Bank of America charges the unemployed less than most banks for prepaid benefits cards. (Photo Credit CC BY/MoneyBlogNewz)

Prepaid debit cards can work well as a gift, but monthly maintenance fees, withdrawal and ATM fees can take some of the usefulness out of them. According to the National Consumer Law Center, prepaid cards may not be the best way of distributing benefits to more than 13 million unemployed in the U.S., as is the custom in 40 U.S. states. When already meager benefits are diminished by a bevy of fees, the unemployed are left with very little.

States should work harder for consumers

A major finding in the NCLC report is that the overdraft, ATM and transaction fees prepaid card issuers charge could be lower if states negotiated more aggressively on behalf of their unemployed. The states benefit from lower administration costs by not having to issue unemployment benefits in the form of paper checks, so working harder on behalf of the populace would be fair trade. While most states make it clear up front that the unemployed have the option of direct deposit or a prepaid debit card, Arizona, Colorado, Louisiana, Oklahoma and Oregon default to debit card. This is a practice that NCLC managing attorney Lauren Saunders says harms consumers.

“Prepaid card junk fees stack the deck against jobless Americans who need every dollar during a financially stressful time,” she told ConsumerAffairs.com.

Prepaid card fees vary by state

According to Saunders, prepaid fees and practices can vary from state to state, even for cards issued by the same bank. U.S. Bank charges overdraft fees in five states, the highest in Arkansas, where overdrafts cost $20. Most states charge only $1.50. ATM fees are standard in four states, not just for purchases, but merely for checking balance.

Among all state unemployment benefit systems studied by the NCLC report, Arkansas, Idaho, Nebraska, Ohio and Oregon are the worst when it comes to overdraft fees, ranging from $10 to $20 per incident. Not coincidentally, U.S. Bank is the card-issuing bank in all five states. The highest number of individual “junk fees” appear on JP Morgan Chase prepaid cards in Tennessee.

Doing the right thing for the unemployed

Saunders stated that not only does the NCLC report highlight which states need to cut a better deal for unemployment benefits debit cards, it highlights that the need for the Consumer Financial Protection Bureau is greater than it has ever been. Considering that only California and New Jersey aid their unemployed by keeping prepaid card fees to a bare minimum – both states are served by Bank of America – the Bureau has much work ahead.

Sources

Bankrate.com

ConsumerAffairs.com

GreenDot.com

ATM fees may not be climbing too much higher, at least for now. Image from Wikimedia Commons.

JPMorgan Chase is bringing an end to its higher ATM fee test run. Chase began a pilot program some time ago where out-of-network ATM transaction fees for non-Chase customers were raised to $4 and $5 in some areas as a test. The high fees just so happened to not be very popular with consumers.

Consumers not amused by high ATM fees

In February of this year, JPMorgan Chase announced that it was going to start testing a new fee structure for non-Chase members that used Chase ATMs. The new fees were instituted in Texas and Illinois, according to CNN. Chase maintains one of the largest ATM networks in the country, and was trying to get people to pay a little more for the convenience of using that network. So the large nationwide bank raised its fees on a trial basis to $4 in Ill., and to $5 in Texas. The Chase network comprises more than 16,000 ATMs nationwide, and there is a reasonable expectation that people should pay to use such a large network. However, people in those states were not amused.

Chase canceling program

JPMorgan Chase is canceling the higher fees. Though Chase does maintain the second largest ATM network in the nation and about 25 percent of all Chase ATMs are in those states, according to USA Today, people stopped using Chase ATMs if an ATM with lower fees or one in their network was nearby. Chase will revert to the standard $3 fee. The nationwide average fee at automatic teller machines, according to MSN, was $2.11 in January. The city that had the highest fees on average as of November was Seattle, Wash., according to the New York Times, and the city with the lowest ATM fees was Cleveland, Ohio. ATM fees have been going up, as financial reform laws have been restricting certain types of fee-assessment practices at banks.

Fewer people after loan capital

Though banks are just as willing to lend consumer loans, there are fewer people lining up to apply for them. The Federal Reserve has noted looser lending criteria for consumer loans such as credit cards, installment loans and other types of personal loans, but demand has been down for some time, according to the Wall Street Journal. If people don’t feel as secure in employment, they are less likely to want to go into debt. Interest earnings for major banking institutions has been declining for months, as fewer consumers are interested in going into more debt after the nightmare of the past few years.

Sources

CNN

USA Today

MSN

New York Times

Wall Street Journal

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

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

Prepaid debit cards have of advantages, but the fees can total up to a lot of cash quick. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

Prepaid debit cards have become quite the popular item for people who don’t want to deal with banks, but the fees can add up to a lot of cash, quick. There are some benefits to using prepaid debit cards, but consumers should comparison shop to find the best one.

Avoid being drained of cash quick by checking prepaid card fees

Prepaid debit cards are not a bad idea. A person purchases a card and deposits money into an account tied to the card, just like a debit card for a checking account through a bank. They are better than credit cards because they use real money and don’t create debt. However, the fees can add up to a lot of cash, and quick. The first fee to look at is the monthly maintenance fee. The standard seems to be about $5 or less. For instance, GreenDot is a prominent prepaid debit card line. A GreenDot card carries a $4.95 per month fee, but it gets waived when the customer makes more than 30 purchases a month or deposits more than $1,000 per month. Paying $5 a month just to have the account adds up to a pretty penny and a lot of instant cash over a year.

Beware wolves in pop clothing

Consumers should always be cautious when it comes to sponsored products. Some celebrity or sport endorsed products are of high quality. However, marketing firms know that celebrities lend instant credibility to a product regardless of quality and that some people will to pay extra for products backed by big names. Also, look for withdrawal and ATM fees. Some prepaid cards only charge for out-of-network ATM usage, so consumers should check to see whether that network is only one ATM in Jackson, Mississippi.

The benefits

One benefit of having a prepaid debit card is that the fees don’t change like checking accounts through major banks. Prepaid cards can also be reloaded with money just about anywhere, and that mobility is handy. Some people don’t like dealing with banks, and given the number of banking scandals in recent memory, that is completely understandable.

A little trim saves a lot of money (photo: flickr.com)

Today, many families are struggling with tight budgets. Even in better economic times, it can be difficult to find ways to save money when there’s little or none left at the end of the month. But when you take a really close look at your spending habits, there’s almost always one more way to save a little money. Small, incremental savings really do add up.  Here are a few ideas to help you trim your budget and free up some extra cash:

Food and grocery expenses

Take a look at where your food dollars really go. Make a list of how frequently you eat in a restaurant or visit the coffee shop on the way to work. Perhaps there are extra impulsive buys at the grocery store that aren’t necessary. If you are purchasing brand name items, there are usually generic brands available that can offer you the same (or nearly the same) quality.  Eating at home more often and buying generic products can save you money every week.

Gauge your utility usage carefully

Utility bills are major expenses in most household budgets. Electricity and water are necessities; however, can you usually find ways to use them more efficiently. Are you switching off the computer when you’re not using it? Are you turning off the water at appropriate times? Are you turning down the heat when you’re not home?  These and other simple things can make a big difference in the bottom line.

Check your bank statement for ATM fees

When you look closely at your bank statement, you may find fees you’ve never noticed before. If you use the ATM frequently, you may be paying several dollars for each transaction. You can avoid this unnecessary expense, by use your debit card for a purchase and asking for cash back.  It doesn’t cost anything extra to get cash back from a purchase at major grocery, drug, and hardware stores.

Cut down on bank account fees

Another thing to look for on your bank statement is fees for services you don’t use.  Some bank accounts have monthly fees for multiple transactions, and others charge you for each one that you make. Count the number of transactions that you make, and find which route is cheaper for you.  It’s easy to find banks who offer accounts with free services.  Change banks if doing so will save you money.  At some banks, you can also save a few dollars by opting for online statements rather than paper statements

Stop using credit cards

If you owe a balance on your credit card, cut the card up and throw it away. If you have any extra cash that you would normally deposit into your bank account, use it to pay down your card instead. You may be paying hundreds of dollars in interest on this debt.  Make every effort to pay it down quickly.  Once you start to make a dent in the principal balance, you’ll notice the difference in your available cash each month.

Pay your bills on time

Paying your bills when they are due will save significant amounts each month.  When money is tight, late fees and other penalties make your struggles so much worse.  Cut back on other expenditures in whatever way you can and pay your monthly bills on time.  If you’ve incurring late fees, you can save hundreds of dollars each month – literally – by make timely payments your first priority.

Add up your extra cash!

When you get serious about cutting your expenditures, you’ll notice the savings right away.  It’s surprising how quickly these little changes can make such a big difference.

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