My Shocking Bank Experience and the Need to Read Terms and Conditions

By Joetta Forsyth, PhD, Assistant Professor of Finance

Monday, October 19th, 2009

This post first appeared on Dr. Forsyth’s blog, Financial Wisdom Preparatory Institute.

I recently had a bad encounter with a bank. However, there is a basic principle that I follow that kept me from financial harm.

I applied for a business credit card, which I wanted to facilitate payments and I intended to pay off each month. It was a little late in the day and the person who handled business accounts had left. Another person at the next desk over offered to “help” me.

I explained that I wanted to take out a business credit card and gave him my business checking account ATM card, which he used to look up my account. He told me about a “great deal” on a card — I wouldn’t have to pay fees to get the frequent flyer miles, etc.

I told him that I was confused because I had called the bank and they did not tell me those terms. His reply, delivered with a beaming smile, was that it was a special offer only given in person. I asked to see the terms and conditions, and he told me that they would be mailed to me after I applied for the card. I had to ask twice more. I flat out refused to apply for the card without seeing the terms and conditions first. He finally gave up and went to print them out. I told him I would read them and come back the next day. At home, I discovered that the right side of the print out was cut off and I couldn’t even tell what it said.

The next day I came back and met with the person handling business accounts. I told him that I couldn’t read the terms and conditions. At this point I found out that they were for a personal credit card. Had I unknowingly been issued this card that I didn’t want, my credit record would have taken a hard hit, lowering my credit score.

But much worse, if I hadn’t realized it was a private card and used it, I could have gotten in trouble with the IRS for trying to deduct any expenses on the card as business expenses. In addition, it might have caused my Limited Liability Company problems. Businesses owners can have their limited liability protection stripped from them in a law suit if it is found that the owner comingled their business transactions and personal transactions.

I was appalled. Had the person who tried to issue me the personal card intentionally deceived me? If so then why? My only guess would be that they were in charge of personal cards, and wouldn’t have gotten a commission on a business card. Hence, their attempt to intercept me and steer me into a personal card.

The alternative explanation is incompetence. What sort of banker doesn’t know the difference between issuing a personal card and a business card? Worse yet, for years the bank had dealt with me in an ethical way. Has the financial crisis gotten so bad that “it’s every banker for himself” and abusive behavior is the now the norm? I know that this particular bank is feeling strains from the financial crisis.

My experience only serves to demonstrate an important principle that I teach — ALWAYS READ THE FINE PRINT. Many people are uncomfortable asking, because they feel that they are questioning the other person’s integrity. This is simply not true. Pluck up your courage. You are not being rude when you ask. Any loan officer, mortgage broker, etc who discourages you from reading the fine print is in the wrong. They are behaving badly by discouraging you from understanding what you are signing, when it is only prudent and reasonable for you to do so. Stand tall and demand your rights!

Related in the GBR

• Investing for Income in a Down Economy by Steven R. Ferraro, PhD, CFA
• Learning to Love Financial Market Barbarians by Joetta Forsyth, PhD
• The Top 10 Embracements for Difficult Economic Times by Darrol J. Stanley, DBA

Topic: America's Financial Crisis, Finance
Tags: banking, credit cards, Finance, terms and conditions