So, our Government recently passed legislation around bank fees, specifically insufficient funds fees for ATM and Debit card transactions.
From cnn.com:
The Federal Reserve on Thursday released a new rule to prohibit banks from automatically enrolling customers in overdraft protection programs, which charge fees when consumers spend more than they have.
Starting on July 1, 2010, all banks will have to ask their customers to opt in to overdraft protection plans for ATM and most debit card transactions.
Some banks charge as much as $39 when customers overdraw their bank account by even a few dollars.
I can’t help but wonder … Why was this legislation even necessary?
The only time you’re charged an insufficient funds fee is when you spend more money than you had in your account. It seems like the Government had to step in to stop banks from charging these fees because we the people are incapable of simple, second grade arithmetic.
If you had $100 in your checking account, you can’t go and spend $101. That would put your balance below $0. One would think that the banks would simply deny the debit at the point of sale, but usually they let the debit that will cause an overdraft go through and then charge the customer a large fee.
But really, it doesn’t matter what the fee is. If people would just keep better records and pay attention to their life and know how much money they really have, this would be a non-issue.
I won’t lie … I’m 30 and I think I’ve overdrawn my checking account 3 times so far in my life. Twice was when I first got a checking account, 14 years ago, and was young and irresponsible and didn’t understand the importance of keeping good records. The most recent time was earlier this year and it was a total record keeping mistake on my part.
I mean, am I wrong on this? Why is this even an issue? It’s up to you to know your balance and know what checks and debits you have outstanding. After all, it is your money.
November 23rd, 2009 at 10:19 pm
ha. we were just talking about this like a week ago
December 11th, 2009 at 1:41 pm
I tend to agree with you on running a balance, but at issue is the WAY they process charges, putting a large payment through first, then maximizing the overdraft fees on smaller more numerous charges. They do this intentionally, they hold payments for up to 3 weeks waiting for the opportunity to cause maximum damage. For many, they don’t realize the mistake and compound it by continuing to use their card until they have racked up hundreds of dollars in late fees and finance charges. They then jack up the rates on cards etc based on your overdraft activity. YES legislation is necessary. So are class action lawsuits. I personally hope Chase gets the shit sued out of them.
December 11th, 2009 at 3:02 pm
I agree with you that something needs to be done about the order bank process debits. They should be processed in time order (the time they occurred) not by largest amount to smallest amount.
But, most people don’t see this legislation that way. Most people see this legislation as OMG BANKS HAVE THE NERVE TO CHARGE ME WHEN I OVERSPEND!
If people didn’t send more money than what they have in their accounts, the order that Chase processes the debits in is irrelevant.
I will be the first to agree Chase is an evil, evil corporation.
But, I stand by my assertion that simple, second grade arithmetic would make this problem a moot point for the vast majority of people.
If you had $100 in your account and you spent $99.99 over 5 transactions, it wouldn’t matter what order Chase processed those transactions in. If you spent $100.01, then it would matter. But, those mistakes happen to frequently. And because people are too lazy? stupid? indifferent to? keeping an accurate check register, they moan about the high bank fees.
I think you and I are certainly on the same page because we understand the issue.
Most people don’t understand it.
December 18th, 2009 at 4:34 pm
Processing used to be for only posted transactions only. Regardless of pending items. Now it’s all lumped into one and you can have multiple fees based on transactions that haven’t even processed yet. Card purchases should be handled the same as a check. Imagine if checks showed up pending for two or three days on your account? People would be ticked!
December 29th, 2009 at 8:44 pm
Yeh..you are 30..wait to you have a family and have to pay dyacare as well as robbing Peter tp pay Paul…then maybe you will see how hard it is not to over-drtaft!! It’s a game that the banks are profiting richly from..I asm not against them charging fees for my mistake but $39 per over-draft is rediculuos!!!
December 29th, 2009 at 9:32 pm
Frank:
Just because I’m 30, you assume I don’t have children or a family?
FYI … I am married – have been since I’m 27. I have a child with more coming soon. I work full time. I have a mortgage and a car payment, just like you probably. If you’re robbing Peter to pay Paul, your finances are out of control.
December 31st, 2009 at 6:26 am
Very interesting and I agree with both sides. It is the account holder’s responsibility to know their accounts adjusted balance. IMO though transaction posting time is what needs to be governed. Very often we have $1.00 pre-auths posting for multiple transactions for up to 10 days. With today’s technology a bank can monitor direct deposits vs average daily balance vs transactions. This long pre-authorization pending game is where the problem is and banks know it. Humans forget & banks use it in their favor on purpose.
We live in (or soon will) a cashless society were the majority of financial transactions occur digitally and rather fast. IMO pending transactions should be finalized by the end of business of the third day in date/time order.
January 5th, 2010 at 9:57 pm
Whoever wrote the original post has no idea what they are talking about. The new regulations are designed to curb excessive fees, not eliminate a banks ability to collect on delinquent accounts. The way the system works presently, banks have been given a license to steal. Can’t you feel their hands in your pockets?
There are several ways banks are currently mugging their customers, to wit…
Banks use deceptive practices such as processing larger transactions ahead of smaller ones, regardless of chronological occurrence. Say for example you have $100 in your account. You spend $1 at a coffee shop, $5 at a gas station, and then $100 at the grocery store after the fact. Banks currently deduct the $100 grocery bill, then the smaller transactions (which chronologically occurred first) so they can charge two overdraft fees instead of one. This underhanded, predatory practice is quite literally a license to steal and must be curbed.
Bank fees are also well in excess of the amount over-drafted. Using the same scenario as above, the total amount of the overdrafts is $6 spread out over two transactions. The national average for overdraft fees is $27, with some banks charging as little as $10 per overdraft, and other institutions charging as high as $35. So the poor sap that over-drafted twice could be faced with upwards of $70 in fees for going $6 into the negative. That’s like a life sentence for stealing a loaf of bread.
Furthermore, banks often enroll customers into their ‘overdraft protection’ programs when they sign up for an account. No opportunity to opt out is given, unless the customer is incredibly bank savvy and reads the fine print. I did, many don’t. These programs allow overspending, and will cause point of sale transactions that place an account below zero to occur instead of rejecting the card. This is where the majority of overdraft fees occur. Between 1999 and 2009, the Federal Reserve reported that the total amount of overdraft fees collected jumped from $18 billion to $38 billion per year.
The new regulations that become law on 1st July, 2010 are intended to prevent these shady practices. Until they go into effect, banks are literally putting the pedal to the metal and hitting every customer with as many fees as possible so 2010 won’t be a total disaster for them.
January 6th, 2010 at 7:33 pm
“Say for example you have $100 in your account. You spend $1 at a coffee shop, $5 at a gas station, and then $100 at the grocery store after the fact.”
Therein lies the problem … If you only have $100 in your account, why are you spending $106?
It’s not the banks … it’s the people spending more money than what they have in their accounts.
Please don’t misunderstand me … Banks are, by nature, evil institutions. You’ll get no argument from me. And, the bigger they are (JP Morgan, BOA, Wells, etc.), the more evil they are.
But, I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.
January 20th, 2010 at 11:40 pm
The point is not about keeping track of their account. It is about the unethical trickery that banks use to hurt people, especially in this economy.
There are many factors that can result in someone not keeping track of their account properly. First though, until 3 months ago, my bank would let my transactions bounce…and that was fine with me. They snuck in the NSF without informing anyone.
Now what factors could effect someone keeping track of their account properly. Stress from various issues: divorce, unemployment, illness, foreclosure, etc. Factors that I am personally dealing with.
Just that person before was wrong for assuming that you were unmarried and had no children, don’t make the same mistake and assume that there are not circumstances that would affect an individual from properly monitoring their account.
God Bless,
GJ
February 3rd, 2010 at 1:36 am
cybercjh: By that logic, They should be allowed to charge $1000 for a $1 overdraft. Where do they/you draw the line?
February 11th, 2010 at 1:00 pm
my problem is Huntington does not give you a choice. They make every one of their customers take overdraft protection. I have overdrafted once in 5yrs since being with them. It was an accident where I got lazy and didn’t keep my book straight. It was $7 over, I recieved a odf for $37.50 that put my total at $44.50. Then recieved a $15 fee for using non huntington atm’s. They charged me that fee which in turn charged me another $37.50. So not I am neg. $97. I didnt know it so didn’t put money into my account. I then recieved a $7 a day extended overdraft fee the day after I went into overdraft. And after a week I recieved a $35 fee for having overdraft for a week. So adding the extra $35 for 7 days of overdraft and $35 for it being a week there was $70 added on top of it all. My account ended up $167 in the negative after a week of over drawing it $7. To me $160 in fees for overdraft of less than $10 is too much and needs taken care of!
February 17th, 2010 at 12:29 pm
US bank is the same way they will sit on your deposit , but u can bet the when you use your debeit card they come out not more than minute later i timed them 1 time. US bank is very good at shuffling around with draws..i cant wait untill june
February 22nd, 2010 at 12:14 am
When we banked through US Bank they hold CASH deposits for several days then do the scam of processing the highest deduction first so a few times we got burned pretty bad because they didn’t process our deposit until they pretty much emptied our checking. They also held a few check payments longer than normal and burned us that way. We no longer bank with US Bank for that very reason. There were several other shady practices that they did to steal our money. Sure if I overspend I deserve to be penalized but not because of your shady policies.
March 8th, 2010 at 10:19 pm
If you are not wanting to see more bank control, you either work for a bank or have no experience with them. I have owned and run my business for 26 years now and can tell you, there is nothing good about a bank, we will be working to get away from them as soon as possible. We never make mistakes but are constantly robbed, overdaft fee’s and the banks are never on you side. They simpy have a license to steal, and help otherss steal from you, you are simply a fool they prey upon. Wise up … we did! Next time someone looses a check or says they didn’t receive it, look at the stop payment rules and overdraft fee’s, try to get the bank to defend your money from scammers and cons, they make tons of dough, just leeting folks get at your money. How can they loose? and how cna you win. Only way to win is not to play.
March 9th, 2010 at 9:21 pm
In response to: “But, I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.”
I’m sorry but you are incorrect. BOA does not keep track of your spending at all if you have $100 and spend $20 and $30 that by debit card that day your account says you have $50 at the end of the day but then the next day BOA says you have $100 available balance because the pending debit card transactions from the day before drop off. Then say today you spend $80 in cash withdrawral because you thought you had $100 in your account. Then spend nothing for 3 days but then 3-5 days later those $20 and $30 transaction hit the account the $30 one 1st even though it was the second transaction in the day now you have 2 overdraft fees 1. beacuse the bank did not displaqy you available balance properly as the pending charge by law are supposed to remain pending on your account for at least 3 days making the available balance remain at $50 the day after up until 3 days later and 2. the charge you because they re-orgered a transaction to make you overdraft.
Now in this simple example you should beable to remember you made 2 tranasaction yesterday for $50 total but when you make 5-10 swipes of you card every day for small amounts you expect the back to keep a proper leger balance (what has cleared) and a proper available balance that takes into account all the pending transactions as well as the ones that have cleared except for the checks you have written that havent posted yet as obviously the bank does not know you have written them.
March 10th, 2010 at 10:21 am
I stand by my statement. When you don’t spend more than what is in your account, the order in which banks process transactions, the amount of their insufficient funds fees and their overdraft protection policies are completely irrelevant.
It’s not up to the bank to tell you how much is in your account. It is your responsibility as a customer to keep a ledger showing you how much is in your account and to not spend more than that.
Some transactions take a day to post. Some take 2. Some take 3. Some take longer. So, what the bank reports as your ‘available balance’ is the money they know you’ve already spent. If a transaction you made 2 days ago hasn’t posted to the bank yet, then they don’t know about it.
People interpreted the introduction of online banking as their ticket to slack off and stop keeping their own register. Well, they do so at their own peril.
If you have $100 in your checking account and you spend $101, you will be charged NSF fees. If you have $100 in your checking account and spend $100 or less, you will not. It’s really just as simple as that.
People need to start taking responsibility for their own finances.
Waaahhhhhhhhhhhhhhhhh … I spent more money than I really had, now the bank charged me a fee. Waaahhhhhhhhhhhhhhhhhh. G. M. A. F. B.