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Banks make $38B on overdraft fees
A chip and pin debit console.
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TEXT OF INTERVIEW
Steve Choitakis: Financial institutions these days are looking for ways to make money. And they certainly have found one tried and true way. A Financial Times report says this year U.S. Banks will charge their customers more than $38.5 billion dollars in overdraft fees. Tamara Keith joins us with more live from Washington. Good morning Tamara.
Tamara Keith: Good morning.
Chiotakis: So how are we ratcheting up more than $38 billion in these fees?
Keith: Well you know it's quick cash for the banks. And The Financial Times reports that the recession has driven them to focus more on these fees to boost their balance sheets. And overdraft fees in some ways are like the motherload for them because they keep coming. The paper says that the fees collected this year will be nearly double those collected in 2000.
Chiotakis: So how much do these fees cost?
Keith: Well they are in the $25-$35 range. Most of us probably don't even remember signing up for overdraft protection, but odds are we've got it. And banks provide this as a kind service to help us avoid bounced checks and things like that. And the banks are basically fronting us the cash. Say you go to the drug store and you want to buy a pack of gum, and you don't have any money in your checking account. Well, instead of getting declined, the bank will just cover the $1 pack of gum and then charge you, oh say, $35 as a convenience fee. And advocates say this is basically unfair and abusive and that it's hitting lower-income consumers the hardest.
Chiotakis: So they're say this, but what's being done about it?
Keith: Well, what's being done about it is advocates are pushing hard for changes. One thing that they want in particular is to go back to the old days where if you used your ATM card to buy gum, and you should be declined, that you could actually be declined. And the Federal Reserve is looking into this, and it's in the process of doing rule making.
Chiotakis: All right. Tamara Keith joining us from Washington. Tamara, thanks.
Keith: Thank you.
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banks are better @collecting fees than they are @paying.my bussiness has had a motorhome in storage for 4yrs.we can't get the bank to pay the fees they owe on there motorhome reason being because of there neglect in not responding quick enough the fees are more than the value of there motorhome.this is the overdraft problem--neglect,cost greater than the return. what is good for one is good for the other.bank needs to pay up.
Bancorp South...The most messed up bank of all, it will rip you and your parents off, stay the hell away from it, its the bank of the devil. debit transactions are fine, they get through right after you enter your pin. BUT, credit transactions take 3-5 business days according to the bank to be run through. The only thing is... Bancorp South is choosing the let the transactions get deduced from your account after they're certain it's going to overdraft your ass. Meaning, they can control when to run the credit transactions from your account, thats why they wait a week or 2 sometimes till your balance is down to 20 dollars for example, and you'll have a pending credit transaction or more..for 21 dollars, they would deduce that and overdraft your ass for 32 dollars.
I have paid this dam bank over a tuition worth in less than a year, for over 2 years.
Bancorp South...The most messed up bank of all, it will rip you and your parents off, stay the hell away from it, its the bank of the devil. debit transactions are fine, they get through right after you enter your pin. BUT, credit transactions take 3-5 business days according to the bank to be run through. The only thing is... Bancorp South is choosing the let the transactions get deduced from your account after they're certain it's going to overdraft your ass. Meaning, they can control when to run the credit transactions from your account, thats why they wait a week or 2 sometimes till your balance is down to 20 dollars for example, and you'll have a pending credit transaction or more..for 21 dollars, they would deduce that and overdraft your ass for 32 dollars.
I have paid this damn bank over a tuition worth in less than a year, for over 2 years.
Don't let it happen to you!
I agree with Denise C. that "we are all to blame...[and] Our society has become more and more lazy" However, I would like to add that certain banks, like BofA, are just malicious about their banking practices. For example, my mother's paycheck would be "automatically deposited" on Friday evenings, she would spend money on the weekend (errands or whatnot) only to discover overdraft fees on Monday. It was because BofA always processes withdraws before deposits. My mother stopped banking with them for this reason.
I honestly believe that banks have downgraded their software so your pending approvals is no longer real time. I've seen this time and time again. However this is one trick I use. If you know you're at the bottom of your ledger but you need a loan for multiple transactions then it's easy. Buy a couple of $100 gift cards, then after it's said and done with the overdraft fee it's like taking out an 18% credit card loan. But I think last year I still paid over $3,000 in overdraft fees. The other funny thing is when I cut down on my food bills I usually gain weight. Does that make sense? If you want to avoid overdraft then switch to a check cash deposit card. It's like a refillable gift card.
And let us not forget that some banks -Bancorpsouth for one- use a program to arrange your checks from largest to smallest regardless of the order they are entered so that the biggest checks can wipe out the account then the several small withdrawals can accrue huge fees. By the way, I did not find this out the hard way, but instead read it on Craigslist's Rants
One thing no one has mentioned yet is overdrafts because someone has tied up funds for a deposit that hasn't been cleared yet. Suppose you rent skis and they tack on a $100 deposit. Even if you have the $100 in your account, how long it takes to clear that deposit after you return the skis varies, so don't go to dinner on the way home or you might get whacked with a fee.
I believe we are all to blame. (1) Banks know they can charge us so they raise the limit to 10x a day one person can overdraft. Which equals to $350 a single person can overdraft in that one day. And they charge an additional fee for being negative 5 days. Shame on them for abusing. (2) Who uses registrar booklets anymore? If you use one you will know exactly how much money you have in your account therefore not overspend. Our society has become more and more lazy. Even with online banking you MUST use a registrar. If you don't overspend you won't get charged.
(There is an exception. When companies you have done business with previously automatically charge you for a service without your consent, but that's another issue)
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