Category Archives: bank fees

You Have Less Money in Your Checking Account Than You Think – How Banks Maximize Fees by Reordering Overdrawn Checks

Posted on May 15, 2012 by admin

Most banks and financial institutions provide account holders with a debit card. These cards are generally used as cash and immediately take money out of your bank account when used.  The bank, however, treats each of debit card use as if you had written a check.  Just like with a check, a debit card transaction can cause you to overdraw your checking account.  Furthermore, your bank may have a policy that results in reordering overdrawn checks to effectively maximize overdraft fees. Now imagine that on the way to work you filled your car with gas and got a cup of coffee. The total you spent at the gas station and its convenience store was $32. However, they were separate card swipes, one at the pump for $30 and one in the convenience store for $2. You have opted-in to your institution’s overdraft protection plan – a document of over 100 pages that you barely understood. Later in the day you realize that your mortgage is due. You hurry on your lunch hour over to the bank that holds your mortgage and pay it with your debit card – you did not have a check with you. But, you realize that your account is about $20 short. If you delay the payment by one day you incur a late fee of $50, but, if you put it on the debit card you will only incur a $35 fee. Right?  No, wrong! You will incur $70 in overdraft protection fees. You see, for your convenience and their profits, banks have the right to forget the order that items are paid in. They reorder them at the end of the day by size of the transaction. Under this system of reordering of credits to your account the good news is that your mortgage payment earned no late fee – wait, do not become delirious with joy. Your two other purchases cost: Gas Purchase $30.00 plus overdraft protection fee $35: total gas purchase $65.00 Coffee Purchase $2.00 plus overdraft protection fee $35: total coffee purchase $37.00 Your gas station stop in the morning cost you a whopping $102.00. Crazy, yes – legal, yes – fair, no. Unfairness stems from two issues. Consumers for the most part have no comprehension of the reordering of withdrawals from time based to size based. The fee is supposed to reimburse the bank for the expenses incurred in covering your overdrafts. It does not cost them $35 to do this. Banks are using overdraft fees as profit centers.  It is estimated that nearly 75 percent of profits for deposit account services come from overdraft fees. Nine percent of customers account for 84 percent of the fees. You Can Act The Consumer Protection Finance Bureau is seeking comments on the overdraft practices of banks.   Have you had an experience related to reordering overdrawn checks?  Submit your thoughts here . The comment period closes on June 29, 2012. Continue reading →

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Understanding Bank Fees

Posted on April 24, 2012 by admin

Banks and credit unions provide a number of ways to save or invest your money.  Unfortunately, this often comes with fees or charges.  After all, most banks are for-profit businesses and need to make money in order to continue to provide the services they do.  While most of the bank charges are open and people are well aware of them, many can sneak up on a person. Many bank fees are only associated with certain accounts.  These accounts provide more for the customer, but come at a charge.  For instance, checking accounts that pay interest will often have an annual fee (often this fee is waived if a minimum balance is kept in the account).  Other fees come in the form of membership dues.  In order to have the privilege of banking at a credit union, they may charge annual membership fees.  The benefit of paying them is the specialized service most credit unions offer.  Other fees are not as straight forward.  A savings account or CD’s cost the bank money.  In order to provide these services the fees are wrapped up in the form of a lower interest rate.  So instead of charging a bill every month, the institution might offer slightly lower interest on the account. Other bank fees are due to negligence on the part of the consumer.  Most people are aware of overdraft fees.  This happens when a person uses their debit card, or writes a check, for more than the amount they have in their account.  The bank will charge the customer for the difficulty of returning checks, often as much as $30 per overdraft.  If this happens, the consumer needs to correct the problem immediately, since some stores will try to deposit the check another time, causing another overdraft. All fees go to cover the service the bank is providing, or to mitigate their losses.  Some fees are distinctly service related.  Banks will charge for non-customers to use their ATM, and the customer’s bank will also charge.  So if a customer of 1 st Bank uses an ATM owned by 2 nd Bank, they will pay the service fee to both banks.  A lesser known similar fee is associated with savings accounts.  While it is not because a machine was used, it is because too many withdrawals occurred in any given month.  Many banks allow up to 6 withdrawals per month, after that they charge the customer as much as $20 for each additional withdrawal.  Since every transaction costs the bank something, they keep their expenses lower by limiting the number of free transactions. The best way to avoid bank fees is to be well aware of them.  There are some truly free (to the customer) accounts out there, and by shopping around the consumer can minimize their costs.  For those who are diligent the penalty fees (overdraft, ATM usage, too many withdrawals, etc.) can be easily avoided.  Accidents do happen, and if for some reason your account becomes overdrawn, be sure not to blame the bank, and negotiate a waiver of the penalties.  If you have been a loyal customer, even for just a few months, they will often happily refund the fee to keep you as a customer. Continue reading →

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Six Tips To Avoid Fees on Your Bank Debit Card

Posted on April 5, 2012 by admin

When you open a bank account today, the bank will usually issue a debit card also known as an ATM card or “check card”. A debit card looks like a credit card, acts like a credit card but is not a credit card. A debit card withdraws money from your bank account and does not extend you a credit line as a credit card does. Debit cards are convenient, you do not have to carry much cash on you, used properly you only pay what you can afford and there are no interest charges accruing on your purchase. On the other hand, debit card fees can wreak havoc on your bank account and pile us fees quickly that come right out of your bank account. Here are some tips to help you avoid these high and annoying fees. Online banking is safe. Bank security is very good and by signing up for online banking, you can monitor your debit account quite easily. Keep a record of your bank balance. An overdraft created by using your debit card is as expensive as a regular overdraft. Use your check register to keep track of your spending. Banks may offer to let you overdraw your account and then charge you an overdraft fee,  By federal law you can refuse this service. Overdraft fees can cause other the declining of important checks that are outstanding, creating more fees and antagonizing creditors. Your bank charges a fee for a “returned check” as well as a fee from whoever received the bounced check. Make sure you know your bank’s policy on crediting deposits to your accounts. If they take time to process then the money you think is in your account may not be. Knowing what is in your account at all times is the most effective way to avoid debit card fees. There are many aspects of this law that went into effect in October, 2011 that banks do not like . Usually, debit cards connect to checking accounts. However, many banks will allow you to use your savings account as a backup account if you withdraw more money from your checking account than it has. The bank automatically transfers, at no fee, money from your savings account to your bank account to cover your debit card use. Many banks will send you a text message or email when your checking account balance hits a pre-determined low balance. The small fee you pay for a text message is well worth avoiding the large fee you pay if you overdraw your checking account. When you got your debit card, the bank also gave you a lot of information about debit card fees. Read this information. Some banks charge you a fee for using your debit card. If this is the case, find a bank that does not do this. Only use ATMs that your bank owns. Most ATMs other than your own banks will charge you a “convenience” fee that can be more than $3.00. If your bank has no ATM that you can easily access, use your bank debit card for a small purchase such as mints or gum and then use the cash back option. Debit cards can be convenient for bill paying and making purchases. Users have to be aware of the fees that are associated with debit card usage so that they can take measures to avoid them. These six tips are a great way to start disciplining yourself when using a bank debit card, and you will save money too! Continue reading →

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Are Payday Lenders Any Worse than Banks?

Posted on March 19, 2012 by admin

Most all agree that fees for payday lenders are exorbitant: $15 for a $100 loan amounts to 391% APR!  What’s more, if the loan can’t be repaid in the next pay cycle, which many times it can’t, then the fees and interest rate go up. However, anyone who has had the misfortune of having a check bounce, a late fee added to a credit card or paid a reconnect fee would have to agree that the payday lending companies have a point when they make the following comparisons: $100 payday advance with $15 fee = 391% APR; $100 bounced check with $48 NSF/merchant fees = 1,251% APR; $100 credit card balance with $26 late fee = 678% APR; $100 utility bill with $50 late/reconnect fees = 1,304% APR. These same arguments are ones consumers who have had success in covering their shortages with payday loans use to defend the practice. There is even a study from an economic research firm, Moebs Services , saying it is cheaper, in some cases, to use payday lenders instead of paying overdraft coverage fees. However, the rub comes when the loan is not paid off in the next pay cycle. Moebs says it takes 3.1 pay cycles to get the average payday loan paid off and often leads people to long-term debt problems. Although bankers have been barred from charging as much in overdraft fees since the initiation of the Dodd-Frank Act, this hasn’t kept them from looking for other ways to address their shortages in profits, including, according to a Reuters article , charging more for checking accounts. “As an industry, we have communicated with a generation of customers that this is all free, and there are costs,” Wells Fargo CEO John Stumpf said. Wells Fargo has eliminated free checking for new customers and will start charging existing customers who do not maintain a $1500 minimum balance or make a direct deposit of $500 each month. Bank America’s accounts for new consumers cost anywhere from $6 to $25 per month unless certain criteria is met. All of which is triggering new “Move Your Money” protests as part of the Occupy movement which grew out of frustration with the federal bank bailouts, the spike in foreclosures and a short-lived plan by large banks to impose new debit card fees. Still other banks have other ideas about how to make up the loss in profits as many of the nation’s biggest banks are offering short-term payday loans —at high interest rates. U.S. Bank, Regions, Guaranty Bank and Fifth Third Bank are among the banks offering Checking Account Advance and Ready Advance loans. Like payday loans, these loans are made for two weeks or a month but instead of using a post-dated check, the banks pays itself back when the customer receives their next direct deposit. Consumer advocates are not happy about this new development. “Payday loans erode the assets of bank customers and, rather than promote savings, make checking accounts unsafe for many customers,” wrote a consortium of 250 consumer groups, community and religious organizations and law centers in a letter urging federal regulators to halt payday lending by banks. “They lead to uncollected debt, bank account closures, and greater numbers of unbanked Americans.” Richard Cordray, new director of the Consumers Financial Protection Bureau’s answer to this latest development?  He said he would be watching this practice closely. If this practice continues, then the answer to the question that began this article has to be, no payday lenders are not any worse than banks. Continue reading →

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Bank alternatives on Main Street

Posted on November 30, 2011 by admin

With the number of bank scandals rising every week, it’s no wonder that around 35 million Americans prefer to keep their money other places.  Banks are feeling the pinch of the recession, and their newly imposed fees aren’t winning over any customers.  Ever since the Bank of America debacle with the $5 debit card fee, consumers have started to look for bank alternatives. Prepaid cards and online bank accounts as bank alternatives are gaining popularity with every segment of the population.  Phone apps for online bank accounts are also a growing trend, since many Americans now have smartphones with web access.  Square and GoPayment are two apps that work with the ever-popular Android and iPhone platforms. Online Banking Online bank accounts are easy to set up and access.  You can log into your own account using your smartphone.  Transferring money from your account to another person’s account now only takes a few minutes and costs a few dollars.  Exclusively online banks (without actual buildings) tend to offer higher interest rates for customers.  Like traditional banks, online banks usually offer “no minimum balance” accounts, low fees, debit cards, automatic bill-pay, and cash-back rewards.  The downside is that the ATM fees are higher, and you can’t walk into a branch for help.  As long as the bank is FDIC-approved, your money is as safe as the cash inside a brick-and-mortar bank. Pre-Paid Debit Cards You might have noticed the broad array of prepaid debit cards next to every checkout counter.  People who don’t have traditional bank accounts often turn to prepaid cards as bank alternatives to pay their bills and shop online.  American Express now offers a card with very few fees.  Other popular prepaid cards include the Walmart MoneyCard, NetSpend Visa, Western Union MoneyWise MasterCard, and many others.  Some of these cards charge small fees for everything, so read the fine print before you load your money onto any prepaid card. Recently, some prepaid cards have received heavy criticism for their exorbitant fees.  The Rush Card and Kardashian Kard, both popularized by celebrity figures, are two such prepaid debit cards with hefty fees attached. On the other hand, prepaid cards are convenient for gift-giving and storing small amounts of money for trips or vacations.  Rather than bank alternatives, some people choose to use prepaid cards to buy things online instead of risking their regular Visa or MasterCard with an unknown online vendor.  In addition, prepaid cards don’t require anyone to have high credit scores, making them convenient backups for anyone who has difficulty qualifying for a traditional credit card. Continue reading →

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New Bank Fees: Your Surprise Holiday Gift

Posted on November 27, 2011 by admin

Although Bank of America recently caved under the criticisms of its $5 debit card fees, it’s not the end of extra banking charges .  You might be surprised when you open your next statement and read about the changes at your bank.  Common bank fees include monthly checking fees, overdraft fees, minimum balance fees, and cash wiring fees. List of New Bank Fees Bank of America – Debit card replacement – $5 to $20 TD Bank – Wiring cash to an account – $15 Wells Fargo – monthly debit card fee – $3 (only certain states) Bank of America – Personal checking account maintenance – $12 Citigroup – Personal checking account maintenance – $10 Chase – Personal checking account maintenance – $12 TD Bank – receive paper statement – $1 Bank of America – receive paper statement – $8.95 Chase, U.S. Bank, and PNC – early account closure – $25 As if new bank fees aren’t bad enough, many financial institutions are cutting back on their cash-back programs.  JPMorgan Chase, U.S. Bank, and USAA Bank no longer offer debit card rewards. One way to get around some of the new bank fees is to switch to a credit union or smaller, local bank.  If you bundle your accounts at a single bank, you might be able to get around some of the fees.  To stay on top of changes, check out your bank’s website and read about the updates. Banks are required to mail or email customers about any new fees or upcoming changes.  Make sure you receive these letters or emails by contacting your bank and updating your email address and/or home address.  Don’t throw out the letters without scanning them for impending charges.  They’re long and boring, but look for dollar signs throughout the text.  Banks seem to make the letters as convoluted as possible so that nobody will read them! See if you can downgrade your bank account to avoid some maintenance fees .  Most banks offer simple checking accounts with no minimum balances or monthly fees.  The downside is that you don’t get any perks or rewards with these accounts. Online banks are another option.  You can have your paychecks deposited right into the accounts and have a debit card to withdraw cash. As a last resort, call up your bank if you notice extra charges on your statement.  If you politely ask the customer service rep to remove some of the charges, you just might get lucky.  Explain that the bank down the street doesn’t have any fees.  This works better if you are a long-time customer of the bank or do a lot of banking there, since they don’t want to lose valuable customers. Continue reading →

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