45% of American Banks make more from overdraft fees than then they do in profits from normal banking activity. What is wrong with an industry whose entire business model is built upon stealing money from the very people who can least afford it?
A recent New York Times article outlines a Wells Fargo customer whose teller failed to tell him that funds from a recent deposit were being held. He went about using his debit card and made a number of purchases under $10.00. He was charged multiple $34.00 over draft fees to the tune of $238.00. This means that a 4.00 cup of coffee at Starbucks actually cost him $38.00.
In my opinion, if a Bank can't make money lending money, then they shouldn't be in business. I say, close their doors now, don't pass go and don't collect $200.00
Here's what the banks do:
1. Customers are allowed to overdraft their account on their debit cards at point of purchase. (The banks bill this as overdraft protection and claim that they do this so that the customer is not embarrassed.) If the customer is aware that this is happening it's not a problem, they get to the bank and make sure that the debits are covered.
2. Unfortunately, thousands of Americans are unaware that it's even possible to use the debit card to withdraw more than is in the account. They find out the hard way that a $1.00 overdraft has cost them hundreds of dollars.
3. One of the sneaky techniques that banks use to increase revenue from overdraft fees is to process large debits first. In the old days, debits were credited based on the date and time they were incurred. No longer. By processing larger debits first, banks realized that it would force many customers into multiple overdrafts, thus increasing fees. By contrast, if the large debit were processed in order, they bank might only make a single overdraft fee- easy profit at the hands of a consumer programmer.
I for one am tired of the heavy handed financial sector. We as Americans do need to be responsible with our money, but when the systems are designed to trip us up and bury us, something is very wrong.
Unfortunately, I have no faith that any legislation being considered will actually help the consumer. Based on what we have seen in the last several year, government intervention will hurt the consumer and the small businesses who rely on small debit card purchases to stay alive.
The playing field isn't level, stay informed and watch your balances.
For those of you who are interested - here is the New York Times Article
I am Kate Bourland. I help my clients get out of debt, get loan modifications and establish a debt free lifestyle. We Guarantee our Loan Modifications. You can reach me at 530-419-3967.
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