Big Banks Made $6.4B Off These Easy-to-Avoid Fees — Here’s How to End it
Everyone’s checked their bank account at least once to gape in wonder, “What the heck is THAT fee?”
But no, really, it’s everyone. The big banks are collecting so much from our overdraft and ATM fees that it equates to at least $25 collected from every adult American, according to an analysis by CNNMoney .
In fact, the three big banks — JPMorgan Chase & Co., Bank of America and Wells Fargo — bogarted $300 million more in these fees last year than they did in 2015. The total? $6.4 billion.
Tired of giving the big banks any more of your hard-earned dollars? Stick with us for some tough-love tips.
Not sure if these fees affect you? Check your bank’s fee for tapping another bank’s ATM. Between your bank and the ATM’s “non-customer withdrawal fee,” we’re all paying about $4.50 for the privilege of grabbing cash on the way to dinner with friends who like to split the bill down to the dime.
What about overdraft fees? Last year, JPMorgan made almost $2 billion (billion!) from overdraft fees alone, with Bank of America and Wells Fargo close on its heels.
Banks have only been required to spell out their overdraft fee revenue since 2015 .
A typical bank overdraft fee to cover insufficient funds is about $35 , which can multiply each day the checking account stays below zero.
Younger people — perhaps because we expect up-to-the-minute bank balance information that’s not always available — are 133% more likely to pay an overdraft fee than a 65-year-old, according to Lisa Servon’s book The Unbanking of America .
Servon also notes that about 11% of consumers ages 18 to 25 incur more than 10 overdraft fees per year.
This isn’t a few dollars here and there we’re concerned about. It easily adds up to hundreds.
Tired of ATM fees creeping on you? A couple steps you can take:
- Start planning regular trips to an in-network ATM or branch. If you have a little bit of cash all the time, you can probably avoid most of your “oh, crap” ATM runs.
What about your overdraft fees ?
You may not realize it, but overdraft protection is supposed to be an opt-in feature. Don’t remember ever signing up for this “benefit”? Visit your bank or log in online to opt out of overdraft protection . Opting out means your card will simply be declined when your account has insufficient funds.
Then, get hypervigilant about your checking balance . Download your bank’s smartphone app, or make logging in every day a regular habit.
Realize that incoming deposits may take a day or two to hit your account — yes, even direct deposits you expect on a regular basis — and that debit transactions will vanish from your balance almost immediately.
You’ve heard the phrase “ protect your heart ”? Start protecting your cash.
Your Turn: Have you gotten dinged with outrageous overdraft or ATM fees? How did you stop the cash bleed?
Lisa Rowan is a writer and producer at The Penny Hoarder who suffered more overdraft fees in her early 20s than she would like to admit.
Presenting How Wells Fargo Nickel And Dimes Clients To (Account) Death
Despite the recent humiliating defeat for the TBTF bank proposal to establish debit fees, the bailed out banks are still somehow supposed to make money now that their prop trading desks can no longer mimic hedge funds and trade ahead of flow or on "expert network" inside information (and old school revenue generation like advisory and underwriting is just too much work). So what do they do? Why nickel and dime clients to death. As the following interactive graphic from the Pew Trust demonstrates, in a recent example where it was caught red-handed, Wells Fargo literally tried to nickel and dime a client (who subsequently sued) to death, by shifting the order of debit transactions in a way that maximized the penalty fee, ignoring the actual chronological order. In other words, banks have a "malicious" algorithm designed to maximize client pain, while ignoring actual sequence of events. The net result an overdraft balance that is 4 times higher than what it would have been if proper temporal sequence had been followed. And that is why banks are desperate to pickpocket their clients: because once news of such practices is made public, everyone should pull their money. That they still don't is quite incomprehensible.
The Transaction Infraction graphic demonstrates how banks can post debits and withdrawals in non-chronological order – a practice that can greatly impact the number of overdraft fees charged to a customer. Pew is encouraging an end to this practice and for banks to post transactions in a fully disclosed, objective and neutral manner that does not maximize overdraft fees.
To interact with this tool, the user should compare the customer’s order to how the bank processed them by toggling between the two tabs.
The actual example of chronological vs Well Fargo's sequence of events is presented below. Raping clients or self defense against an evil environment that no longer allows money to grow on trees? You decide.
New Bank Overdraft Fee Laws For Your Debit Cards & Checking Accounts
As of August 15th, 2010, there are new laws in place regarding overdraft fees from your bank. Up until that date, many banks and credit unions automatically enrolled customers in an overdraft service that could run as much as $35 each time you over-drafted your account. This service was there (in addition to padding the bank’s bottom line) to “protect you” from having your card declined due to having insufficient funds in your account. Granted, if they had just left the $35 IN the account, maybe you wouldn’t have gone over the limit, but still – this was an automatic enrollment and not something you could opt out of. Well, that all changed on August 15th, when the overdraft section of the financial legislation overhaul went into effect.
An overdraft fee is a financial penalty that the bank takes from you when you try to spend more money than you currently have available in your account. Ranging from $20-$35 or so, banks have been making a fortune off this fee for many, many years, without you having a choice if you wanted to pay it. Overdraft your account, they take the fee. Period, the end. But now you can opt-out of the fee, and your card(s) will just be declined if you do not have enough money to cover the purchase. I really appreciate this new rule, because I think it encourages people to be more diligent in knowing the balance of their accounts and just how much they can spend. By opting out of this service, it’s almost like using cash to buy things with, in that you have to actually have the money to spend it! (True, this is for debit or ATM cards only, and I will touch on using credit cards instead a little later) So what can you expect from your bank now that the rules have gone into place?
The new Federal Reserve rules state that your bank and/or credit union, (or any financial institution you may deal with) has to send you an explanation of how their overdraft rules can apply to your account. This is for all debit and/or ATM cards that you have at your bank of choice. You now have a choice to enroll in their overdraft service or not, and you will be marked as opting out if you do not specifically opt in and agree to their rules. If you do opt in and agree to pay for the overdraft service, you can still change your mind and cancel at any time in the future. You may also do the opposite – opt out now and opt in later. (But I say you stay opted out) These new rules do not necessarily apply, however, to writing checks and/or any bills you have automatically paid out of your account. Banks may still charge you overdraft fees on these transactions, and it’s up to you to make sure you have enough in the account to cover those type of drafts.
Anything to reign in the absurd profits that banks have been making off people is good news in my book. Yes, they need to make money, otherwise they don’t have any money to lend out to borrowers like you and I. But there is a difference between making a profit and just gouging your customers – and thus I like this new rule. Personally, I have never overdrafted my checking account for anything, so I would never have needed this service on my account and have never paid the fee. But if you run that risk on occasion, a better alternative to the bank fees would be to use your credit card for purchases and pay off any balance at the end of each month. I rarely, if ever, use my ATM card for buying anything. I always use my rewards credit card so that I have protection against fraudulent activity and my checking account doesn’t get cleaned out. And to make sure I always pay off my card each month, I make 4 monthly payments every Monday that equal an approximation of my monthly expenditures and automatic payments to bills. So if my monthly credit card bill is $500, I send $125 every Monday to the credit card company. This makes the balance easier to pay every month and assures me that my balance is always paid off. So while the new Federal Reserve rules can help you avoid overdraft charges, there are also other ways to keep annoying fees from raiding your bank accounts!