Bob Sullivan of MSNBC’s Red Tape Chronicles has written an interesting piece about how much money banks are raking in with overdraft fees. He states that the Center for Responsible Lending claims that banks take in over $17.5 billion dollars in overdraft fees each year! What a lucrative business for the banks providing “overdraft protection”… most of us use the overdraft protection, but it used to be that it would simply pull funds from a savings or other account. It still does that, but banks often charge $10 or more for the “service”.  For someone who inadvertently overcharges their account several times, they can pay an enormous amount of fees. We have several banks for our accounts at home- and all but one charge for this service. Opinions go both ways- some people feel strongly that consumers should know their account balances and the banks have a right to charge fees. Others believe it is piracy… banks are simply finding more ways to charge consumers at every turn. The truth is usually somewhere in between- but in my opinion there should be a cap to how much a bank could charge in a given day, or number of occurrences. In any event, Congress is taking a hard look as well with a House Financial Services subcommittee investigating how banks charge fees for consumer services. Yesterday the Subcommittee on Financial Institutions and Consumer Credit held hearings about Overdraft Protection: Fair Practices for Consumers. The live webcast link isn’t working yet, but a printed version of the hearing “will be available soon.”
I’ll be interested in reading about the opinions and tesitmony presented. Perhaps like credit card regulation, if the banks become too focused on “monetizing” products that consumers need, there may be a backlash. What can we do? My personal approach is to watch my bank accounts like a hawk. Obviously, try not to overdraw accounts… but sometimes it happens, especially with the faster check processing times and increased use of debit cards. Many banks will debit accounts quickly but then take their own sweet time crediting a deposit. Find out how long your bank takes to credit deposits, and know that any debits will take place immediately. And look for strange fees and charges on your account! One account I’ve had for over a year was included as a “free account” when I opened several other accounts. Last week I noticed a $5 “monthly charge” that magically appeared. I called the bank and asked why, and that it should be a free account, etc. They promptly refunded the amount and said they would take care of it in the future. With all the accounts and services we use, it’s easy to overlook a minor charge here and there.  I’ve called this bank about a half-dozen times in the past year for various charges- they’ve refunded every charge I’ve questioned them about.  They do appreciate our business and want to keep it… sometimes it pays to call and ask about refunding a charge you didn’t know about. But for the banks… those charges certainly add up to their bottom line each year.  Â
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