4 ms·

The title is misleading, but subtly so: Interest is most definitely charged, just in a far more indirect method than most banks. To take a loan you are required

by FBT 12y ago

The title is misleading, but subtly so: Interest is most definitely charged, just in a far more indirect method than most banks. To take a loan you are required to have kept a proportionate amount of money in the bank,without being paid interest on it either. Therefore, they demand as their fee that you pay the opportunity cost of the interest you would have earned by keeping your money in another bank. I don't really see the point. All banks do need to charge interest, true, but the least they can do is charge you it in a fair and straightforward manner. Normal banks charge you, but at least they are explicit about what they are charging you, whereas this one charges you in an abstruse way that you need training as an economist in order to understand fully.

galuggus 12y ago
It is true that you are losing money by having it tied up in an interest free account(+Inflation). However I think the real interest rate for your loan is much lower in this type of bank. There is no profit. Could anyone work out the exact rate. P.s Most current accounts in U.K/Ireland pay abysmal rates of interest
- draugadrotten 12y ago
  > Could anyone work out the exact rate. The true effective interest rate varies with time so the answer to your question would be a set of equations. Professor Stefan Yard at Lund University in Sweden has made a calculation with a 10-year JAK loan, and compares it to borrowing money in a normal bank for 5 years and then saving money in the same bank for 5 years without interest (this is how a 10 year JAK loan work) The effective interest rate of the JAK loan is then 6.5% which is higher than the normal bank. Source: Use e.g Google translate to read http://www.jordensvanner.se/2012/gar-det-att-driva-bank-utan-ranta http://www.jordensvanner.se/2012/gar-det-att-driva-bank-utan...
  - gcb0 12y ago
    Which makes one wonder that if jak puts it's assets on another bank, it's turning an obscene profit...
- deleted 12y ago
  [deleted]
- VLM 12y ago
  "There is no profit" I unbanked many years ago (a decade now?) and the only practical local difference between a bank and my credit union is the CU is non profit and unsurprisingly the related fees and interest rates are microscopically more consumer friendly, and arguably less of a "screw the customer to earn your paycheck" attitude exists so in a fluffy and subjective manner customer service seems a lot better. Thats it. They still pay and charge interest, just better rates than a for profit bank, etc. No fooling around with a fake currency of "points". I have no idea why any locals do business with a for profit bank, other than maybe some conspicuous consumption thing to prove the can afford to make the bank shareholders richer. "In the old days" CUs had strict membership requirements like "military veteran" or "holder of teachers license" (no kidding). My local CU membership requirement is "mailing address at time of account opening within same county as CU branch". That's it. There are two interesting aspects of "points". Not being legal currency I imagine the tax implications are bizarre, probably more of a pain than bitcoins. And the article didn't touch on "points" being inheritable or taxable. So assuming old people live in apartments and forfeit their point collection at death, that is an income stream situation that was not discussed.
  - bane 12y ago
    Not surprisingly I've found customer service at CUs to be much better as well. Before I switched to a CU, my bank had about a dozen paper forms and things to be filled out and notarized, with a branch manager or higher present as a witness in order to do something as mundane as open a CD. When I switched to my CU I asked about opening a CD with some funds from my account and 30 seconds later it was done. I switched all of my business over to the CU that week and closed my account with my bank and never looked back or regretted it. All the dumb little nonsense I had to deal with with my bank is all gone poof and banking with my CU has been more or less a pleasure.
    - brianwawok 12y ago
      How is your CUs website? My biggest observation that smaller CUs have a low IT budget, so even though the Chase's of the world have very annoying websites, CU's tend to be even worse. I guess for most people just checking balance and transactions online is enough, but I do enjoy some fancy stuff from the bank like deposit check via smartphone.
jordan0day 12y ago
You're not wrong, but how many people consider their opportunity cost in most money-related matters? That is, every year around tax time (in the USA), I see several people trumpeting about how folks who get tax refunds did it wrong. "You should have taken a larger paycheck and put the surplus in an interest-bearing account!", they always exclaim. And they're right. People should have done that. But most people wouldn't have. A tax refund ends up being like an unseen piggy bank for a lot of people. They're not earning interest on that money, but at least they're saving it and not spending frivolously. Without that unseen piggy bank though, a lot of people wouldn't have the discipline to save that money.
- rrrx3 12y ago
  Sure, but plowing through life oblivious of something - in this case opportunity cost - doesn't mean that that thing doesn't exist.
mrow84 12y ago
Maybe I've misunderstood you, but you wouldn't in any sense "pay" to JAK the opportunity cost of putting your money in their bank, so it can't really be called a fee. Opportunity cost is a thing unearned, not a thing paid. If they were using the deposits to make interest earning investments for profit then that would be a slightly different matter, but they are not, they are using it to make interest free loans. The key point is that they do not make profit. They could do this at any interest level, from zero up, as long as their deposits balanced their loans. If they chose to make a profit then they would need an imbalance between the interest on their loans and the interest on their deposits, and then there would be a net interest charged. The other sources of interest are inflation and defaults, and from what I can work out they do make investments with some of the deposits, precisely to cover these liabilities.
scotty79 12y ago
I think the main point is to reduce the fraud.

by FBT 12y ago

galuggus 12y ago

It is true that you are losing money by having it tied up in an interest free account(+Inflation). However I think the real interest rate for your loan is much lower in this type of bank. There is no profit. Could anyone work out the exact rate. P.s Most current accounts in U.K/Ireland pay abysmal rates of interest

draugadrotten 12y ago
> Could anyone work out the exact rate. The true effective interest rate varies with time so the answer to your question would be a set of equations. Professor Stefan Yard at Lund University in Sweden has made a calculation with a 10-year JAK loan, and compares it to borrowing money in a normal bank for 5 years and then saving money in the same bank for 5 years without interest (this is how a 10 year JAK loan work) The effective interest rate of the JAK loan is then 6.5% which is higher than the normal bank. Source: Use e.g Google translate to read http://www.jordensvanner.se/2012/gar-det-att-driva-bank-utan-ranta http://www.jordensvanner.se/2012/gar-det-att-driva-bank-utan...
- gcb0 12y ago
  Which makes one wonder that if jak puts it's assets on another bank, it's turning an obscene profit...
deleted 12y ago
[deleted]
VLM 12y ago
"There is no profit" I unbanked many years ago (a decade now?) and the only practical local difference between a bank and my credit union is the CU is non profit and unsurprisingly the related fees and interest rates are microscopically more consumer friendly, and arguably less of a "screw the customer to earn your paycheck" attitude exists so in a fluffy and subjective manner customer service seems a lot better. Thats it. They still pay and charge interest, just better rates than a for profit bank, etc. No fooling around with a fake currency of "points". I have no idea why any locals do business with a for profit bank, other than maybe some conspicuous consumption thing to prove the can afford to make the bank shareholders richer. "In the old days" CUs had strict membership requirements like "military veteran" or "holder of teachers license" (no kidding). My local CU membership requirement is "mailing address at time of account opening within same county as CU branch". That's it. There are two interesting aspects of "points". Not being legal currency I imagine the tax implications are bizarre, probably more of a pain than bitcoins. And the article didn't touch on "points" being inheritable or taxable. So assuming old people live in apartments and forfeit their point collection at death, that is an income stream situation that was not discussed.
- bane 12y ago
  Not surprisingly I've found customer service at CUs to be much better as well. Before I switched to a CU, my bank had about a dozen paper forms and things to be filled out and notarized, with a branch manager or higher present as a witness in order to do something as mundane as open a CD. When I switched to my CU I asked about opening a CD with some funds from my account and 30 seconds later it was done. I switched all of my business over to the CU that week and closed my account with my bank and never looked back or regretted it. All the dumb little nonsense I had to deal with with my bank is all gone poof and banking with my CU has been more or less a pleasure.
  - brianwawok 12y ago
    How is your CUs website? My biggest observation that smaller CUs have a low IT budget, so even though the Chase's of the world have very annoying websites, CU's tend to be even worse. I guess for most people just checking balance and transactions online is enough, but I do enjoy some fancy stuff from the bank like deposit check via smartphone.

jordan0day 12y ago

You're not wrong, but how many people consider their opportunity cost in most money-related matters? That is, every year around tax time (in the USA), I see several people trumpeting about how folks who get tax refunds did it wrong. "You should have taken a larger paycheck and put the surplus in an interest-bearing account!", they always exclaim. And they're right. People should have done that. But most people wouldn't have. A tax refund ends up being like an unseen piggy bank for a lot of people. They're not earning interest on that money, but at least they're saving it and not spending frivolously. Without that unseen piggy bank though, a lot of people wouldn't have the discipline to save that money.

rrrx3 12y ago
Sure, but plowing through life oblivious of something - in this case opportunity cost - doesn't mean that that thing doesn't exist.

mrow84 12y ago

Maybe I've misunderstood you, but you wouldn't in any sense "pay" to JAK the opportunity cost of putting your money in their bank, so it can't really be called a fee. Opportunity cost is a thing unearned, not a thing paid. If they were using the deposits to make interest earning investments for profit then that would be a slightly different matter, but they are not, they are using it to make interest free loans. The key point is that they do not make profit. They could do this at any interest level, from zero up, as long as their deposits balanced their loans. If they chose to make a profit then they would need an imbalance between the interest on their loans and the interest on their deposits, and then there would be a net interest charged. The other sources of interest are inflation and defaults, and from what I can work out they do make investments with some of the deposits, precisely to cover these liabilities.

scotty79 12y ago

I think the main point is to reduce the fraud.