Discount Diva
Discount Diva: Let’s whip whopping bank fees
Bank fees have always been annoying. But, in light of the big bailout, punitive bank fees have become downright infuriating.
If I’m scribbling in my check ledger, forget to carry the one and overdraw my account by 13 cents, I end up with $30 in overdraft fees.
Meanwhile, a few bank executives and mortgage brokers mismanage their business to the point of ruin and the industry gets rewarded with a multibillion-dollar rescue package.
The banks say punitive fees are necessary to deter bad behavior. But, while we’re shelling out bucks for our little math errors, executives elsewhere are sailing away in golden parachutes.
How fair is that?
Our local banks weren’t involved in the kinds of activities that brought the economy tumbling down. But the current situation does bring to mind the hypocrisy of an industry charging more egregious, exorbitant fees than ever.
The cost of doing business for financial institutions has actually decreased, according to consumer watchdogs. So why did banks take in $36 billion in service fees in 2006, accounting for about 27 percent of the industry’s total revenue?
I’m a firm believer in capitalism. I understand the economics of incentives and deterrents. But now that banks have changed the rules to suit themselves, hopefully they will be forced to make those deterrents a little less, shall we say, mercenary. Contact your lawmakers and ask them to give the banks a nudge.
Until then, here is one way to keep from getting pillaged:
Opt out of courtesy overdraft or bounce protection. This is a service that covers purchases you make and checks you write without sufficient funds to cover them. With it, your bank will fund the purchase for you as a “courtesy,” then ever-so-courteously sock you with huge overdraft fees for each transaction they let slip by.
By opting out, your debit card won’t go through on purchases your account can’t cover. See, if I don’t have enough money for the pack of gum I just grabbed, I don’t consider it a favor that my bank lets me have it for a $30 fee. I’d much rather find out I’m broke and be deterred by having my card declined in public.
Remember, opting out means overdrawn checks won’t clear either, leaving you susceptible to returned check fees. But you’re more likely to engage the service through the use of your debit card anyways. Trust me, it’s not the rent check you carefully mark down in your checkbook that goes unnoticed. It’s that gallon of milk you grab with your card on the way home that does it.
What’s worse is banks have a policy of processing the largest same-day purchases first. So if you’ve got a $100 balance, make five $20 purchases and one $100 one, your big-ticket purchase will go through first, leaving you with five whopping overdraft penalties.
Instead, if you’re prone to overdrawing, have your checking account linked to a line of credit or your savings account. You’ll still be charged a flat fee or percentage rate when you use the service, but it’s a lot less.
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