.