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Posts Tagged ‘bank fees’

Bank of America Penalizes Good Credit

October 28th, 2009 by Krayton M Davis | 1 Comment | Filed in Credit Cards, News

This just in from the “let no good deed go unpunished” department: Bank of America, a recipient of tens of billions of dollars of federal (taxpayer) bailout money, has decided in their erudite wisdom to start charging its best customers fees for their credit cards. This means that if you have good credit and pay off your credit card every month, our nation’s largest bank may assess you an annual fee of $29 to $99 to use their cards.

Merrill Lynch

According to columnist Mike Morin and various news sources, Bank of America is experimenting with this fee to help offset costs as well as to test customer reaction. Apparently, the bank doesn’t realize just how angry many people are that they have benefited from government assistance which also paved the way for them to purchase Merrill-Lynch, one of the most extensive financial management firms in the world.

To defend itself, Bank of America is pointing to the practice of Citibank, one of its chief competitors, who is now charging credit card fees to their best customers. Citibank was by far the largest beneficiary of taxpayer largess, receiving more than $300 billion in funding last year.

Your Choices

Customers have a choice when they receive notification that their credit card issuer will be charging fees. By law, you must be notified in advance of any changes to your credit card agreement, including lending terms and fees. With such notification you can choose to 1) keep your card and pay the fees or 2) cancel your credit card.

Of course, if you choose the latter, your credit score will take a hit because one of the five components of determining your credit score is your credit history. A closed account will lower your score.

Temporary Hit

Still, expect that many consumers will tell Bank of America “enough” and order their accounts closed. Though a hit to a credit score can be painful, it is only a temporary setback, one that many people with good credit will likely decide is one worth taking.


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Surging Overdraft Fees Hurting Americans, Advocacy Group Says

October 7th, 2009 by Matthew C. Keegan | 4 Comments | Filed in Consumer Tips, News

The Center for Responsible Lending (CRL), a nonprofit, nonpartisan research and policy organization, says that bank overdraft fees have surged by 35% over the past two years, costing Americans nearly $24 billion in 2008 alone. As many as 51 million Americans are affected annually at an average cost of $34 per overdraft.

Protecting Family Wealth

money trapThe Durham, NC organization whose mission is defined as, “protecting homeownership and family wealth by working to eliminate abusive financial practices,” says that overdraft fees are adversely affecting families who are already financially pressed due to the most recent recession and its aftermath.

“Banks and credit unions have become so sophisticated in driving up overdrafts that Americans now pay more in overdraft fees every year than they do for books, cereal, or fresh vegetables,” said CRL senior researcher Leslie Parrish. “These billions of dollars drained from consumers each year represent lost opportunities for families to save for a rainy day or buy necessary goods and services that could help spark the economy.”

Small Debit Transactions

According to the CRL, small debit transactions are the usual trigger which bring about overdraft charges. Most of these could be avoided if these transactions were denied in the first place, instead of approved and resulting in overdraft charges.

A handful of banks have attempted to amend their overdraft policies, but the CRL contends that they aren’t going far enough and have asked policymakers to do the following:

  • Require that institutions deny debit card purchases and ATM withdrawals, without charge, if the funds aren’t there.  As a limited exception, an overdraft fee could be charged if the lender gives the customer a real-time warning and chance to decline.
  • Require that overdraft fees bear some relationship to a lender’s cost of covering a shortfall.
  • Limit the number of fees that can be charged to a customer during a year before the institution must enroll the customer in a reasonably priced overdraft product, such as a line of credit, if it wants to keep charging for overdrafts.
  • Consolidate and streamline existing federal consumer protection authority by housing it in one organization: the proposed Consumer Financial Protection Agency, which would focus solely on what’s in the best interest of consumers.

As mentioned, most banks allow customers to enroll for overdraft protection which greatly reduces the fees for overdrafts. Funds are typically withdrawn from a related credit card or savings account, but those costs are much lower than an overdrawn checking account and the resultant fees.

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Overdraft Fees Can Be A Real Budget Buster!

December 8th, 2008 by Matthew C. Keegan | 3 Comments | Filed in Consumer Tips

I was helping a friend with his checking account a few years ago as he had taken ill and fallen behind on managing his checkbook. While hospitalized, several automatic drafts were posted to his account, but no money was deposited, therefore his account was overdrawn.

The worst part was that the funds which were to be automatically deposited (direct deposit through Overdraft Feeswork) were credited to the wrong account, triggering the overdrawn account. Four overdrafts later and my friend’s checking account was charged $120 in fees — $30 for each overdraft!

In this case, the bank was at fault and when I notified them of their error, his monies were quickly deposited into the correct account and the fees reversed. However, if my friend was at fault then the charges would have stayed in place and additional overdraft charges could have been assessed. It turns out that his bank allows up to five overdrafts per day but at a price of $30 per incident.

Overdraft fees are not uncommon. All banks charge them and fees range from $25 to $40, closer to the higher end for many of the large commercial banks. I’ve read related horror stories such as where a depositor made a simple accounting mistake that cost him nearly $400 in fees when all was said and done. In this person’s case they lived on a fixed income and his bank was only willing to forgive half of the fees.

Though it may seem as if some banks are eager to sock you with charges, you can avoid them by doing the following:

Sign up for overdraft checking – Have your checking account linked to your savings account, credit card, or line of credit to avoid fees. In the event that you overdraw your account, monies will be taken from another account and deposited into your checking account to cover fees. Likely, you’ll pay a small fee – usually $5 – for this coverage, but it sure beats a $35 overdraft charge!

Get direct deposit – Lots of businesses no longer issue paychecks, preferring to deposit money into workers’ checking accounts on pay day. Monies are in your account that day (no waiting to have a check clear) and you can access those funds immediately.

Seek notification – My bank notifies me when my account gets low via email. You can also set up this feature up to appear as a text message which will be delivered to your cell phone.

Fight fees – Don’t accept bank fees as is. You can always ask the bank to waive charges especially if this was a first time offense.

You don’t have to be beat up by bank fees, but you should take steps in advance to make sure that you don’t receive a nasty surprise in the form of costly and budget busting overdraft fees. In these days of tight money, a simple mistake can cost you dearly.

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