Hacker News Reader

Comment by MrDresden | Hacker News Reader

> Believability aside (I do think it’s believable personally) this is pretty much how “evil” (from outsider perspective) is done at every company

I used to be in a mobile application team for a bank, where I had genuine meetings with the loans department where it was discussed if we truly wanted to make it easy and obvious to users how they could pay their loans on time (their logic was that those who default and have to pay extra fees were the banks "best" customers).

We obviously pushed back hard on that. But I can imagine these scenarios playing out in other places and with other results.

View on HN

In my new credit card app I can set if I want to repay 3%, 5% or 100% at the end of the month. If I set it to 100%, I have to pay $2 per month. Banking is already actively hostile against the customer.

You have to pay more money when you pay the total amount you owe? That's just evil.

In some locations banks are allowed to charge you for the interests they will loose out on when their clients pay more of the principal.

In other locations this has been deemed illegal and/or only allowed above a certain amount (think 10-15% of total remaining principal).

I do not agree with this being an ok practice (to charge).

Banks make money on interest. Perhaps the principle itself is the issue, if it's legal to earn money on loans, no surprise a bank incentive is to make you take loan, and have you keep them for as long as it can.

Typically a mortgage does not allow over repayments. Why? It would get people in the nasty habit (from the perspective of the bank) to pay back a little more every month with the spare they've got.

Of course you can pay a fee to overpay.

Mortgages have amortization schedules, Banks love it when you pay more as it only reduces the tail end of your loan. You still pay the interest up front.

Not all banks are the same, some have other incentives to pay off early.

With my mortgage, interest is monthly on the remaining principal and paying extra in a month is entirely on the principal - it reduces the total interest paid, so the bank gets less.

Yes, I think that's standard in the U.S.

The idea that you pay the interest up front is a very common misunderstanding of how mortgages work and more broadly the concept of an amortization schedule.

Yeah, I see people describe it like that all the time, it's never corrected, and doesn't match how I always thought mortgages in general work (and definitely doesn't match mine), so I'm never entirely sure if it's a different system from another country or just a version of the blind leading the blind. Which is why I made my comment so specific to myself.

The parent of that comment mentioning "a fee to overpay" is one I've never even heard of before. Definitely not the case here, free to pay down the principal as much as I want whenever I want as long as the current interest for the month is paid first.

Banks don't care at all how or when you pay your mortgage. They only originate and service the loan. The loan is sold to Fannie & Freddie and isn't on the banks' books anymore.

Only credit unions and small regional banks still hold mortgages on their books. The overwhelming majority(90%+) of mortgages are agency - ie sold to the federal government.

If we're talking normal credit cards in the US, you technically are getting a 30 day loan for free, no interest if paid in full every month.

I don't see a issue if credit cards charged 30d interest on balance, but if mine did that I would drop it instantly.

...which is to say nothing of the interchange fees they earned on that "free loan"

What country is this?

I believe this to be illegal in the USA but would not be shocked if a rule change was slipped into some random unrelated bill.

Which bank is this?

À major one.

By definition, usury/interest based banking is hostile against the customer.

Not shocking, their ethical responsibility is to do what’s right to make profit for the shareholders, not to do what’s best for the customer.

Reply on news.ycombinator.com