Overdraft fees still a mystery to many people
A new study indicates that despite federal reforms consumers are still angry and confused about banks' practices.
This post comes from Krystal Steinmetz at partner site Money Talks News.
Imagine getting hit with $90 in overdraft fees for a $3 taco you purchased with your debit card. The only thing that might make that situation worse is not being able to recall if you signed up for overdraft protection on your debit card in the first place.
According to a new report from Pew Charitable Trusts, many Americans are still confused about banking rules regarding overdrafts, despite a requirement that customers need to opt in for debit card overdraft protection.
In fact, more than half (52 percent) of people who paid a debit card overdraft penalty fee in 2013, said they did not remember signing up for the service. And it gets expensive. The report said:
In 2013, overdrafters report paying total fees averaging $69 during their most recent overdraft. Although the median total reported was $35, a quarter of overdrafters paid $90 or more during their last overdraft.
Since 2010, federal regulations have dictated that banks get consent from customers before they can process overdrafts and charge overdraft fees. If you don't sign up, your card will simply be declined if you don't have enough money in your account to cover the purchase.
Before that, consumers were automatically enrolled in so-called overdraft protection. But people are still confused. Pew said the results of the survey are troublesome.
"Checking accounts are the most widely used financial product in the country, yet many consumers are still concerned and puzzled by bank overdraft practices," said Susan Weinstock, who directs Pew's Consumer Banking Project. "Overdraft protections shouldn't be a guessing game."
When it comes to overdrafts, the study found that younger, nonwhite and lower-income consumers, as well as people who don't have a credit card, are more likely to rack up overdraft penalties.
Customers also appear to be fighting back against their bank's overdraft fees, the study indicated. According to MarketWatch:
Although there was some overlap among consumers, approximately 13 percent of people who paid an overdraft penalty within the last year say they no longer have a checking account, 19 percent reacted to their overdraft fees by discontinuing overdraft coverage, which consumers must opt into by law, while 28 percent actually closed their checking account in response to overdraft fees.
Overdraft fees equal big bucks for banks. According to The New York Times, banks accumulated $16.7 billion in overdraft penalties in 2011 -- about $6 billion of which could be attributed to debit card overdrafts.
Pew is urging the Consumer Financial Protection Bureau to require banks to do the following:
- Provide consumers with clear and uniform pricing information for overdraft options.
- Make overdraft fees reasonable and more in line with the bank's costs to cover the overdraft.
- Prohibit the reordering of transactions to maximize the overdraft fees. For instance, if you have a $50 transaction and a $5 transaction and $49 in your account, the bank could clear the $5 transaction first, so you'd only have one overdraft, instead of two.
Do you understand your bank's overdraft policies?
More from Money Talks News
Never going back.
I work as a banker. I open people checking accounts and deal with overdraft conversations for a living. Basically, half the people DONT LISTEN or pay attention to whats in their accounts.. why should they? since everyone is on disability its not their money so why worry? , the other quarter cant do simple math to balance their accounts and the rest make honest mistakes. its not a grand conspiracy, banks know people dont pay attention and they capatalize on it. just like how washington operates. and the obama administration operates. get used to it.
Bottom line, balance. Use the FREE services like mobile banking, atms, online banking so you can know whats in your account all the time. Remember the checks and monthly debits you have coming out. Its never the banks' fualt you overdrew.
The Bottom line with American banks is you cannot legislate criminality. If they outlaw one aspect of the overdraft fiasco, American banks will simply find a way around the law, and will continue to screw their customers like never before. Why, you ask? Because they are American banks, of course. They exist solely to steal your money a little bit at a time. Confusing terms? Of course the terms are confusing! That is exactly they way banks WANT their terms: hard to read, impossible to understand, shaky on the details. Criminal enterprises live on the margins of society; they rely on uncertainty and confusion to make their illicit profits. Amercan banks can never, ever provide clear, simple terms, because those terms are so awful that anyone competent enough to have a bank account would refuse to do so, because they would lose all their money to a criminal enterprise.
So, asking banks to provide clear, easily understandable verbiage for ANYTHING would be like asking the Mafia to provide a business plan for loansharking. Ain't gonna happen.
Only when bank presidents start swinging from the hangman's noose will anything ever change in the American Banking industry. Until there is a sense of justice in this country (also not holding my breath here) banks will do everything they can to rob us blind.
A viable alternative to putting your hard-earned money in an American bank would be to toss it into a pile and BURN IT.
Yeah, its simple. Banks are no longer your friend. Banks are no longer respectable companies in the community. Banks are no longer whom your turn to first. Small Local Banks are just as bad (and sometimes worse) and clearly they will charge whatever they can and will bend and even break the laws if they think they can.
Its simple. If you can't reliably keep at least a small cushion in my account, find another way. Pay in cash or use a pre-paid program or something. Don't allow them to rape you.
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