Your bank account is the hub of all your financial activity. Whether you have a checking account for everyday expenses or a savings account for those long-term goals, ensuring your account has all the money it should is an important part of maintaining your finances. Unfortunately, some banks and credit unions are underhandedly cheating their customers out of well-earned interest on their interest-bearing bank accounts. McCune Wright Arevalo, LLP, is already taking steps to right this unscrupulous activity, but could use as much help as possible from wronged customers to take on these large institutions. Are you a victim of this scheme as well?
How Does an Interest-Bearing Bank Account Work?
To begin, it depends on whether you have an interest-bearing checking account (also called “high-yield checking”) or a savings account. Most savings accounts yield interest, but only some checking accounts do the same. You’ll have to check with your deposit agreement to determine whether your checking account generates interest.
The bank or credit union doesn’t simply do this out of the kindness of their heart, though. Financial institutions use the money deposited in their interest-bearing bank accounts to make large investments or lend out to other customers as loans. The interest paid on your account balance is a courtesy to you, while the bank makes extra money on the higher interest rates charged to outstanding loans. As long as all customers are making payments on their loans or the bank’s investments are sound, your money remains within the bank. It’s a genius system that ensures banks and credit unions aren’t simply warehouses full of cash, and it’s worked this way for over 100 years.
How Does Interest Accrue?
Your account accrues interest on a daily basis. Typically, the bank will deposit a small percentage of the amount currently in the account monthly, therefore, increasing the amount you are offered the next month. This is called compound interest and it’s a fantastic tool for increasing wealth passively on money you aren’t touching. For example, if you have $5,000 in a savings account that you don’t use for anything but saving and the bank offers you 0.5% interest rates on your money in savings, the first month you will receive a deposit of $25.00, placing your new savings balance at $5,025. The second month you’ll receive 0.5% of $5,025 — $25.13 – bringing your total to $5,050.13.
This process continues as long as you meet the requirements of the account listed in your deposit agreement. All this is true if you simply leave your money alone in the account. Now, imagine if you were actively contributing to this savings account every month. You could generate an immense amount of interest by doing nothing at all.
How Are Banks Taking Advantage of My Account?
However, these accounts aren’t all sunshine and rainbows. Usually, interest-bearing accounts are subject to “variable interest rates”, meaning the bank or credit union can change your rate at any time for any reason with or without notice. Although irritating, this practice is technically legal because your bank discloses it in your Deposit Agreement.
However, banks are cheating many customers out of their interest via interest payments when you use the account for money transfers. Your bank or credit union has promised to pay interest which has been accruing daily every month. Whether you are paying a bill or transferring money to a different bank entirely, there is usually a delay of up to three business days between when the money leaves your interest-bearing account and when it appears in the recipient account. That money is still yours while it is in this “processing” phase. However, it doesn’t appear in any financial institution’s records.
Banks and credit unions are using this time to short you on your daily accruable interest. When the money leaves your initial account, the bank will deduct the amount from your balance. They then charge themselves interest on the lesser balance up to three days before it reaches its destination account. Your bank still owes you interest on the full balance of your account for those three processing days.
Do I Have a Case?
Banks have long been exploiting loopholes in financial laws to make or save money for themselves. McCune Wright Arevalo, LLP, (MWA) is currently investigating several financial institutions for their unscrupulous practices. If your bank appears to be deducting your processing transactions to calculate interest before the third party is paid, we could help. The class action attorneys of MWA have a long history of success against banks and credit unions of all sizes. We boast a $203 million verdict against Wells Fargo and more than $1 billion total collected in trial verdicts and settlements.
Unsure if your bank is cheating you out of interest? Find out if you have a case by contacting us today or calling (855) 976-3154.