The Great Bank Robbery
Several weeks ago I wrote an article about bank fees. I stirred up a hornet's nest and have received countless e mails from individuals that are very upset about problems with their bank. Today, I want to do a follow up on my prior article and also address some new issues on this topic.
1. Debit Card Overdraft Fees
This is by far the number one topic of complaints I have been receiving. Without telling you, most banks will put in place an overdraft ‘benefit’ on your debit card. What this does is allows charges to go through when you have no money in the account to cover them. One single charge beyond your balance can result in fees on top of fees on top of fees. One example I shared in my prior article was about an individual owing nearly $400 in fees due to an overdraft of only $10 on their debit card. The new credit card law, which goes into effect in February, requires banks to give customers the choice to opt into over-the-limit programs. That law only applies to credit cards,but lawmakers are now considering applying the law to debit cards.
From the Los Angeles Times, “For debit card holders, the burden of paying overdraft fees has risen 35% over the last two years, reaching $24 million nationwide last year, a new report from consumer advocates says. The fees, collected mostly on small ATM transactions, produce big profits for banks and credit unions but create a financial burden for approximately 51 million Americans, who overdraw their bank accounts each year, says the Durham, N.C.-based Center for Responsible Lending.”
From the Houston Chronicle, “It's true that soon after Senate Banking Committee Chairman Christopher Dodd, D-Conn., announced he was drafting a bill that would restrict overdraft fees, Bank of America, JPMorgan Chase and Wells Fargo voluntarily changed some of their rules on how much and when they charge customers for overspending. Three-fourths of the service charges banks collect on debit cards and savings and checking accounts come from overdraft fees, according to a November study of 462 banks by the Federal Deposit Insurance Corp.”
From the Federal Reserve Website “Example: Suppose you forgot that you had only $15 in your account and wrote a check for $25, used an ATM to get $40 cash, and used your debit card to buy $30 worth of groceries. In these 3 transactions you’ve spent a total of $95--and overdrawn your account by $80 ($95 - $15 = $80). How much will your forgetfulness cost you?
If you have a courtesy overdraft-protection plan, your bank may decide to cover all 3 transactions. And each of the 3 overdrafts will trigger a fee. You will owe your bank the $80 that you spent even though it wasn’t in your account, plus the 3 overdraft fees. If your overdraft fee is $25 per overdraft, you will owe your bank $155: $80 + $75 (3 x $25).”
Strategy: Opt out of any overdraft program that is in place on your debit card. If your bank will not let you opt out, close your account.
Check Out This Video On How Banks Can Trap You When You Simply Buy Gas
2. ATM Fees
Forbes is reporting that Bank Of America is now charging $3 when a customer uses an ATM of another bank. Of course, this does not include the charge levied by the other bank’s ATM, which can be an additional $2 to $3. Imagine withdrawing $20 and having to pay $5 in fees (25%) to access your own money!
Strategy: Use your ATM only at your bank or get cash back when making a purchase.
3. Consider Ending Your Use Of Checks
A bounced check is a bonanza for your bank and the merchant you presented it to. You could end up owing $70 or more for one bounced check. I would suggest using a debit card to pay all of your bills or online bill pay. There is almost no reason for anyone to be using checks these days. This is one simple step you can take to dramatically reduce the odds of your bank being able to soak you. Personally, I don’t write checks. We have not used checks in our household for at least two years. Another option is a pre paid debit card. Pre Paid Visa Card (Full disclosure: they are a paid sponsor of my podcast).
4. Beware Of Free Checks and Other Come Ons
Banks that are notorious for charging high fees are usually the ones that want to appear to be consumer friendly. They will offer something like free checks and then hit you with hundreds of dollars in fees for an overdraft. Focus on the banks overall fee structure (which you should be able to obtain in writing) and for choices such as opting out of overdraft programs on debit cards, etc… The cost of buying a box of checks that should last you for a very long time is only about $15.
5. The Best Way To Appeal A Bank Fee
The way I do this is somewhat of a guerilla tactic, but it works. Pick a time that you know the bank will be busy; lunch hour on a Friday is a great time. Go into the bank in person and challenge one of these ridiculous charges to your account. Rest assured, that they will want to get you out of the lobby as quickly as possible so that no one else will hear what is going on. You will likely get nowhere calling in to a toll free number. The bank teller may try and tell you that they have no authority to waive a fee, but that is usually not the case. Be persistent and don’t take no for an answer.
Some related articles you should read:
Anger At Bank Overdraft Fees Get Hotter, Bigger, and Louder
Overdraft Fee Revenue Up 35 Percent
Please help! I want to send a letter to members of the Senate Finance Committee with some actual stories of banks taking advantage of customers. Use the comment section below to add your story. Please be sure and include your e mail so I have a way to contact you.
Helping you make the most of God’s money!
James L. Paris
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