The fourth month of the program was a wonderfully informative and educational month taught by Ron Cook on the perplexing subject of Entertainment Finance. To some, the numbers were scary - To others, the 9 am math was daunting - To me, it was just another finance class (I dropped out of aerospace engineering to come to Full Sail, a little accounting math is not too horrifying to me unless its personal finances). The assignment that month was to venture out in to the big scary outside world beyond the (relatively, unless you're an unattended book bag in a passenger seat) safe harbor of the learning establishment and contact a person with something we all hope to never have after graduation - a real job.
I chose to sit down with my personal banking branch's manager - Chris, who was gracious enough to spend time from his busy day and give me an informative interview regarding the inter-workings of the financial system; okay not really but he did spend about twenty minute interview going over what he saw and how he felt about banking today.
During the interview we discussed things ranging from bank lending requirements, to the way the FDIC works and the then pending merger between Chase and Washington Mutual.
Introduction
In today’s rapid environment of change and uncertainty, local Washington Mutual (WaMu) branch manager Chris Cucci took some time out of his busy schedule to speak about how WaMu was handling investors money and helping businesses make it through this trying time. Unfortunately however, WaMu is also struggling in these trying times and has been acquired by Chase Bank and is currently undergoing a transitional phase from being an independent bank to being part of the larger Chase family of banks.
Chris became a banker after working in the computer-networking field for a few years. In 2003 Chris became a banker working primarily with small businesses overseeing business accounts and business and consumer lending. In 2005 he was promoted to Assistant Branch Manager and approximately a year and a half ago was again promoted, this time to Branch Manager.
Bank Accounts and Services
WaMu offers an extensive collection of free accounts to customers. These accounts include checking and savings for businesses and individuals. The accounts have no limitations on balance, checks written, and ATM usage. Coming in and seeing a teller, and all online banking and bill payment are also included. They additionally offer money orders, traveler’s checks, wire transfers and bank checks to all customers as well. They also have fee-based accounts that, while being fee based, offer fee waivers on these accounts if a certain level of investment is maintained. One of these accounts is an Analyzed Account – this account includes an ACH service which enables businesses to auto-bill customers, and remote deposit capture which is the automated check reading machines and things of this nature, allowing businesses to enact many of their day-to-day bank transactions from their place of business. This frees businesses up to use employees more effectively by not having to send someone on a bank run.
WaMu offers two kinds of credit cards to businesses and consumers. One is a rewards based card, the other doesn’t have rewards attached to it however has a slightly lower interest rate. The rewards card has approximately one percent higher interest rate to offset the rewards. Chris recommends this card for businesses and says the best way to take advantage of the rewards card is to pay all monthly bills on the credit card then to pay the credit card down to zero at the end of the month. Paying the card down every month prevents the interest charged and still provides all the rewards offered by the card. In addition to credit cards WaMu offers revolving lines of credit to businesses as opposed to taking out business loans if the situation calls for it. WaMu does offer safety deposit boxes, however, Chris’s particular branch did not have any. The boxes are paid for with a monthly fee and the larger the box the larger the fee charged.
WaMu additionally offers two forms of credit monitoring services. One is free and comes with every account and basically offers $5,000 in legal fee protection for instances of theft protection and the other is fifteen dollars a month for $15,000 in legal fee protection and insurance against identity theft. The second option also allows monthly checks into an individuals credit report. Estate planning is also offered through a partnership with J.P. Morgan. In addition to all of this, business owners are offered discounts of ¼ to ½ % on home loans and discounts of closing costs as well as an incentive to have both business and personal accounts with WaMu.
Lending Requirements
A topic of interest in today’s economy is credit and lending requirements. Chris said that even in the last year lending requirements have gotten stricter than previously. Current lending requirements demand a credit score of 680, which has risen from 620 as recently as a year ago. Other things considered are level of income and an employment history of at least two years. If a person’s employment history doesn’t go back a full two years due to college WaMu will consider college as employment history to allow recent graduates to fulfill the requirement.
A down payment ranging from 20% down to 7% based on the applicants credit score. Collateral against loans range from equipment to real estate, however vehicles are no longer considered collateral due to the rate of depreciation. Real estate is the preferred option because it generally grows in value over time unlike equipment or other forms of collateral. Business Loans offered typically have a repayment period of between two and ten years. More often a revolving line of credit is offered with variable interest rates and repayment periods, often acting as a credit card of sorts, simply with a much higher limit. A typical thing companies don’t make loans for is marketing, Chris said that they would be willing to loan money for marketing provided collateral was offered worth the amount of money being borrowed.
Outpacing Inflation
In today’s economy with current interest rates set where they are, outpacing inflation is a difficult prospect anywhere, let alone at a corporate bank. Chris offered his opinion by suggesting that diversification is the best method today to ensure safety and offer growth for any investments. The method of diversification suggested included investing the majority of money in money market accounts, minimal investing in stocks, and investing into retirement accounts. The retirement accounts are tax-free and offer a way of investing small amounts over time to reach a large lump sum at retirement.
Insurance Options
The FDIC insures every account at $100,000 per investor, however if you add people to an account the coverage for the account goes up per person. If this amount doesn’t cover the amount placed in an individual bank by an investor, no other insurance exists but this isn’t an issue as when a bank goes under the FDIC steps in and takes over the bank then selling it to a healthy bank to take over the failed banks accounts. This process has allowed customers to keep all of their investments, even when a bank has failed.
Ironically enough, WaMu fell to this process in October of 2007. Chase has agreed to purchase WaMu and take over all of its accounts and service them as well. Chase has handled this take over very effectively. In less than one year all WaMu accounts will be fully integrated within Chase’s systems. Chase has decided that WaMu’s consumer account set up was better than their own; and will be keeping WaMu’s individual account’s while converting WaMu business accounts to their own set up. Chase offers much of the same benefits that WaMu offers such as a free account with debit card usage.
Conclusion
In today’s ever changing ever evolving markets WaMu and Chase are prepared to handle any struggles that appear. Money invested in a bank, while perhaps not earning the most for the investment, definitely won’t be shrinking any time soon. If a safe investment is what is desired, nothing beats a CD account or a money market account. However at a younger age, riskier investments tend to pay off better and if they fail, allow time for recovery, invest wisely and cash a big check.
Oh - and Tom Cruise and Ann Rice, when it comes to titles, I thank you for your ability to be parodied.
