Overdraft Fees of up to 17,000 Percent Make Online Installment Loans Look Cheap
A recent analysis conducted by CNNMoney and SNL Financial found that three of America’s largest banks, JPMorgan Chase, Bank of America and Wells Fargo, made more than $6 billion from just overdraft and ATM fees last year. The excessiveness of the fees caused so much frustration throughout the country that they became an issue during this year’s presidential campaign. With overdraft fees of up to 17,000 percent, online installment loans look cheap.
Online Installment Loans Seem Almost Affordable Compared to Overdraft Fees that are as High as 17,000 Percent
CNNMoney reported that during the presidential campaign, Hillary Clinton said that ATM fees were usurious while Bernie Sanders promised his supporters that if he made it to the office of president, then he would cap ATM fees at $2. He said, “In my view, it is unacceptable that Americans are paying a $4 or $5 fee each time they go to the ATM.”
With banks charging this much for people to gain access to their own money, these traditional financial institutions are starting to make installment loans online look good. Online installment loans allow people to avoid overdraft fees.
Big Profits Come in Small Packages
During the presidential campaign, the candidates spent more time railing against ATM fees than they did overdraft charges, but banks are receiving more profits from overdraft fees. According to Time, the average overdraft fee is $34.
Regulations state that banks are not permitted to charge their customers for overdraft charges when they attempt to get cash through an ATM from an account that doesn’t have enough funds unless the customer accepts the added charge. In 2014, the Pew Charitable Trusts completed a study about overdraft fees. During the study, Pew found that of those who took out more money than they had available in their checking accounts, more than half of them didn’t recall accepting their bank’s overdraft service.
How Overdraft Fees Put People at Financial Risk
Richard Cordray, the director for the Consumer Financial Protection Bureau, or CFPB, said, “Consumers who opt into overdraft coverage put themselves at serious risk when they use their debit card.” Even though the average overdraft fee is $34, a study conducted by the CFPB found that most overdraft charges are billed for transactions that are $24 or less.
Regulations state that people can choose to opt out of their bank’s ATM overdrafts whenever they want to. Those who take this step will not have access to money from an ATM if their checking or savings account doesn’t have the available funds. However, banks are still able to charge a fee if a customer’s account balance reaches a negative amount due to a cashed check or an automatic withdrawal.
The CFPB’s assessment confirmed that if a consumer borrowed $25 for just three days and paid the bank an overdraft fee of $34, then this equals a massive 17,000 percent APR, making installment loans for bad credit look reasonable.
Banks are Now Required to Report to the Public
Financial institutions that have more than $1 billion in financial assets are required to provide specifics about the amount of revenue that they earn from overdraft and ATM fees as well as from other charges. As with the operational aspects of online installment loans, the CFPB has turned its eye toward these fees, and it reported that of the 594 banks subjected to the additional reporting requirement, 8 percent of their revenue was derived from overdraft fees.
Overall, the CFPB determined that 60 banks obtained a substantially higher amount of their recurrent profits from nonsufficient funds and overdraft fees than their fellow institutions. In this case, the fees came to 65.3 percent of all reported customer deposit account fee earnings.
The Consumerist reports that the amount that banks are earning from these overdraft programs range from 5.3 percent to 19.8 percent of their revenue. This disparity comes from several factors that include bank size and contributions from each bank’s other business. Because of this, bigger banks earn more revenue from overdraft fees. The CFPB released a statement. It said, “The new fee revenue information is beginning to help us understand the magnitude and diversity of banks’ overdraft programs.”
How Banking Customers can Avoid Fees
The CFPB published a list of tips designed to help customers decrease or avoid overdraft and nonsufficient fund fees. The bureau advises customers that they should not opt-in to their bank’s debit card-based overdraft option. However, those who have a savings or money market account through their banks should link it to their checking account. This will prevent insufficient fund situations from happening.
Customers who decide to take the linking step should check for fees though. Many financial institutions charge to move funds, but in most cases, this fee is less than the amount that they charge for overdrawing an account. The CFPB also advises bank customers to track their account balances judiciously and to consider signing up for low balance alerts.
Banking Fees are Increasing
Major banks like Wells Fargo claim that they have taken steps to clarify the overdraft fees that they charge and are working to help their customers make better financial choices. Ricky Brown, the president of BB&T Bank, said, “Overdraft behaviors are becoming more managed by our people.” However, the data isn’t supporting his claim, which means that installment loans for bad credit may be a better option than overdrawing an account.
According to the statistics, the nation’s big banks made more money from overdraft fees for the first three quarters of the year than they had from these fees in the past. The last quarter’s results aren’t in yet, but estimates show that the last quarter is usually the most profitable since people spend more around the holidays.
The numbers show that JPMorgan earned $1.9 billion from overdraft fees while Bank of America and Wells Fargo received $1.6 billion each from these types of fees. Because bank fees levied against the accounts of everyday Americans came to around 4 percent of the operating costs for the country’s largest banks, the CFPB is considering enacting more rules for overdraft fees. When considering the profits that banks are making from them, installment loans online seem like the practical option.
Installment Loans Online Take the Brunt of the Financial World’s Bad Guy Stereotype
Since overdraft fees of up to 17,000 percent APR are becoming the norm in the banking world, these charges make installment loans online look cheap. Christopher Vanderpool, an analyst for the research firm SNL Financial, said, “Consumers really need to look at the fine print.” It’s important to know the ins and outs of banking to avoid unnecessary fees that work to enrich these financial institutions. To learn more about today’s banking fees and the benefits of online installment loans, visit the Personal Money Store.