When banks compete, do you win?

The web site LendingTree says, “When banks compete, you win.” The idea is simple enough. If you need a home mortgage, your application gets shopped among different banks so you can choose the best offer from multiple offers.

In a local exercise of what could pass as real investigative journalism, the Honolulu Advertiser shows that when local banks compete, it doesn’t necessarily mean lower rates for bank service fees. In fact, they’re higher. Much higher.

Local bank service fees are higher again this year, up over 14-percent, to over $100-million, and unlike what competition is supposed to do, there is nothing you can do about it. Bank service fees are on the rise because so many banks have been hurt in our recent home mortgage and credit crunch. Oh, and because banks love to take our money.

In other words, banks are not as profitable as they want to be so they’re taking out their frustration by charging you more for services. Fees are highly profitable for banks. If you bounce a check, you’re charged a fee, usually $25 the first time. If you use a non-local bank ATM, those handy automatic teller machines, you’re usually charged a fee for the privilege of pulling your money out of their bank.

I loved the quote in the Advertiser from Blenn Fujimoto, vice chairman of Central Pacific Bank which made less service fee money last year by “focusing on long term relationships and cross selling opportunities” instead of going after “transactional types of accounts.”

Translation: ‘We only want customers with a lot of money.’

Banks love to float money because the longer they have your money the more money they make. State Senator Sam Slom, also president of Small Business Hawaii pointed out the issue with bank float in the same Advertiser article. The bank float got so bad that he stopped doing business with Bank of Hawaii. Why? Deposits were held so long before clearing that checks written on the deposit bounced. Bank of Hawaii made money on the float and on service fees they collected on the checks they bounced back.

Bank of Hawaii spokesman Stafford Kiguchi said the ‘bank regrets that it wasn’t able to resolve Slom’s concerns.’

Translation: ‘Damn, we didn’t want anyone to find out about the double dipping.‘

In reality, when banks compete, you pay anyway. When they don’t compete, you pay even more.