Despite bank customer satisfaction being higher, banks are being sued more frequently for ATM fee policies. Image from Wikimedia Commons.

Bank fees, specifically ATM fees charged to out-of-network debit card holders, infuriate many consumers. An increasing number of lawsuits have been initiated nationwide based on an obscure law regarding ATM fee disclosure.

Banks facing 30 lawsuits over bank fees in Michigan

There are more than 30 lawsuits over fees at automated teller machines facing various banks in the state of Michigan. All of the suits concern fee disclosure laws, according to USA Today. There are similar suits pending in numerous states, but there are the most in Michigan because of a couple of pesky retirees. Nancy Kinder and Ray Harrison of Fowlerville, Mich., have sued numerous banks because they found that they do not disclose bank fees in the manner specified in the Electronic Funds Transfer Act. Kinder and Harrison filed five of the suits in one day. They have, according to the Chicago Tribune, sued 36 banks in the last two years, accusing them of violations of federal law.

Nuisance lawsuits

Kinder and Harrison actively search for banks that aren’t in compliance with federal law regarding how ATM fees are advertised. When they find a violator, they make an ATM withdrawal and take pictures of the screen during the transaction along with the disclosing signage. Once the evidence is gathered, they file a lawsuit against the offending bank. Banks must have a sign disclosing the fees; a notice on the screen isn’t enough.

Customers more satisfied with their banks

A consumer survey by J.D. Power and Associates found that consumers are happier with their banking experience compared to three years ago, according to CNN. On J.D. Power’s 1,000 point scale, customer satisfaction rated a 752 for banking, four points higher than last year and the first time the approval rating has moved up since 2007. Bank fees and credit card fees have been getting a lot of attention recently for being raised at nearly every opportunity. However, only 18 percent of those in the survey had their fee structure changed in the last year, and only 43 percent recalled being charged a fee by their banks. That changed from last year, when the same survey revealed 53 percent of bank customers surveyed had been charged a fee by their bank.

Sources

USA Today

Chicago Tribune

CNN

Consumers fed up with bailouts, bonuses and bogus fees are switching to local banks and credit unions by the millions. Image: CC bk1bennett/Flickr

Wall Street banks watched their customers jump ship by the millions in 2010. Community banks and credit unions have watched their clientele grow as consumers disgusted with bailouts, big bonuses and deceptive fees move their money. A driving force behind the movement is the “Move Your Money” project, a campaign that assists consumers who want to divest from Wall Street and invest in local financial institutions.

Big bank defections a growing trend

Wall Street banks, in a game of cat and mouse with regulators, are devising creative new ways to gouge consumers as traditionally abusive practices are outlawed by financial reform. Big banks bet that their customers are too lazy, busy or negligent to notice they are getting nickeled and dimed into giving up dollars. For example, many banks that can no longer charge usurious overdraft fees have discontinued free checking. Carly Fried at MoneyWatch reports that in a recent presentation to shareholders, a Chase executive boasted of making about $1 billion simply by converting 8 million free checking accounts into a revenue stream generating $10 to $12 in monthly fees. But that windfall could be short-lived. The largest banks lost more than 4 million accounts last year. According to the research firm Moebs Services, 7 million to 9 million more accounts could move to community banks and credit unions in 2011.

The Move Your Money campaign

Consumers who question the new checking account fees are often told by their banks that the government forced it to take such action. What they should know is that 65 percent of banks in the U.S. still offer free checking despite the Dodd-Frank bill. The easiest way to find those financial institutions is at moveyourmoneyproject.org. Move Your Money is a campaign organized by Arianna Huffington. The Move Your Money website search tool locates the closest local community banks and credit unions simply by typing in a zip code. After Huffington appeared on CNN to promote the website in January last year, 80,000 people used it to find a local financial institution. In the past year moveyourmoneyproject.org has been getting up to 45,000 page views a day.

Closing a bank account

For consumers thinking about moving their money, closing a bank account should be done carefully. Open an account at your new financial institution first, then make sure all your checks have cleared. Physically go to your bank to close your accounts, but call before you leave to learn about its policies about closing accounts. Some banks will try to ding you one last time with a hefty fee. Be sure to go before 3 p.m. on a weekday so the staff has plenty of time to complete your request. Bring two forms of identification, including a photo I.D. Don’t leave without the balance of your accounts. If the bank can transfer the funds electronically, have it do so. If not, take the money with a cashier’s check or cash.

Sources

Huffington Post

Christian Science Monitor

CBS MoneyWatch

ehow.com

If you use one of these, you're paying an "invisible tax," says Richard Eskow. (Photo Credit: CC BY/MoneyBlogNewz)

JPMorgan Chase CEO Jamie Dimon claims that consumers should start paying for the privilege of using their debit cards, but the truth is that consumers have been paying a premium to use debit for years, argues public policy consultant Richard Eskow in a March 24 Huffington Post column. Eskow states that U.S. consumers pay $48 billion each year to use their debit cards, thanks to the increased prices retailers are forced to charge consumers to offset interchange fees charged by card-issuing banks. It’s a kind of “invisible tax” that big banks collect with no real costs or risk involved.

Debit card fees are getting carried away

The “invisible tax” Eskow speaks of amounts to a kind of sales tax of 1 percent to 2 percent on everything consumers buy with a debit card. This is a tax that hits consumers through higher prices at the register, as retailers must charge more to compensate for the interchange fees debit card-issuing banks charge retailers for accepting debit card payments. On average, retailers pay card-issuing banks 75 cents for every $100 consumers purchases. This amounts to a lot of money in the long run — and most consumers have no idea that it’s happening.

“You never got to vote on it, never heard a debate about it and may not have even known it existed before it came up in the debate over bank reform,” writes Eskow.

Interchange fees go straight to the same “too big to fail” banks that taxpayers have already fed with bailout dollars. As Eskow puts it, the debit card business is “an oligopoly-driven, secretive, usurious system that shafts American consumers along with the small businesses that are the engines of jobs and growth.” And big banks – which had 383 million Visa and 125 million MasterCard debit cards in consumer hands in 2010 – wouldn’t have it any other way.

More covert than credit card fees

Retailers use a number of tactics to encourage consumers to use credit cards rather than debit cards. Some charge an additional fee to use debit or automated card swipe systems may default to credit. Regardless, if consumers have the money to cover a purchase, they will typically use their debit cards, as it does not result in revolving debt with interest. The heightened risk of credit card default makes debit cards more of a popular item with banks than credit cards, too. The public doesn’t deal with interchange fees up front, so the concept is rarely discussed.

Dodd-Frank and the $5 ATM fee

The Dodd-Frank Wall Street Reform Act bears a provision by Democratic Sen. Dick Durbin of Illinois that limits the interchange fees banks can charge retailers. As banks have projected this will cause them to lose $14 billion in revenue (less than the $20 billion the industry gives out in annual executive bonuses), major players like JPMorgan Chase are contemplating $5 non-customer ATM use fees. Don’t be surprised if the money-making idea catches on like financial wildfire across the banking industry.

Sources

Huffington Post
New York Times
U.S. Public Interest Research Groups

GOP questions interchange fees

Next in the backlash from banks in the battle over interchange fees is the loss of debit card rewards, which JP Mortgan Chase is already dropping. Image from Wikimedia Commons.

The next customer perk to go on the chopping block at the nation’s largest banks is debit card rewards. JP Morgan Chase stopped offering debit card rewards to customers in February, and will stop giving rewards to debit card swiping customers entirely in July. The program was closed due to the ongoing battle over the pending cap on interchange fees.

Banks contend they will be brought low with interchange fee cap

The possible cap on interchange fees, or the fees banks charge merchants to transmit payment from debit purchases, has caused the nation’s largest banks to start curtailing customer rewards and incentives, such as free checking. The next casualty of the interchange fee battle is likely to be debit card rewards, according to Bloomberg. Leading the charge in cutting back on rewards for customers is JP Morgan Chase, which stopped offering enrollment into the debit card rewards program to new customers in February. Chase will stop offering rewards altogether on July 19, though any reward points that have been accrued by that point will still be honored. Consumers may eventually need same day loans to use their own money.

Fees at ATM locations going up as well

Another response to financial reform laws has been to raise fees for using automatic teller machines out of a bank’s network, according to MSNBC. JP Morgan Chase, the second largest bank in America, is currently testing $4 and $5 fees for customers who use Chase machines that aren’t Chase customers. The program is testing $4 fees in Texas and $5 fees in Illinois. All other states will retain the $3 fee for non-Chase customers, which is above the $2.33 national average. Chase customers will still pay only $2 per transaction at non-Chase ATMs, which is also above the $1.41 national average. Chase has the second largest ATM network in the nation. TD Bank and Citi bank are following suit, and Wells Fargo and Bank of America are likely to not be far behind. The idea of Chase, Bank of America and Wells Fargo having to run for installment loans because legislation prevents them from gouging customers is not likely to cause many people discomfort, but there is a catch.

Credit unions would also suffer

Merchants are charged interchange fees by for-profit banks and non-profit credit unions alike, according to Forbes, and that is why credit union trade groups such as the National Association of Federal Credit Unions, oppose the Durbin Amendment to the Dodd Frank Act. Credit unions and community banks are not as easily equipped to absorb the loss of revenue from interchange fees, which will be lowered to 12 cents per transaction from the current average of 44 under the current proposal by the Federal Reserve. Currently, bills are being introduced into the House of Representatives and Senate which would delay the Durbin Amendment from taking effect for two years, in order to study the possible fallout.

Sources

Bloomberg

MSNBC

Forbes

When it comes to ATM fees, JP Morgan Chase is setting the bar higher. (Photo Credit: CC BY-SA/Thomas Belknap/Flickr)

ATM fees are an unfortunate fact of life for out-of-network banking customers. Now ATM fees are on the rise, as banks look to recapture the overdraft fee money lost to the Dodd-Frank Wall Street Reform Act. According to the Huffington Post, all JP Morgan Chase customers could face $5 ATM fees very soon.

Chase ATM fee in Texas, Illinois

Banking giant JP Morgan Chase has begun charging non-customers in Illinois $5 to use a company ATM. In Texas, it’s $4. If Chase’s ATM fee increases produce enough revenue, the company has told the Wall Street Journal that the increases will go global, sending even more customers in search of short term loans because they’ve been charged an exorbitant amount to access their own funds.

According to Bankrate.com senior financial analyst Greg McBride, Chase’s $5 ATM fee is just the latest in a wave of changes sweeping the banking industry. As banks expect to lose billions of dollars in revenue once Dodd-Frank provisions involving overdraft and other fees fall into place, the “too big to fail” financial monoliths are passing the inconvenience on to customers.

“The reality is that bank revenue is being squeezed by regulatory changes and the banks are going to be accounting for that in other areas,” said McBride.

Maintaining ATM networks is another expense cited by banks, as building and maintenance aren’t cheap. However, a Wall Street Journal study found that most of the 425,000 ATMs in the U.S. aren’t even owned by banks.

What’s going on behind the curtain

Consumer advocates believe that big banks are making noise about allegedly being forced to charge non-customers $5 at the ATM in order to drum up sentiment against the Dodd-Frank act, and consumer-oriented financial reforms in general. A lawmaker may hear this and be swayed. A consumer, on the other hand, may be too busy tracking down a short term loan to make up for the higher ATM fees to care about a bank’s problems.

The reality of the matter, according to consulting firm Oliver Wyman, is that banks generated $7.1 billion in total revenue from ATM fees in 2010. Of that chunk, $3 billion came specifically from banks charging their own customers for using another bank’s ATM, reports the Wall Street Journal. Non-customer ATM fees may only have accounted for 1 to 2 percent of total pre-tax operating profit for banks, but that’s still billions of dollars that the banks are scrambling to replace.

More customer restrictions

Chase’s $5 ATM fee is yet another prohibitive mark against the bank in the span of a week, as it is also considering a $50 cap on debit card transactions. Still, low to no monthly fee ATM and debit cards are a selling point for banks. Higher ATM fees are hidden in the fine print.

“It’s easy to compare debit cards by looking at the monthly fee, so banks are going to try to minimize the monthly fees and load you with (ATM transaction) fees,” said CardHub.com CEO Odysseas Papadimitriou.

Sources

The Atlantic

Huffington Post

Wall Street Journal

Don’t forget the high-to-low processing

JP Morgan Chase could see a mass customer exodus if a debit card transaction cap is instituted. (Photo Credit: CC BY/MoneyBlogNewz/Flickr)

Customers of JP Morgan Chase may have additional restrictions placed upon their debit card usage soon. The third-largest bank in the U.S. may cap debit card transactions to $50 or $100 at a time, even if the card is run as credit, says an anonymous insider. Blame it on the rising interchange fees banks charge retailers per transaction, reports Chicago Breaking Business.

Interchange fees: Why retailers demand minimum debit transactions

On average, banks charge retailers 44 cents for every debit card transaction, as an interchange fee that the bank shares with its financial partners. Federal Reserve data indicates that interchange fees from retail debit card transactions amounted to $16 billion in 2009. Wall Street reforms introduced by the Obama administration will curb the amount of such fees. Interchange fees may be capped at only 12 cents per debit card transaction, beginning July 2011.

Passing the expense on to customers

JP Morgan Chase and other banks aren’t enamored with this. Chase estimates it would cost over $1 billion per year. Joe Price, president of consumer banking at Bank of America, said that a 12-cent cap would not fairly compensate the bank for infrastructure costs. Banks would increase consumer costs for debit cards and other services to compensate.

One innovative way Chase would recoup costs is to charge customers $3 monthly for having a debit card, and $15 more each month to maintain checking accounts. Match this with Chase’s defunct debt card rewards program and customers are left out in the cold.

Hate ATM fees? Avoid them!

There are a number of ways that banking customers can avoid excessive debit card/ATM fees. CBS Moneywatch and Personal Money Market have some ideas that consumers try as many of the following as possible to beat the bank.

Open a brokerage checking account

Brokerage checking accounts are generally high-yield. Not only that, but accounts at some brokerage houses rebate customer debit card transaction fees at the end of the month if a separate brokerage account is maintained.

Try online banking and apps

Consider online banking. Some charge no ATM fees at all, while others will completely reimburse customers for a limited number of out-of-network ATM fees each month. Keep in mind that maintaining a minimum balance in the account is often required at online banks.

Remember that there are also numerous free iPhone and Android applications that make finding an in-network ATM a snap. Who wants to pay $3 every time cash is needed?

Get cash back at the store

When the option is available, try to use your debit card for cash back when you make purchases. There is typically no transaction fee involved, although the amount of cash you can withdraw may top out at around $60.

Need same day loans?

Sometimes, what a consumer has in the bank isn’t enough, particularly during an emergency. Same day loans and installment loans can be had for a relatively modest fee, and they won’t drag a checking account into overdraft.

Sources:

CBS Moneywatch

Chicago Breaking Business

Get hungry for a new bank

Bank of America has unveiled a pilot program that grants customers greater choice between checking account types, and associated bank fees. Photo Credit: MoneyBlogNewz/Flickr/CC-BY

Bank of America has unveiled a new pilot program that gives members of the bank more choices regarding their checking accounts. The bank is offering new customers in select areas choices between checking accounts with varying structures of bank fees. Bank of America and other large national banks have been steadily raising fees.

New pilot program lets customers choose banking fees

A new pilot program by Bank of America allows customers to choose from several different checking account plans; this allows greater choice regarding which account fees they prefer to potentially face, according to ABC. The largest national banks have come under criticism for charging excessive banking fees, and now Bank of America, JP Morgan Chase, Wells Fargo and others have rolled out new programs for checking accounts to make fees more transparent. The new B of A checking account programs are being offered in Georgia, Arizona and Massachusetts.

Monthly fees vary by account type

Bank of America is offering five checking account options, and fees range from $6 to $25 per month. The account types include:

• Essentials: Simple checking account with a debit card. The monthly account fee is $8.95, but the fee is waived if a customer receives monthly direct deposits or maintains a minimum account balance of $1,500.
• eBanking: Also simple checking. However, customers can waive most fees altogether by banking entirely online or through an ATM and electing to receive electronic statements instead of paper. However, overdraft, non-sufficient funds and ATM fees will still likely apply.

Account options with greater amenities are geared toward wealthier account holders.

• Enhanced: Account fees are waived if customer has a minimum balance of $2,000 in one account or $5,000 across linked accounts. The Enhanced account offers two linked checking and two savings or money market accounts. Enhanced account holders can also have fees waived with monthly use of linked credit cards.
• Premium: Fees are waived with a minimum balance of $20,000 across linked accounts, certain Merill Lynch investment accounts or a mortgage through Bank of America. This account offers services such as cashier’s checks and money orders for free.
• Platinum Privileges: Customers must have a minimum account balance of $50,000 in order to be eligible for these perks: Personalized customer service, a Privileges credit card, special rates on mortgages and money market accounts.

Bank fees on the rise

As the federal government has increased regulatory pressure on banks to curtail deceptive fee practices, account fees have been steadily rising at the nation’s largest banks. B of A, Chase and Wells Fargo are trying to make up for revenues lost when the Dodd-Frank Act curtailed fee practices that weren’t made clear to customers, e.g. enrolling checking account holders in costly overdraft protection programs without notifying them.

Source

ABC

The nation's largest banks may start limiting debit card usage, as legislators are targeting usurious bank fees. Image from Wikimedia Commons.

The largest banks in the nation may institute limits on how often debit cards can be used by account holders. Large banks are said to be hurting from laws which limit how much can be charged to retailers by banks when customers of those banks swipe their debit cards. Various acts of legislation have been aimed at curbing fees paid demanded by banks.

Cap on fees charged to retailers could prompt backlash

A law passed last year will cap the fees banks charge retailers when customers make purchases with debit cards. When a person pays for something with a debit card, the merchant is charged a fee by the bank that the customer belongs too, called an interchange fee. Last fall, the Durbin Amendment of the Dodd Frank Act gave the Federal Reserve powers to place limits on the fees that banks charge to retailers, according to ABC. The Fed proposed that fees be limited to 12 cents per transaction. The current rate is about 63 cents per transaction, though it isn’t likely that any of the largest banks in the nation will have to run for a cash advance to cover losses anytime soon.

Possible curb on debit purchases

It is rumored that the largest banks in the nation may begin imposing a limit on how many purchases people can make with their debit cards, or how large a purchase made with debit may be. The limit could be set as low as $50 to $100 in order to restrict customer use of debit cards, and thus not lose too much revenue. Interchange fees currently make up about $80 billion in revenue for the banking industry. Vikram Pandit, CEO of Citigroup, maintains that the fee caps will restrict available credit for banks and loan lenders, according to Bloomberg.

Trend of rising fees

The nation’s largest banks have been raising fees and cutting programs such as free checking for months, as an overall trend has been emerging of commercial banking trying to extract more revenue from customers. However, people can avoid dramatic fee increases by banking with community banks and credit unions. Just about every city in America, from Scottsdale to Birmingham, has a credit union or two open to just about anyone.

Sources

ABC

Bloomberg

People are going to have to pay advance cash to banks more often to use their checking accounts. Image from Wikimedia Commons.

People who bank with the nation’s largest banks are going to have to start paying advance cash for having a checking account. Free checking accounts are all but gone at major banks, now that U.S. Bank is rumored to be jumping on the account fee bandwagon. Increasing bank fees are a trend unlikely to cease.

Banks charging advance cash

Free checking accounts, from the customer’s standpoint, were far preferable to checking accounts with fees. It used to be an account holder simply had to pay for blank checks, they didn’t have to pay the bank advance cash to keep the account open for another month. Account holders at the nation’s largest banks can bid goodbye to those days, as free checking accounts are becoming a thing of the past. Bank of America, Wells Fargo and JP Morgan Chase all introduced new fees on checking accounts, and U.S. Bank is likely going to hop on the bandwagon, according to CNN. More people can expect to have to part with some instant cash to use their own money.

Get around fees

Avoiding bank fees is one of the more common reasons people take out a payday loan, but there are other ways around bank fees as well. Consumers should check with their banks to find out what loopholes they might be able to use to get around fees. For instance, check to see if a minimum balance can get any maintenance fees waived and whether monthly direct deposits can get fees waived. Some banks will waive account fees after a minimum number of purchases with a debit card.

Free checking will not die

Just because major banks are instituting fees does not mean free checking is going extinct. For instance, many community banks and credit unions offer free checking accounts and lower fees than major banks. Fees at those institutions go back into the community, not toward funding an executive ski chalet in Scottsdale, Arizona.

Source

CNN

Major banks are starting to demand more cash be advanced to them simply for having an account with them. Photo Credit: MoneyBlogNews/Flickr/CC-BY

Major banks are all starting to require some cash advanced by checking account holders just for the pleasure of banking with the company. Fees for checking accounts are being raised at most major banks, but there are ways of getting around them. People using their own money are having to pay more for it.

Banks want cash advanced just for banking with them

Part of the marketability of the nation’s largest banks is that they project an image of more security. Banks know this, and now they want some cash advanced to them just for the pleasure of banking with them. The largest national banks are raising fees on checking accounts, according to CNN, and the changes are starting soon. JPMorgan Chase has announced that new checking accounts will automatically be opened under the new Total Checking program, which has a base monthly maintenance fee of $12 a month. Bank of America is instituting fees on checking accounts, from $8.95 to $25 a month, depending on the plan. It appears Corporate America wants people to pay to use their own pay day cash.

Free checking not disappearing

It may seem there aren’t any banks that offer free checking anymore, but nothing could be further from the truth. The majority of credit unions and community banks offer free checking, and because credit unions are nonprofit organizations, an account holder is essentially injecting instant cash into their own community. Credit unions and community banks are in nearly every city, in every state, from Alabama to Arizona, and all points in between.

The same folks who needed bailouts

These are the same people who also received billions in the bailouts. Not only do they want more of our earnings, they want our tax dollars too. Not that these companies are all bad, but it certainly means that more people are going to be excluded.

Source

CNN

The Fed wants to bring swipe fees closer to what it costs banks to process debit card transactions. Image: CC MC2 Honey Nixon/Wikimedia Commons

Capping debit card swipe fees at 12 cents a transaction is part of a proposal submitted by the Federal Reserve on Thursday. The Fed is proposing the swipe fee cap and other curbs on debit card abuse by banks to comply with the financial reform bill. As expected, merchants support the measure and major credit card companies oppose it as they watched their stock take a hit on the news.

The Fed swipe limit proposal

Under the current system of debit card swipe fees, credit card companies charge retailers 1 to 2 percent of the transaction, regardless of the dollar value. The Fed debit card swipe fee proposal also includes giving merchants a choice from at least two independent debit card networks, a move that would create more competition for Visa and Mastercard. The Fed swipe limit proposal was made to comply with a provision of the financial reform bill requiring debit card swipe fees to be “reasonable and proportional” to how much it costs a bank to process electronic transactions. The Fed offered the reasoning that debit card swipe fee limits will force banks to be more cost efficient.

Banks to lose billions in easy money

Swipe fees earned credit card companies about $15 billion in 2009. The Fed swipe fee limit proposal would be a boon for retailers. An analyst at JPMorgan Chase told Bloomberg that banks that issue Visa and Mastercard credit cards could lose 80 to 90 percent of that revenue. According to UBS Investment Research, the 12 cent swipe fee cap will drive down average debit card swipe fees about 75 percent. The Fed said the new debit card swipe fee limits probably won’t translate into lower prices for consumers. But banks looking for ways to make up for their ill-gotten gains could cut back on debit card reward programs and come up with more of the creative ways to gouge consumers they are known for.

Reactions to Fed swipe fee limits

The National Retail Federation said lower costs for merchants could lead to discounts for consumers. The American Bankers Association said the Fed would allow retailers to avoid paying their fare share for the benefits they get from the card payment network. Shortly after the Fed presented the swipe fee proposal Thursday, Visa stock fell 11 percent and Mastercard stock fell 9 percent.

Sources

Washington Post

Bloomberg

Wall Street Journal

Chase wants more instant cash from customers who are audacious enough to be poor and bank with them. Image from Wikimedia Commons.

Chase banking customers will soon start to see more cash going out the door in bank fees. Major banks are raising account fees left and right, as apparently even the biggest banking organizations are hard up for money. Regulations have made covert bank fees harder to institute.

Bank fees rise for least wealthy of Chase customers

JP Morgan Chase is raising the fees on some checking accounts that receive direct deposits that will cost the least wealthy of Chase customers more instant cash for the egregious act of simply banking with one of the nations’ largest banks, according to USA Today. Chase will be assessing a $6 fee on accounts that receive direct deposits if a deposit is less than $500. Say a person gets one $495 direct deposit and a $1,000 deposit of pay day cash into a Chase account every month. That person will end up with a $6 account fee because one of the deposits is less than $1,000 and that person had the audacity to not be rich while banking with JPMorgan Chase. The fees take effect in February of 2011.

Punishment of the poor

The people who will end up getting hit with the fees and having to advance cash to Chase for having an account that receives deposits with them are the most vulnerable. Mostly, it will be retirees and the unemployed. Many people receive unemployment benefits that total less than $500 per check, and about 7 percent of people living off of Social Security benefits receive $500 or less as well. Apparently, if a multi-billion dollar corporation needs money now, the best source for it is people who really do need money now.

Even the largest banks need money

Major banks, such as Chase and Bank of America are thought of as virtuous bastions of capitalism but have begun notoriously raising bank fees in the open as regulations make it harder for them to do so covertly. For instance, a bank cannot automatically enroll a person in overdraft protection without asking them first. Overdraft fees are one of the largest sources of revenue for banking institutions.

Sources

USA Today

Consumers are getting fed up with having to give the bank a cash advance to use their own money. Image from Wikimedia Commons.

Americans are getting fed up with having to give a cash advance to banks to use their own money. In order to get a quick payday out of customers, major banks are stepping up account fees, ATM and overdraft fees. Account holders are not amused.

Anger over giving a cash advance to banks grows

Most American consumers don’t think it’s fair that a person should have to give a money to a bank to use their own payday cash, according to ABC. The Office of the Comptroller estimates that there will be 80,000 or more complaints by consumers about their financial institution by the end of the year. That would make it the highest level of dissatisfaction with banks since consumer dissatisfaction with banks began being monitored 15 years ago. New regulations were passed last year that helped, but it hasn’t stopped banks from trying to find new ways to extract instant cash from their customers.

Frustration over overdrafts

The bulk of consumers’ ire is about overdraft fees. A practice among some large banks is to clear large transactions first. This way, if multiple overdrafts occur due to a few small purchases, those fees stack up.  Say a person pays their power bill, buys a pack of gum, a coffee and a sandwich over the course of one day with their debit card, but only has enough money to cover the power bill. The bank will clear the largest purchase first. That way, the smaller purchases made when the account was in overdraft can all result in the most fees possible. This practice makes a lot of quick payday cash for banks.

Interest rate can be astounding

Overdraft fees can be viewed as sort of a loan until payday, as the customer is technically borrowing money and paying a fee for it. That said, a $35 fee on a $1 overdraft, is 3,500 percent in simple interest. That works out to 1,277,500 percent APR.

Sources

ABC

If you're a Social Security recipient with direct deposit, beware the personal loans your bank pushes on you. (Photo Credit: Chordboard/Wikipedia/Public Domain)

Social Security recipients – particularly those who depend entirely on it – don’t need anyone skimming off the top. That’s why there is a plan on the table to eliminate paper Social Security checks entirely. The Wall Street Journal reports that the Treasury Department plans to stop issuing paper Social Security checks by 2013 and distribute monies via direct deposit or prepaid debit cards. The intention is to save taxpayer dollars and make benefits more secure. However, numerous consumer groups are now concerned that those Social Security recipients whose funds are directly deposited into accounts at major banks like U.S. Bancorp, Wells Fargo and Fifth Third Bancorp are being targeted for high cost cash advance-style loans by the same banks.

Bank loans that target low-income seniors, disabled

According to the National Consumer Law Center, these new cash advance-like products are drawn from customers’ Social Security benefits as collateral. These personal loans can be requested from the bank via telephone or online. When the next benefits check comes via direct deposit, the bank takes its cut for the cash advance service. If the loan isn’t paid in full within 35 days, the bank automatically withdraws the amount owed, frequently producing overdraft and a morass of fees.

Making up for lost revenue by siphoning from baby boomers

As the latest Wall Street reform bill approaches law status, banks fear the effect the loss of automatic overdraft loans will have on their bottom line. The National Consumer Law Center believes this may be a big reason why these larger banks are aggressively pushing payday loan products to Social Security recipients. Sources indicate that as much as $700 million in Social Security benefits are taken each year to pay overdraft fees, which draws focus to the magnitude of the issue for America’s monolith banks.

Afraid of what banks will do with your Social Security direct deposit?

The Wall Street Journal recommends the prepaid debit card option for benefit disbursement. Costs are low and the cards are FDIC insured. The card can be used like a standard ATM card for purchases and bill payments.

Sources:

Wall Street Journal

Wikipedia

Social Security and dance lessons – enjoy the rant:

No credit check payday loans critical as credit dries up

In the world of credit and lending, remarks by Federal Reserve Governor Elizabeth Duke have made a lot of headlines. Duke said that bank lending that shriveled during the recession continues to decline. She said it will take years for bank lending to recover from the financial crisis — even though banks, bailed out by the government, are raking in profits once again.

Banks rake in profits while consumers struggle

The ability to get easy instant cash for an emergency has never been more important. Lending by banks contracts further as the financial crisis slowly recovers. ABC News reports that Duke, a former banker, said that in April and May, total loans held by commercial banks shrank at an estimated 7.75 percent rate. She said bankers tell her that anxiety about financial reform and stricter government oversight is holding back lending. Shrinking availability of credit is also due to a weaker demand for credit as consumers, left broke by the recession, don’t spend, and small businesses that can’t get bank loans get hit the hardest.

Banks try, but can’t compete against direct payday lenders

Banks remain coldblooded in their pursuit of profits. As they pull back lending, they try to grab business away from short term lenders. The FDIC started a program called the Small Dollar Loan Pilot Program to do that. But as it turns out, Tom Brown at seekingalpha.com reports that the FDIC’s product fails as a replacement for payday loans. Approval usually takes 24 hours, for instance — sometimes too late to serve the very pressing needs of most payday borrowers. And the lender is required to pull a credit report.

Instant cash when you need it most

All that payday lenders online usually require, by contrast, are ID, checking account info and employment verification. And most important, payday lenders put the money in your bank account immediately. So the payday loan alternative the FDIC has dreamed up misrepresents itself.

The responsible, sensible payday loan solution

Payday lenders are getting targeted by politicians, with encouragement from banks, for providing a valuable financial service, economically. Brown cites this example:

Suppose I’m a cash-strapped consumer and my $100 utility bill is due tomorrow. I can either a) pay the bill late and incur a late fee of, say, $20, b) intentionally write a bad check and be hit with NSF charge of $29 (and break the law, to boot), or c) visit a payday lender and borrow the $100 with a promise to repay $115 next pay period.

What will you do?

Think banks will still love their customers after more stringent overdraft laws are in place? Don't be surprised when more banks simply fire their customers. (Photo: ThinkStock)

Bank overdraft fees have been a thorny issue for consumers who have argued long and hard that a single $.01 in the red transaction should not trigger a $35 penalty plus additional daily penalties. Congress has listened to consumers, and recent financial reforms voted into place will affect just how much banks are able to collect from customers who overdraw their accounts. According to Consumer Reports, losing such a major source of income may prompt banks to “fire” customers.

Banks without their overdraft fees will not go quietly

Instances of overdraft fees are at a 10-year high according to BBC News, and the numbers are similar in the United States. The Federal Reserve recently clarified the changes to come, reports the Kansas City Star, and one look at what’s to come could make a banker sweat like they do when they lose business to no credit check payday loans companies. If they can’t rake in obscene profits from overdraft fees, then banks need to stop the bleeding caused by careless customers. As new customers will by law no longer be automatically enrolled in overdraft protection schemes after July 1 (after August 15 for existing customers), bank income will decrease dramatically.

How dramatically?

The convenience of free checking is made possible by overdraft fees, claims the Boston consulting firm Celent. Their report “Reg, Reg, Go Away: Sorry Banks, They’re Here to Stay” indicates that up to 50 percent of all revenue generated for banks by retail checking accounts comes from overdraft fees. Consumer Reports points out that the new rules governing overdraft fees don’t eliminate fees charged to cover checks or recurring bill payments, but they will crack down on debit card purchases that induce overdraft. Considering that 41 percent of overdraft fees come from debit card transactions, that’s a big chunk of change that banks will lose.

Which leads to the friendly ‘banks fire customers’ policy

Celent advises banks to simply shut down accounts of customers who are simply too expensive to keep. Where that line will be drawn remains to be seen, but all banking customers should take heed and make sure that they have enough money in the bank when they go to make a purchase or payment. Of course, no credit check payday loans and military payday loans will always be an option for those emergency situations were fast cash is necessary. They are much better alternatives than being fired by your bank for overdrafting your account.

Sources:

Consumer Reports

BBC News

Kansas City Star

Related Video:

Will financial reform help the average consumer?

Several issues affecting everyday life are part of the financial reform bill. But what isn’t in the financial reform bill is important, too. Credit, when needed the most, was preserved after debate was rejected on an amendment regulating the pay day loans industry. And other aspects of the financial reform package may make a difference in the financial health of most Americans, including mortgage lending and debit and credit card fees.

Cheap pay day loans protected

Money lenders providing convenient access to online cash advances escaped restrictions on their business. Some politicians wanted to go after people who work for their money. The financial reform bill could have limited consumer access to same day cash advances and prohibited cash companies from offering additional products and services. Another provision forced federal regulation on the best practices of payday lenders, such as offering installment loans. Fortunately the Senate rejected the payday loan amendment.

Financial reform: debit and credit card use

Financial reform seeks to limit the fees banks charge retailers for debit card transactions. This could mean either lower prices, higher bank fees or both for consumers. The Christian Science Monitor reports that Visa and MasterCard charge retailers 1 to 2 percent of the cost of whatever people buy with their debit cards. That’s a lot more than what it costs for a computer at a bank to process the payment. The financial reform bill wants to make sure debit card fees are “reasonable and proportional to the processing costs incurred.” Or, in other words, lower. Retailers say they will pass the savings to consumers. But banks, deprived of such easy money, will probably turn the screws in other ways, such as increasing checking account fees. So it remains to be seen if the debit and credit card fee provision of the financial reform package delivers any benefits to most people.

Financial reform: mortgage loans

The financial reform bill could limit banks from lining their pockets when a borrower wants to pay off a mortgage early. For most mortgages, prepayment penalties would be allowed only in the first three years of the loan. For mortgages with balloon payments, prepayment penalties go away altogether. Plus, Reuters reports that the financial reform bill ends kickbacks to bankers and “liar loans,” two shady lending practices that led to so many bad mortgages in the housing bubble. Kickbacks known as “yield spread premiums” encouraged brokers to steer consumers into risky, high-interest loans even if they qualified for cheaper loans. Liar loans let consumers qualify for loans they could not possibly repay if they opted to simply state their income or other assets, rather than waiting for verification.

Financial reform: credit scores

Financial reform package provisions originally called for giving consumers free credit scores every year to go along with the three free credit reports, but this consumer benefit didn’t survive. However, the New York Times reports that an amendment requires those who use a credit score to deny credit to someone to give the score to that person free. When someone doesn’t have the best interest rate on a mortgage, credit card or auto loan, or gets stuck with a high insurance premium, they get to see the score that was used to make that judgment.

Payday loans: no credit score required

No credit check payday loans online often don’t require any sort of credit score. This is good because simply having one’s credit checked can have a bad effect on the credit score. A no credit check payday loan allows a person to get the quick cash they need without waiting for approval or damaging their credit score. Plus, the money can be in their bank account within 2 hours upon approval. Better yet, for people who may have bad credit or no credit, paying back the online cash advance on time can help raise that credit score.

Zero percent liability

The FTC requires that consumer liability for fraudulent charges made to their credit or debit accounts be limited to $50. However, VISA and MasterCard, which control 100 percent of the U.S. debit card market and the majority of the U.S. credit card market, have taken it one step further, requiring that all of their card issuers adhere to a zero percent liability policy for customers affected by fraud.

Equal protection for both accounts

This means that whether you use a credit or debit card, you are equally protected and will receive a 100 percent refund on fraudulent charges made to your accounts. Since both your credit and debit card issuers are required to adhere to the same zero percent liability policy, you should feel equally comfortable when using either account, right? Not necessarily.

Your debit account

When you use your debit card, you’re risking direct access to your checking account. Someone making fraudulent charges to your debit card is stealing your actual money, making the logistics of a refund to your checking account a more difficult and nerve racking process.

What you can expect as a victim of debit card fraud

As a victim of debit card fraud, you run the risk of bouncing important checks, such as your electric and water bill, or even your mortgage payment. Your cash flow for day-to-day expenses is cut off until the dispute is resolved with your bank. While you will get your money back eventually, you have to act fast.

The difference using your credit card

Your credit account, on the other hand, exists on the basis of borrowed money. If someone makes fraudulent charges to your credit card, it has no direct effect on your cash flow for your day-to-day living expenses and you’re generally not responsible for the debt for 25-55 days.

What you can expect as a victim of credit card fraud

For example, let’s say fraudulent charges are made to your credit card account 10 days before you receive your bill. Assuming that you don’t notice the charges until your printed bill comes in the mail, you have a minimum of 25 days to resolve the matter before your bill is due. However, if you’ve been a little more diligent by checking your account online, you will have an additional 10 days to resolve the dispute. Either way, with a credit card, you should have enough time to detect, report, and resolve fraudulent charges before you become responsible for paying them.

And the winner is…

These practical matters clearly make credit cards a more convenient payment method when it comes to fraud protection. However, if you have trouble handing your credit responsibly then credit cards remain an unfit choice.

*Source: CSCU, The Nilson Report, VISA

Banks use the prepayment penalty for protection

The way they work is that banks would allow the borrower to get lower rates, but in return the buyer would sign a paper stating they must pay a prepayment penalty if their mortgage was paid off between three to five years. Ilyce Glink, publisher of ThinkGlink.com, (see http://www.bankrate.com/finance/mortgages/6-steps-to-a-lower-prepayment-penalty-1.aspx) said, “These contracts were structured to guarantee banks a certain amount of profit. The banks would do a risk calculation or a profit calculation, and the penalty itself was generally set between 2 percent and 4 percent of the loan.”

The sad truth about prepayment penalties is that homebuyers need to sign them, but often times they don’t notice them. Glink added, “The stacks of paperwork homebuyers are required to go through usually disorient them and the cost of prepayment penalties are often ignored.” The problem comes in when the borrower wants to pay off or refinance the loan and the penalty is a reality they have to face.

Ways to handle a prepayment penalty

Clarky David, Debt Diva at CareOne Debt Relief Services, said, “With a mortgage, you’ve entered into a legal contract, and most of the time, the bank is not going to want to go to the effort to renegotiate it.” Although there is now a way to get around a prepayment penalty, there are ways to minimize it. Here are five tips to follow:

1. Find the paperwork. The first step consumers need to take is to make sure that they have a prepayment clause. Glink said, “It usually says ‘prepayment disclosure’ or ‘prepayment penalty disclosure’ at the top. There are usually three or four documents you had to initial to indicate that you read them.”
2. Read the contract. Most of prepayment penalties have a single fee and others have a sliding scale to watch for. The sliding scale ones will decrease the longer a borrower holds the loan. For example, during the first year of the mortgage a homeowner may have a prepayment penalty of 4%, whereas during the third year it may fall to just 1%. For consumers who are in the time span where a rate is set to decrease, this is a great time to wait for a month to save some emergency money.
3. Crunch the numbers. The next thing to do is pull out a calculator and do the math. Sometimes the prepayment penalty is worth the chance to move to a less risky lower-interest loan. Best case scenario, the prepayment penalty is eaten up by overall savings on a new mortgage loan. On the other hand, consumers may have to lower the penalty before they move. Again, it’s best to compare the options mathematically and make a decision based on savings.
4. Talk to the loan officer. The next step is to start negotiating the penalty with the loan officer. Glink said, “The first point of contact should be the loan officer. But if you don’t have any luck there, escalate to a manager. They generally have more pull and decision-making power.” Most likely the penalty won’t be ignored altogether, but there is a chance they may cut back the penalty if a homeowner has some track record of consistent payments for a good amount of time.
5. Get any changes or amendments in writing. Document all discussions and negotiations with everything from the loan officer’s name to the time the discussion was had. Consumers should always request that the deal is sent in writing. A verbal offer is worth nothing and without proper documentation consumers may be starting from square one.

Banks willing to negotiate

Banks are suffering as a result of the recession and aren’t eager to let go of valuable prepayment penalty fees. Despite the contract, they still may be willing to negotiate. For any consumer looking for emergency money, it can be a good option to try to at least shave a few thousands off of a penalty. It may not sound like much, but it can add up to substantial savings in the end.

Need emergency money now? Apply HERE!

Understanding banks

When it comes to banking, there are some important rules to understand. Every American needs somewhere to put their money. Although grandparents may have kept it at home, in today’s world there is no need to do the same. Today’s market allows for great savings vehicles and although the savings rate is not what it used to be, it still brings in some return on investment.

• Banks and safety. For years banks have had insurance for individual accounts of up to $100,000. Due to the recession, the federal government upped that to $250,000 per account. Although after January 1st of 2010 the insurance will return to the lower number, it is still a great way to protect your savings.

• Bank fees. Remember that every service costs and that includes the service of holding your money. Banks pay lower rates on interest-bearing accounts than brokerages or mutual fund companies, but may take out hefty fees. In particular many people get caught in the “minimum required balance on deposit” trap. This is where a bank charges a fee if a balance falls below a certain predetermined level. These fees can easily add up to hundreds of dollars in a year. Be sure to understand your bank’s rules so you can avoid fees as much as possible.

• Understand interest rate at your bank. Not all banks calculate interest the same way. You want to ask your banker about each accounts’ “annual percentage yield.” Banks normally quote both interest rates and APYs, but only APYs are calculated the same way everywhere. Interest rates can vary greatly.

• Try other savings vehicles. If you don’t have the need for quick cash, try using CDs, or Certificates of Deposit, for your money. These are accounts that offer you better interest rates than just plain savings accounts. The catch here, though, is that you have to agree to leave your money untouched in the account for a specific period of time. That time can vary from 3 to 48 months. If you think you’ll need cash soon, opt for a lower lifespan for the account. On the other hand, if you won’t need the money, then take advantage of the typically higher interest rate on longer life spanning accounts.

• Watch ATM fees. ATMs are one of the most convenient advances of the decade. They are everywhere and allow you to take out money at a moment’s notice. The problem, however, is that they also charge you fees each time you enter your PIN. On average, the fee your bank charges to use another institution’s ATM is $1.50 according to BankRate.com. On top of that, you also will get hit by a fee to use the ATM and that can range anywhere from $2 to $5.

Banking in 2010

Using a bank is a great way to grow your money and protect it. Like with any contract, though, there is fine print. Be sure to understand your bank’s rules and regulations so that you are maximizing your return. You want your money to be safe, insured and in a prime position for growth.