Overdraft Fees A Windfall For Banks

Sep 21, 09 Overdraft Fees A Windfall For Banks
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With the recession in full swing, many banks have tried to squeeze every cent from their patrons.  By allowing people to exceed their balances and then charge them a substantial overdraft fee for each transaction, banks have implemented a scheme that has harmed many consumers.  Overdraft “protection” is really a racket that allows banks to make billions of dollars in additional fees.

Financial analysts forecast that banks will make over $27 billion dollars in overdraft fees in 2009.  While every consumer should be financially responsible, the banks are well aware that their system is unduly harming many consumers.  Some of the largest banks will not even allow their customers to opt out withdrawal protection.

With mounting pressure from consumer advocacy groups and members of Congress, a battle is brewing between us and the banks.  The conclusion is far from foregone.

Their defense is hackneyed.  Many financial analysts, economists, and bank executives argue that overdraft fees are one of the few things that are keeping teetering banks from failing completely.

The statistics are harrowing.  Approximately 45% of banks and credit unions make more money from overdraft fees than they do in profit.  The banks insist that without the overdraft fees they would have to find other ways to make money, such as charging a monthly fee for checking accounts.

According to the analysts in the credit industry, overdraft fees actually cost more than credit cards.  Credit cards can charge 30% interest at most.  Adjusted, overdraft fees are hundreds of times more than that.  As with the Credit Card Act of 2009, consumers and conscientious politicians have a chance to reel in banks that have a reckless disregard for their own customers.

Extra overdraft fees can cripple a family’s or individual’s budget, especially when banks intentionally delay deposits among many other nefarious tricks in order to trigger overdraft charges.  The battle is coming.  We have a real chance to influence the outcome and affect change that will benefit everyone.

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2 Comments

  1. jennifer /

    I agree.

    Overdraft fees are schemes. I’ve been charged twice now that I’ve been with Chase Bank. I like Chase. I appreciate that the bank allows transactions to go through if the amount is more than my balance, but $33 is charged when that happens. yikes!

    On the other hand, I have to take much responsibility for not calculating how much is in there.

    Great reminder, Londo.

  2. That’s outrageous. Imagine paying $33.75 for a pack of gum or $34.25 for a soda. I think that initially the banks instituted the protection to help consumers and then it morphed into the greedy racket that it is now.

    But you’re right, personal responsibility plays a role in everything.

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