US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers...I'm sorry. How is that mathematically possible?
There are 300 million Americans, and, the FT reports, 130 million checking accounts. $38 billion divided into 130 checking accounts puts the average yearly overdraft total at $300 dollars, which is the equivalent of 9 overdraft charges from large banks like Bank of America. How many Americans really overdraft 9 distinct times a year? Moebs Services discovers, however, that one bad day for a consumer can mean gangbusters for the banks:
At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350.Banks are defending themselves by saying that overdraft fees are really no worse than parking tickets -- responsibility requires financial incentives, and so on. But practices like BofA make it quite clear that banks aren't merely using overdraft fees to regulate withdrawals. They're also trying quite clearly and cleverly to wring customers dry for billions of dollars. Bank overdraft fees totaled $11 billion in 1992. Now they're nipping at $40 billion.
I'm sympathetic to the argument that banks have to build capital in down times, but by turning overdrafters into ATM machines and then falling back on the "Hey, we're just trying to encourage responsible checking!" excuse, they're only making the government's point that a consumer financial protection bill is necessary to regulate the banks' relationship with its customers.
Wow. What a number.
I have another question: What about interest rates? We were all warned that the economic crisis, and then the credit card protection bill, were going to result in higher interest rates on our loans of credit. But the guys who are giving us those loans are getting money from the government at incredibly low rates. Is the call for a new usury law, capping interest at 10%, the right answer? Or is there a better one?
"At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350."
It's worse than that. Say you have $500 in your account. You make $200 in purchases and bill payments, then get hit with a $450 bill for emergency car repairs. Instead of clearing all the other payments and purchases, and charging you a fee for the overdraft on the $450, they'll clear the $450 first and then charge you a fee on each transaction of the $200 that aren't covered. So instead of one $35 fee, you're suddenly looking at, say, $105 in fees. Sometimes, if you make a deposit to cover a potential overdraft, they'll slow-walk the deposit to ensure they get the overdraft fee.
IT'S EVEN WORSE THAN THAT!!! Say you have $100 in your account and try to charge $105 on your check card. In the old days, your card would be declined and that would be it. Now, the bank allows the charge and then turns around and charges you for the overdraft.
And then, there's this: Now BofA will charge you overdraft fees if the credit AUTHORIZATIONS placed against your account exceed your available balance. I attempted to buy postage for a package three times on USPS.com, the first two times I got an error message saying that the ZIP code was incorrect then the phone number. Third time it went through without a problem. I didn't realize until some days later that USPS placed a separate authorization for $64 on my account each time I pressed the button, even though the actual transaction errored out. BofA charged me $70 (two charges of $35) because my balance at the time was only around $100.
As we say in the Army: WTF, over?
Personally, if they wanted me to feel bad about overdrawing my account, they shouldn't charge me. As it is, it's just another service charge and I don't put up with their condescending tone for a second.
The problem here is Bank of America. I know for example Chase does charge you for overdrafting, but they don't charge you daily for carrying a negative balance. Also, if you notice that you overdrafted, you can deposit money by midnight on the same day as the transaction and they will waive all fees. Just a suggestion for unhappy BofA customers- I used to be one myself.
thadesirae,
Chase is just as bad as the rest. I used one of their courtesy checks to borrow money at 4% interest for a car for my college-bound daughter. The very next month Chase moved my due date in by five days making my payment late and raised the interest rate to 20%. All the sudden I’m looking at around $500 in late fees and additional interest charges.
The stringent bankruptcy laws passed during the Bush era and the lack of laws against usurious lending have given banks the green light to turn as many of us into indentured slaves as they can. Something has to change…
It doesn't stop there even...
I'm a freelancer so I cash checks from a lot of different sources in my BofA business banking account. I get a warning the first time (or two) in a year that I try to deposit a bad check. Then I get charged $5 for the next piece of rubber I turn in and the fees get incrementally higher from there.
If this is about responsible banking then I'm at a loss for how this is supposed to teach me how to bank responsibly.