Friday, March 20, 2009

The Financial System's Maze to Defeat You

I don't have automatic bill paying through my bank because I don't trust banks. My last bank, Washington Mutual, failed. Many people had great difficulty extricating themselves from their automatic bill paying with WaMu, and as a consequence, their bills remained unpaid until they were way past due.

I pay the old way: writing a check, putting it in an envelope, and pasting on a stamp (now 42 cents, will be 44 in May). Generally I send out it out days before it's due. For instance, I paid for my el cheapo, desperation bid Daily News subscription on 3/5/09. Due date 3/8. Because they didn't get it until 3/10, they sent out a past due invoice immediately. My check was cashed 3/12. In other words, there is no way to pay bills on time the old-fashioned way. Yet if you trap yourself with automatic bill paying through a possibly zombie bank, you may get hung up with the over-burdened FDIC (527 banks on the watch list and counting) and the difficulty extricating yourself.

The Post Office is cutting back one day a week and raising the cost of its first class stamps in order to remain in business. Those measure impair its service. On the other hand, banks are failing and wise heads say don't connect your account with your creditors.

So what happens? If you have an arbitrage thinking financial company, they will dart out a past due notice with late fees and finance charges eagerly attached without a breather. There's no way they can lose. They're betting against the post office and you can't prove them wrong. I mean, the Daily News is telling me they got my check a week after I mailed it. Imagine what Bank of America could do to leverage the calendar? Their BoA credit card is the only one I use. I have a large credit line and I've invested the card with sentimental value (it's granted through my alma mater). And BoA is first out of the gate. The instant my check leaves my burning fingers, BoA has cashed it. I don't know how they do it. Maybe they've cracked the time-space continuum.

I try not to use my credit card at all. I'm not going to pay extra and risk my credit score. How does this system of logic help stimulate the economy?

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