Banks are squeezing customers with historically high fees and penalties, from overdraft charges to account service fees to new surcharges on foreign debit transactions.
For many banks, the most profitable customers aren't the mass affluent -- they're "Joe Lunchbox."
Last year, overdraft and insufficient-funds charges totaled nearly $35 billion and comprised about 90 percent of banks' consumer-fee income, according to a study by the consulting firm Bretton Woods Inc. Three-quarters of banks automatically enroll consumers in their "overdraft protection" programs without formal permission, and more than half of banks manipulate the order in which checks are cleared to trigger multiple overdraft fees, according to a Federal Deposit Insurance Corporation study.Man-o-man, I've long suspected that something of that sort was going on. Now we have data. And along those same lines:
Banks want you to enjoy the "advantages" of paying with credit, debit, check and cash -- because it will make you more likely to lose track of your money.Here's my question: If the banks make tons-o-money from customers who lose track of their funds, then why are they so quick to toss lower-income customers out of the system? For years, banks have used ChexSystems to blackball customers who have gotten into trouble. (Remember: The banks intentionally trigger overdraft fees.)
In low-income neighborhoods, banks are disappearing. The working poor use check cashing stores. (Of course, even locales with no banks had fly-by-night mortgage companies, back in the go-go years.)
Me? I stick to cash. Almost always. Safest.
9 comments:
Regardless of whether or not the banks want folks to "lose track of their money" to generate over-draft fees, it is still the responsibility of the consumer to ensure that s/he doesn't do that.
To avoid overdraft fees is simple; pay attention to your expenditures. If a bill is due on a certain date, make sure it is covered and won't be taken out too soon or too late. Check your account daily if you have spent any money at all. Take cash out to cover expenditures instead of using your debit card for a lot of little purchases. The bank can't charge you an overdraft fee if you haven't spent more than what is in your account.
Lonni
I think that this is yet another situation where people make assumptions based on "the old days." In the old days, you could write a few checks on Friday night that put you over, toss in some money in the form of a payroll check on Sunday, and then expect everything to be toted up in your favor come Monday.
Doesn't happen that way anymore.
That's why I use a credit union. Free checking and automatic transfer from my savings account if I ever overdraw the checking account for a $2 transaction fee. No fee if I transfer the money myself online.
Sue-TX
Reply to Sue-TX:
How soon until our Senators and Representatives shut down credit unions on behalf of Wall Street?
Or force them to add a fee schedule that makes them uncompetitive?
Banks have been fighting credit unions since FDR signed the Federal Credit Union Act in 1934. I think the credit unions will continue to survive.
Sue-TX
lol, Joseph. Surely people don't still think there's a green-visored guy with an adding machine making entries into a ledger of their deposits and checks. Even assuming no one ever reads the disclosures their banks send them endlessly, anyone would have to know that banking is computerized like everything else. The "float" was a favorite of mine back in the day but now it's gone.*sigh*
It is quite easy to avoid bank fees so I would guess that $35 billion is more indicative of overall reduced financial circumstances than financial inattentiveness.If you can't keep a little extra in your account as a safeguard against math errors or lax record keeping, then you are probably in a vulnerable financial position. The banks are only too happy to make things worse by dinging you with their highly profitable junk fees.
Joan
"More than half of banks manipulate the order in which checks are cleared to trigger multiple overdraft fees, according to a Federal Deposit Insurance Corporation study."
Man-o-man, I've long suspected that something of that sort was going on.
Me too. I'm across the pond. Never make any 'direct debit' agreements. Just watch companies squirm when you tell 'em no, you never pay by direct debit because you think it's a scam.
Where are the fucking lawyers when we really need them? How much of the expenditure of the non-lumpen poor is accounted for by scam bank charges?
Joan - the scandal that may never break is that the banks are surely using software to ensure that movements into and out of an account happen at whatever time maximises their income from charges. This is an absolutely classic case of when one knows something is true without being able to produce any direct evidence.
Lonni, you need to read the post more carefully: banks are manipulating the order in which checks are cleared, so they might (for example), hold off on clearing a payroll check until past when an automatic car or mortgage payment comes due, triggering the overdraft fee; this is all out of the customer's control.
[Oh, and in case anyone was wondering: "post-dating" a check does not work (as I found out firsthand). Banks are under no obligation to observe the check date, i.e. they can cash it at any time.]
Sergei Rostov
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