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A “Service” You Don’t Need!
By JLP | April 9, 2007
Charles, a reader of this blog sent me an email this weekend with a copy of a letter he received from his bank about a program that will save him thousands of dollars in mortgage interest. You can click on the letter to see a larger version. Sorry about the quality.
The Deal
Instead of him paying his mortgage once per month, the bank will set him up so that half his monthly payment is paid every two weeks. This works out to 26 payments per year, which is equivalent to one extra monthly payment per year. According to the bank’s letter, going this route would pay off his mortgage nearly 7 years early and save him nearly $46,000 in interest. WOW! Sounds great! Sign me up!
The Catch
Now, before you sign up, you need to know about the catch. The bank charges a $295 enrollment fee and $5.42 per month for as long as you are using their program. In this particular case, it would cost $1,769 to take advantage of this offer.
Psst… I’m gonna let you in on a little secret:
If this is something you think you would like to do, most likely you can do this yourself for FREE!
That’s right! If your bank won’t let you pay every two weeks, you can just send them an extra payment once per year. Just be sure that you won’t face a prepayment penalty if you pay off your mortgage early.
Banks won’t go out of their way to let you know that you can do this yourself. Instead the’ll send you a letter showing you how much you can save in interest and hope that you’ll think, “Wow, by spending only $295 and $5.42 per month, I can save myself nearly $46,000 in interest. This is a ‘no brainer.’” Only a bank would figure out a way to charge you for something you can do yourself and make you think it’s a smart decision!
Just remember, if a bank is telling you how great a deal something is, there’s most likely a catch.
Topics: Banking, Budgeting, Mortgages |