Banks Earn Big Money from Overdraft Fees
The crusade against ATM fees is well-known by many people who have a bank account and have been charged $2.50 or $3.00 in order to get access to their own money at another bank’s ATM machines. Thanks to the revolution and a few loud-mouthed bloggers and pundits against ATM fees, many banks shrugged their shoulders and acquiesced…slightly, as they lowered the fees, some banks eliminated them entirely, and others started offering “bank fee refunds” meaning that if you were charged a fee to take your money out at another bank’s ATM, it would be refunded to you by your bank at the end of the month. Many people cheered the changes and went on with their lives satisfied in their victory. Bankers, on the other hand, hid their smiles behind wads of cash and quietly upped their overdraft fees to compensate.
Way Worse than Other Fees
Unless you are one of the fortunate few who literally has more money than they can spend and keeps a substantial savings in the bank at all times, then you have probably run into the occasional overdraft fee here and there. Overdraft fees are those penalties charged by a bank for having to extend you “credit” when a charge comes through that you do not have sufficient funds to cover on your own. This can happen through negligence on your part, or sometimes happens through no fault of your own, as sometimes a vendor who wasn’t supposed to charge you anything will place a “hold” on funds in your account as a way of verifying the account. This hold may cause money to no longer be available for a couple of days that you needed for other pending charges. When those charges come through, they are paid by your bank even though you “technically” could not afford them, and each time it happens, you are assessed a fee of $26 to $40 depending on your bank. The real nightmare happens if you have several charges…no matter how small…in rapid succession to an account and you quickly find yourself hit with $100 or more in fees alone.
No Compassion, No Mercy
It is estimated that banks will make more than $38 billion dollars in overdraft fees in one year alone. Most of this money comes from the poorer part of the population that can ill afford it, of course, and to make matters worse, the vast majority of the time that you call to complain about an overdraft fee, you will find yourself faced with a cold, merciless banker on the other end who will refuse to reverse it, no matter what excuse or reason you give them for the lapse. Most of the $38 billion comes from fewer than 15% of all bank accounts in the country – bet you didn’t know you had that much money to lose, didn’t you?
Avoiding fees is done quite simply by building up a small savings account in your checking account. If you put $100 in your bank account and start to think of that $100 as a zero barrier, then you will probably find your overdraft fees reduced significantly. If your account balance ever drops below that $100, it is time to panic as if you were already being charged that $30 overdraft fee and work diligently to bring the account back to a positive status. Otherwise, banks often offer overdraft protection, where you keep money in a savings account that is linked to your checking account and if you overdraft, they will transfer money over for you to catch the overdraft…
Of course, most banks charge a fee for that service as well.