When you get mail from your bank, it seems like it always either a statement, an offer for a new service or a privacy notice. I always wonder why my bank feels the need to change their privacy policies so often. Despite how boring the average privacy policy is, though, I do make the effort to look over each one I get.

A privacy policy tells you:

1. the personal financial information your bank, lender or other financial company collects
2. what parts of your personal information your company shares with other companies
3. how you can limit the amount of information your company can share
4. how your company protects your private information

Your personal financial information is valuable — your bank may make a pretty penny by selling the information that you keep quite a bit of liquid cash in your checking account. It’s up to you to decide whether you want them selling that information, of course, but, personally, I want as little of my information to be known as possible. A lack of privacy doesn’t just open you up to annoying ads. It also increases your risks of identity theft and other types of fraud.

You can’t entirely stop some companies from sharing your information, but you can often opt out. When you receive a privacy notice, it’s often information on how to opt out of the most recent plan to share your personal information. Banks and other financial companies are required by law to tell you how to opt out of such plans. But you want to read your privacy notices right away. Don’t let them build up, because you can have as little as 30 days from the date the company mailed the notice to stop them from handing out your financial information.

A wide variety of companies that handle your financial information have privacy policies in place. although not all may send out notices. Companies that may set privacy policies — which, in turn, may include selling your private information to other companies — include:

• Banks
• Credit unions
• Insurance companies
• Securities and commodities brokers
• Retailers that issue credit cards (Gas stations, department stores, etc.)
• Mortgage brokers
• Automobile dealerships
• Check cashers
• Payday lenders
• Financial advisers
• Credit counseling services
• Money order sellers
• Travelers check sellers
• Credit card companies

Pretty scary to think about how many companies have your personal financial information and how many of them can just sell it off if they want, isn’t it? And, like most of us, you’ve probably just been throwing all those privacy notes away, haven’t you?

Keeping your information private doesn’t take a whole lot of effort, though. Whenever you receive a privacy notice, skim it looking for contact information. When you find it, information on how to opt out of whatever current plan to share your information your bank has should be in the same general section. If you don’t have time to read the whole notice, reading just that section can help you protect your privacy.

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A new and disturbing trend is starting to ripple through the banking world, one that changed the airline and retail industries over thirty years ago. In the face of huge drops in profit from the now infamous sub-prime mortgage debacle, banks are looking to find any way possible to recoup those losses, and they want to do it fast. Their answer: price optimization.

In other words, charging different prices for the same product. While this isn’t a new idea in general, its application to the banking world is less than a year old. Airlines charge different rates to the same destination based on the time of year (ever try getting a flight around the holidays?) and retail shifts their prices based on how new or how popular a product is. Now banks are looking to charge different rates of interest on their loans, based upon the customer.

But it’s not going to work like you think. In the past, the more relationships you had with a bank (checking accounts, savings accounts, etc) the more perks you got. Perhaps it was a better interest rate on a CD or no fees on an account. With price optimization, the more relationships you have (and indeed, the more money you have in general) the higher your interest rate will be. Why? Because banks want money, and the need it fast. Here’s a scenario:

A 31 year old professional walks into his local bank branch and expects to get a very good rate on a loan. After all, he has an extremely good credit score (785), and is willing to make a 20% down payment on a new four bedroom home. He walks out with an offer of 6.5%, not even close to the industry norm of 5.8%. If he goes with them, he could end up paying over $21,000 more over the life of the loan.

Essentially the banks are looking to eek out as much interest revenue as possible in the shortest amount of time possible. Therefore the more money you have the higher interest rate you’re able to pay. There are many other factors that play into it as well (up to 20,000 in some models). Computer software takes your information and after running it through filters and projection models, determines how much you would be willing to pay. Live in the Midwest? You’re more likely to eat a higher rate than someone in New York. Applying at a local branch? You’re more likely to take a higher rate than a phone or internet application. Are you a lifetime customer who doesn’t have accounts anywhere else? You’re going to get hit just as bad as an uneducated consumer with a low credit score.

The lesson here is to be aware. There is nothing that says you have to take these higher rate offers. Shop around, do some research, make some calls. Essentially the banks are hoping that you don’t do these things, and take their word for granted. The best thing you can do is arm yourself with knowledge and challenge your bank to give you a better rate. If they don’t, then move on to one that does. Industry consultants say that eventually this approach will phase itself out, that once people start looking around for better rates the computer software will start spitting out lower rates to compete. However for the short term, banks are looking to squeeze every dime out of you they can. Don’t let them! Take matters into your own hands and become an educated consumer. Now, if we could only do something about airline rates…