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As college students, handling money seems to be a hard lesson to learn.
A lesson which, unfortunately, many of us learn through experience.
One thing I’ve learned is that banks can sometimes get you into trouble before you’re even aware of it – then you’re stuck trying to figure out what to do with those red numbers staring you in the face.
For many national banks, fees have become a major source of revenue.
And those banks have plenty of fees to utilize. ATM fees, minimum balance fees, "per use" fees (such as a charge each time you opt to use your card as debit rather than credit) and monthly service charges are just a few ways your bank can stick it to you.
Overdraft fees are my worst enemy.
The bad news is the fees aren’t getting any better, as bank fees reached a new record high this year.
According to Bankrate’s 2009 checking survey, nonsufficient funds fees (NSF) or bounced check fees rose 2.1 percent. This brought the average overdraft fee from $28.95 to a new high of $29.58 per fee.
This isn’t anything new.
Banks have continued to raise their fees every year. In 1998, the average overdraft fee was about $21.57.
While some banks have competitively lowered their fees, they are still outnumbered 8-to-1 to those banks who have decided to raise their fees.
I get so infuriated when I do the math. (This rarely happens, I’m a writer – I don’t do math.)
It seems ridiculous that banks can charge almost $30 for $5 overdraft.
It’s unfair banks raise their fees over two percent, yet money market accounts, on average, pay only 0.32 percent.
This leaves the consumer waiting about five years to yield an average of 2.19 percent on MMA.
Some banks are even instituting a tiered system, charging even more for the second through the fifth overdraft during a given 12 month period that you overdraw from your account.
Of the banks surveyed by Bankrate, 17 percent have a tier that averages $36.19 after you bounce your fifth check.
I understand that chronic mistakes should be addressed, but charging more than $36 seems a bit steep to me.
It doesn’t end with the overdraft fee – some banks even charge a fee for every day that the overdraft goes unpaid.
And after two to four weeks, your account can be closed.
Banks just get dirtier and dirtier by means of handling our accounts. I imagine that in the contract you signed to open an account, they failed to mention how they apply charges in a single day.
With multiple debit transactions on the same day, the bank applies the charges by amount (from largest to smallest) and not by the order in which you swiped your card.
This is troubling because the account may have bounced after the largest debit was applied. Each transaction after gets a nice little fee tacked on to it.
Something to look forward to: there is current legislation concerning bank fees.
A congressional bill (H.R. 1456) was introduced in March that would amend the Truth in Lending Act to address overdraft protection programs and services.
According to Bankrate, this has caused some of the top national banks, such as Bank of America, Chase and Wells Fargo, to change some of their policies concerning overdrafts.
Let’s hope this becomes a trend – or it looks like I’ll be investing in a piggy bank after college.
7 comments
Teletech employees have been working for BoA for quite a while. I am sure quite a few of them can tell you some great stories and loop holes about how the banks change fees to the unaware.
While I have to agree that physically documenting and keeping track of personal finances is vital to avoiding overdrafts, online banking is NOT helpful, at least with the bank I use. I tried to keep track of the transactions myself but was confused when trying to balance my checkbook with the online system. I then foolishly attempted to rely only on the online transaction list and got into a whole heap of trouble because transactions do not post in order and often do not show up right away. Not to mention any transactions from 2:00pm Friday til 11:59pm on Monday don't post until Tuesday. There are many complicated loops in what would normally appear to be a simple system. A bank manager attempted to explain the policy to me but some of it was difficult to understand. We aren't all bankers; how are we expected to compare banks for better service and rates when many banks have different systems and policies?
So the obvious and only solid solution to avoiding overdrafts is to keep track of and document every expense--a bit difficult but possible--when you are motivated by exorbitant fees.