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Bank Fees and your money: Changes in the future

Have you ever encountered an overdraft fee at your bank?  Did your $3 latte or $5 Big Mac Meal turn into a $30 disaster?  Well, hopefully that will change soon.  Along with all of the new economic legislation coming from the Obama administration - bank fees are also being addressed.

The Center for Responsible Lending released a new report on Tuesday that stated overdraft bank fees grew 35% from 2006 to 2008.  In addition to that, over 50 million Americans overdrew their checking account at least once and 54% of those incurred 5 or more overdraft fees.  Many banks have started responding to this situation, but some in Congress feel their intended changes are not good enough.

Beginning October 19, 2009, Bank of America will reduce the cap on overdraft fees to 4, where the cap is currently 10.  JP Morgan Chase will begin processing and clearing expenses in time order, instead of biggest to smallest which can reduce funds faster and cause additional fees.  Other banks are completely eliminating fees for customers with overdrawn balances of only $5 or $10.  Other banks with pending changes include BB&T, City National, Fifth-Third Bancorp, PNC, Regions Financial, US Bancorp, and Wells Fargo.

Rep. Carolyn Maloney (D-NY) has introduced a bill that has four-fold implications for banks to help protect consumer interests.  First, this bill would require all banks to allow customers to agree to participate in overdraft protection.  Currently, most banks automatically register customers with the opt-in status, which means they may cover your transaction but charge you an overdraft fee if the funds are unavailable.  With this new bill, all customers would have to opt-in for the banks to approve transactions and charge fees.

Second, this bill would also require banks to notify customers if they are on the verge of being overdrawn, so the decision lies in the customers' hands.  This moves the decision from the bank to customer, and may make people think twice about that $30 latte!

Third, this bill would require transactions to be cleared in chronological order as opposed to largest to smallest.  If you have ever been in the situation where your 1pm deposit was cleared after your groceries and utilities cleared (and incurred overdraft fees), this will help you tremendously!

Fourth, the bill would require increased accuracy in available balance reporting.  Some banks show available balances that include overdraft protection, which gives a distorted view of the truth.  Additionally, some pending transactions are reflected and some or not.  This would enforce more consistency and would help consumers as they manage their funds throughout the month.

Considering all of the changes that are coming from the banks and from legislation, this does not relieve you of the responsibility of managing your finances.  If you are struggling with making your money work for you (instead of you working for your money) check us out for the Personal Finance Seminar - Budgeting and Your Money: Maintaining in a Tough Economy.  This will be an informative session that will give you tools to take back your financial life.  If you are unable to attend contact us for a free consultation.

Until then, please leave comments on your interesting, challenging, or amusing bank fee encounters!

Comments

  • AyanaRED 5 years ago

    I have overdrafted my account a couple of times, in the past. Fortunately, I was able to sweet talk the bank rep into removing the fees. If I was unsuccessful in my persuading efforts, however, I would think twice about changing banks.

    I think that gov't should not get involved in stuff like this. As long as the bank is transparent about its fees, they should be able to charge whatever they wish. If the consumer doesn't like it, he or she is free to bank with another institution.

  • AyanaRED 5 years ago

    I have overdrafted my account a couple of times, in the past. Fortunately, I was able to sweet talk the bank rep into removing the fees. If I was unsuccessful in my persuading efforts, however, I would think twice about changing banks.

    I think that gov't should not get involved in stuff like this. As long as the bank is transparent about its fees, they should be able to charge whatever they wish. If the consumer doesn't like it, he or she is free to bank with another institution.

  • Melissa 5 years ago

    Great points Ayana! The only problem is some banks are not transparent about their fees. Some banks automatically enroll customers in their overdraft program without their knowledge. This allows customers to make the decision rather than the bank deciding for them.

    As far as the political side, I'll stay out of that one!