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5 ways your bank may be ripping you off

Your bank may not be on your side. Discover the common ways financial institutions may be fleecing their customers.

By MSN Money Partner Oct 24, 2013 2:28PM

This post comes from Maryalene LaPonsie at partner site Money Talks News.


Money Talks News on MSN MoneyYou trust them with your money, but they may be putting the proverbial knife in your back.


Bank Vault © Radius Images, JupiterimagesWhile some banks go to great lengths to set up friendly neighborhood branches -- complete with smiling tellers who know you by name -- the fact remains that big banks are big business. And in case there was any doubt, big businesses are all about making big profits.


Banks can be so into making money they sometimes walk the line of what is legal or ethical. Here are five ways your bank may be ripping you off in their pursuit of profits.


1. Misleading you about bank fees

Bank fees, glorious bank fees! If you have ever wondered how banks make money off of checking accounts, this is it. A report from the federal Consumer Financial Protection Bureau found that 61% of a bank's checking account revenue comes from overdraft and NSF fees.


Now, the government tried to protect you from yourself back in 2010 by requiring banks and credit unions to have consumers opt in to so-called overdraft protection programs. Previously, many accounts were automatically enrolled, enabling banks to let your overdrafts go through and charge you a large fee for each one.


However, many institutions were apparently not clear about what overdraft protection entails. A 2012 report from the Pew Charitable Trust found that more than half of those who had incurred an overdraft fee in the past year did not realize they had opted in to the program.


2. Jacking up your costs

Speaking of checking accounts, even if you have a so-called free account, you may be paying significantly more than you were even a few years ago.


Bankrate.com surveys bank fees annually and has found the costs associated with checking accounts haven’t gone up a little; they have gone up a lot.


Check out how much the following fees went up from 2007 to 2012:

  • Average overdraft charge -- up 11%.
  • Average ATM surcharge -- up 40%.
  • Average monthly service fee -- up 142%.

Plus, the minimum balance needed to avoid a monthly fee jumped 365% in a five-year period to an average of $723 in 2012. So much for free checking.


3. Looking the other way when fraudulent charges appear

If it weren't bad enough that banks are increasing their fees and other costs, even worse is the fact that some banks apparently don’t care if their customers are fraudulently charged.


The New York Times came to that conclusion after it analyzed hundreds of court documents this past summer.


According to the report, some banks regularly allow suspicious transactions to withdraw money from customer accounts. Banks that allow such transactions stand to make a lot of money from processing and overdraft fees.


While the report focused on two banks in particular, federal officials told the Times the problem is widespread.


4. Facilitating consumer-gouging payday loans

You may think you are smart enough not to use a payday lender, but don't be so sure. Some banks offer cash advance products that are essentially the same.


The Center for Responsible Lending says some institutions extend money to customers who then pay it back along with a fee that is the equivalent of up to 365% interest. These aren’t small, backwoods banks either. They are big names that include Wells Fargo, Fifth Third and Regions Bank.


Meanwhile, other banks appear to be helping out-of-state payday lenders circumvent state laws by allowing them access to customer accounts via automated clearing house transactions.


For example, payday lending is illegal in New York, but residents may be getting around the law by using online cash advance services. In response, the state this summer asked banks not to allow transactions from known payday lenders.


According to Bloomberg, residents of Maryland and Pennsylvania are taking a different tack by suing banks they say are allowing payday lending transactions.


5. Continuing to mishandle mortgage paperwork

Finally, you'd think banks would have learned their lesson about mismanaging mortgage paperwork. Remember robo-signing and the $25 billion settlement?


But apparently old habits die hard. The Consumer Financial Protection Bureau found that many bank and non-bank mortgage servicers continue to have sloppy paperwork and are missing protocols to guide the handling of key documents.


Other problems uncovered by the bureau include the following:

  • Delays in paying property tax.
  • Delays in canceling private mortgage insurance.
  • Long application review periods.
  • Deceptive communications regarding the status of loan modifications.

How to avoid being ripped off

So now that you know banks don't necessarily have your best interests at heart -- but you already knew that -- what are you going to do?


Fortunately, not all banks are bad seeds and there are certainly plenty of affordable and ethical companies out there. To find them, you only need to take a little time to do your homework rather than signing up with the first bank that promises $100 for opening an account and setting up direct deposit.


Try these ideas on for size:

  • Credit unions are member-owned and tend to have lower fees and more favorable policies. See if you are eligible to join one in your area.
  • Consider using an online bank. Like credit unions, these banks tend to have lower costs, and some -- such as Ally Bank -- will even reimburse you for ATM fees.
  • If you have opted in for overdraft protection, opt out. Do you really want to pay $35 to avoid the embarrassment of having your debit card declined? That is essentially what you are doing with overdraft protection.
  • Avoid cash advance programs that act like payday loans. If you absolutely can't avoid spending money before your next payday, it may be better to swallow your pride and ask for help from a friend or relative. Doing so also gives you added accountability so you don't end up in an endless cycle of payday loans.
  • Keep on top of bank and mortgage statements. It would be nice if you didn't have to think about it but don't count on the bank to catch potentially fraudulent charges or to pay your property taxes on time. When your statements arrive, open and review them. Every month.
  • Stay on top of loan modification applications. Keep the lines of communication open and think twice before you simply stop paying your mortgage on the promise of a modification.

Not all banks are bad, but remember that all those conveniences they offer come with a price. They aren't giving you overdraft protection and other services to be nice; they are doing it to turn a profit. Keep that in mind, and you'll be one step ahead when it comes to beating them at their own game.


More on Money Talks News:

60Comments
Oct 24, 2013 7:38PM
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TELL US SOMETHING THAT WE DID NOT KNOW.
Oct 24, 2013 8:08PM
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HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA - THIS IS NEWS?

 

I think the bigger news story would be list of individuals and organizations - that BANKS do not rip off.

 

Though I have a hunch it would be a VERY short list!

Oct 24, 2013 8:19PM
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I didn't even have to read this article in it's entirety to know from experience banks are ripping me off on a regular basis.  Greed, greed, greed...it's everywhere you turn and has ruined the free enterprise system.  Capitalism...is sure is pretty now isn't it?

 

They typically use the tired excuse they are looking after their stockholders, but it's still greed no matter how you spin it. 

 

I bank at Wells Fargo and nothing irritates me more that their bank tellers "coined" comment after every transaction..."Is there anything else I can do to make sure you are 100% satisfied with Wells Fargo today"?  Really?  How about you stop asking me that ridiculous question and actually do something for your customers that doesn't insult their intelligence.  How plastic can you get? I would rather talk to a programmed robot than an employee that has to say that to keep their job!!!!!!!!!!!!!!

  

Oct 24, 2013 9:24PM
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Credit unions:  the new,  and somewhat better replacement for commercial banks and savings and loans.
I have had it with the tricks commercial banks play.  It's purposely tricky,  confusing,  and downright fraudulent.

Oct 25, 2013 3:07AM
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Does the sun rise? Banks are parasites on businesses and consumers.
Oct 25, 2013 10:04AM
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People in this country need to except some personal responsibility. If you want to avoid costly fees, do your research before you sign up for an account. Of course banks are going to collect overdraft fees, would you lend people money without getting some kind of return? That being said, they don't force people to spend money they don't have. Fees are disclosed at account opening, if you don't want to incur fees don't use the services that have fees associated with them. As for the whole payday loan mess, the article is accusing banks of facilitating the loans not signing customers up for them, signing up for the payday loan is done by the customer who authorizes the lender to make automated withdrawals via the Automated Clearing House. I would encourage ALL consumers to switch to a local bank. Of course the big banks don't care about you, if you close your account they have thousands of other customers to contribute to their capital. However, a smaller bank needs all the customers they can get so they generally offer better customer service. The real key here isn't necessarily what bank you choose, it's how carefully you choose to read the account disclosures. Banks aren't to blame for poor financial management.

 

Oct 24, 2013 7:55PM
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Banks and casinos are the same breed !!!!!.....Wise up America !!!!!!!!!
Oct 24, 2013 9:39PM
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HEALTH SAVINGS ACCOUNTS were great until the banks & credit unions began billing the account for a monthly fee that EXCEEDED the NON-TAXABLE INTEREST. All the more reason to 'spend down the account as quickly as possible" and avoid Health Savings Accounts!

 

 

 

Oct 25, 2013 7:36AM
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Everyone is screwing you or trying to....O yes, big brother hurts the most.

Oct 24, 2013 11:59PM
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phuck banks ,they all suck ! cold hard cash is king ,buy a good safe ,way cheaper then the fees and BS interest that they claim to pay you
Oct 25, 2013 7:11AM
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Chicken feed for interest is below the standard for all checking accounts . #1 on the list ,which was not  on thier list . less then $2 on twenty thousand is peanuts . price you pay for free checking as said is not free .  Greed is the name for CEO pay.
Oct 25, 2013 10:19AM
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This article makes some valid points about "opt-in" and the way banks handle fraud disputes. However, I'll play devil's advocate here. 

First an foremost, the writer of this article is under the assumption that banks are obligated to provide their services for free. Just like any other business - banks are in it to make money and it is up to us, consumers to decide whether we need their services or not. In the environment, where rates are still ridiculously low, they need another source of revenue. Their margins are not as extreme as most people believe.

Second, if you are getting overdraft fees - you probably should not have a bank account or need to reevaluate your budgeting practices. If you borrow money from the bank (which is essentially what an overdraft is), they, as a business, are entitled to charge you for this service. 

Thirdly, I don't understand the author's point about facilitation of payday loans. In order to initiate an ACH a customer has to provide the merchant with their checking account number and their routing number. Is it the bank's fault that they are dumb enough to do it? If you borrow money and agree to pay back via ACH through your bank account what is the problem? Do you think it was free money that you don't have to pay back? Nobody forced you to use loan sharks or give up your account information. I don't understand how it is the bank's fault in this. 

Although I am as big of a fan of big banks as the next guy, I feel that today's consumer's lack the sense of personal responsibility. When you sign up for a bank account, you agree to their terms. It is your responsibility to read the disclosures, pay back on your obligations and safeguard your personal information.
Oct 25, 2013 9:55AM
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are the banks ripping us off, probably.  is the government ripping us off , definately . the difference is we can shop around for another bank and actually read about what the banks are really doing,  the government  not so much
Oct 25, 2013 8:48AM
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Isn't the question, which bank is ripping you off the least? 

Oct 24, 2013 9:14PM
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Apparently they never get tired of bashing banks. They seem to run this column about every other month. If people are not smart enough or interested enough in finding out about fees and charges beforehand, they deserve to get taken.
Oct 24, 2013 9:48PM
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I'd worry about the illegal obama regime 'ripping me off'' more than banks, they're not FORCING UNaffordable healthcare down my throat!: and if you people hate banks so much take whatever money you've got and stick it under the proverbial mattress...it's not like 'yesterday' when you can keep money in the bank and get a great interest...now? please..........what a joke....anyway...

forcing citizens to pay for a gov't product that's anti-Constituional, of course illegal and guess what? doesn't work!! well of course not! how does being forced to 'buy' a product 'affordable' supposed to insure 30millon people who never had insurance when the opposite is happening: not only will there be MORE people uninsured but 430,000 people have just received, so far, insurance policy cancellations! ---seriously folks, do you azzwipes actually think that the 'young' people are gonna foot the bill for outrageously high "free" insurance premiums so the sick can be 'covered'??? are you really that insane: 1: the 'young' people can't find a job 2: they're gonna spend it on themselves you fools EVERYONE WOULD!! and now they're gonna have 'additional' bills? are you kidding? do you morons have any idea how insane that is? do I need to spell this out? so now there's gonna be:

LET'S TRY THIS SCENARIO SHALL WE: SINGLE PERSON FOR NOW HAS:

1.mortgage/rent bills
2.phone and/or cell bill
3. utilities
4. car note/
5. car ins.
6. cable/bill let's say $165+
7. gas bill (car)
8. did I mention: HOME INS or RENTER's ins? oh well...
9. food
10. misc: entertainment/eating out etc...
11. AND ADDITIONAL PAYMENTS NOW?? to the tune of $7200 single person or $15,000 for families????!!!!! deductibles of 5 to 12,0000 dollars!!!!! YOU SONS OF WHORES MUST BE KIDDING, THERE'S NO WAY IN HELL ANYONE IS GOING TO DO THIS, AIN'T GONNA HAPPEN, TALK ABOUT NEEDING A REVOLUTION IN THIS COUNTRY!!! who can do this you may ask??

why the RICH! of course, they won't have a problem right? oops there's that word you hate libs!! RICH!! ahahahah!!! guess again liberal morons!!
THE RICH, PAY AS THEY GO, SO YOU THINK 'THEY'RE' GONNA PAY THIS EXTORTION? NOPE!! and that's the great irony of it all: the RICH pay as they go, and the 'young' people'll be damned if they're gonna go bankrupt paying for a product they'll never use or rarely use, and pay for the 'elderly' with the jobs they can't get!!! END OF THE OBAMA GAME!!

oh and if or when those idiots you voted in, you mindless clueless drones, and guilt-ridden white morons, get that stupid website up.....you'll get to see EXACTLY WHAT FREE! will cost, 56% more, 140% more 44% more who knows:

 ah the cost of FREE, see what communism does for you, YOU FOOLS!! and while were at it, what else would you douchebag drones want the gov't to 'force' you to do? or buy? the illegal obama regime is infecting you're pathetic lives and you're ok with that? you pathetic liberal vermin heh you have truly no idea what you've done, do you....well just wait for the reckoning...meanwhile you're clueless mindless drone himself, your king, 'didn't know healthcare.gov didn't work! he never knows anything, not him, not sebilies that decrepit old cow, not reid, that decrepit old fossil, that sick and twisted pelosi, a drugged out witch on prozac and God knows what else....you libs never know anything....and now you vermin that voted for him will PAY big time, and I couldn't be happier! giddy in fact, payback is in-deed a Bitch! well in this case you're astronomical "free" healthcare premiums are, enjoy!
Oct 25, 2013 12:02AM
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The credit union I use (and most banks), don't count a direct deposit as a direct deposit if it arrives early.  For example, for those of you that get paid on the first of the month, if the check for the next month arrives on the 30th or 31st instead of the first (happens whenever the first falls on a weekend), then it's not counted as direct deposit.  Guess what?  My accounts don't pay interest when I don't have direct deposit unless I sign up for some of those fee generating services!  Just another new scam the banks use to take your money that I've noticed recently.
Oct 25, 2013 8:22AM
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Johnny Paycheck said , Take this bank and shove it, did'nt he?
Oct 25, 2013 12:48AM
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My Mom was pretty savvy about finances, and handled the estates of her Mom, Dad, Brother, my Dad, and helped Me and wife or 2, albeit very conservative. Not so much about home or business security. I tried to help with both and like that old saying I as the messenger was getting tired of dying (or at least being thrown under a bus or 2).

End of'10 ad beginning '11 after Wells Fargo bought Mom and I's bank, Wachovia, and I having a horrible financial melt down I did one of the stupid things in this article to get thru Christmas and By the time April '11 rolled around Wells Fargo had 'fleeced' me for 1200.00, the pay day loan wasn't any closer to being paid off, and the bank wouldn't give me a short term loan to correct this problem. I hadn't been with them long enough (I had been with Wachovia 5 years), even though over 2 month's Wells Fargo had taken 1200 cash and that's EXACTLY what had been owed to the off-shore, on-line loan. It gets better.

     Same time, unknown to me, Mom takes her 88k she owed (at 73) and was either nudged or PUSHED into one of the last reverse mortgages Wells Fargo sold in 2010. Paid 15K for that distinction. She had put 200k down on this 400k house.

     She died right after Christmas. I have been selling off my inheritance to pay for moving and storage and the bills, the 43,000 in reported, stolen assets (there was a lot more, none of that mattered) as denied by her insurance company The Hartford. It took them 7 months to come to that conclusion and dropped me (My Mom's estate) nobody else would cover me with an open claim. Wells Fargo got the property covered =3500 for the premium, 2000 more than the Hartford, and getting static from them because of the hail damage claim I had no control over. Well's Fargo then because of this farce with the insurance accelerated the foreclosure, and I have dropped the price of this meticulously maintained, 4,000 + sq. ft. home to 364k and am running out of time.

     I feel like I got a Greek upper cut from the grassy knoll. Question: who are the good guys? The burglar ('s) who were nice enough NOT to break anything letting themselves in and out? The Cop's, who didn't want to write a report (to include 18 of my Mom's GUNS, mostly high$), because a window wasn't broken??? The Insurance company who was glad to ride on that last one? Or the bank, who, might be tickling all those just mentioned cause they know too much about me (alone in a small town) because I had banked there and they stand to make 200K more over and above the 100k they already got, but I get fresh cookies waiting for one of the teller's in training?

     Anybody looking for a big beautiful house in Greeley, Co. call Sears Realty, they know who I am.

Please. 

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