In this difficult economy, businesses have had to become very creative to stay profitable. Perhaps none have become as creative as the banks. At Christian Money we have been receiving a growing number of complaints from people that feel that they have been ripped off by their bank. The latest "scam" is what is known as automatic overdraft enrollment. Sounds like a good thing, right? After all, wouldn’t it be a great thing to have your bank cover any shortfall in your account from time to time? Imagine this scenario; you set up a checking account and add a debit card. Without informing you, the bank automatically enrolls you into their overdraft program. Next, one day you're using your debit card and rather than the charge being declined, the bank approves the charge under the overdraft program. Perhaps your balance was getting low, but you thought that as long as the card went through there was sufficient money to cover the charge. Unfortunately for you, the charge was paid by your overdraft protection. I was shocked to read an article last week in the Chicago Sun-Times outlining a scenario of a person overdrawing their account by as little as six dollars and owing more than $400 in fees to their bank! See Entire Article.
Should You Sue Your Bank? Watch This Video.
Banks are going to great effort to set up scenarios that will result in you owing potentially hundreds of dollars in fees. A study by the economic research firm Moebs Services forecasts that US banks could collect some $38 billion in overdraft fees from customers this year, double the amount in 2000. What is especially insidious about this latest bank scam is that it is totally legal, but clearly unethical. As a rule, banks do not tell customers that they are automatically being enrolled in the overdraft program. Most people would absolutely not go along with this arrangement if they were made aware of the details. While it certainly is true that we should all keep track of our account balances and even keep a few hundred dollars or more of padding, that is not always reality. If you do have a bank debit card, I would recommend that you contact your bank right away to find out if you were unknowingly enrolled in an overdraft program such as the one described above.
Should You Leave The Banking System?
Everyone has to have a bank account, right? Not necessarily. One option that is becoming more and more popular is that of a prepaid debit card. Imagine receiving your paycheck and going into a local Wal-Mart and having the entire amount credited to a pre-paid card. You then use the card for all of your normal weekly expenses and if you need cash you withdraw it from the card at an ATM. Most of your bills can be paid with a credit card, and as a result you may not even need a bank account at all. This is a much better alternative than operating on a strictly cash basis. Some people, becoming tirelessly frustrated with the banks, just cash their paychecks and pay their bills either in cash or with money orders. The problem with this approach is that money orders can be lost in the mail and very difficult to get refunds for (losing your cash is even worse). The better option if you want to go “bankless” is a pre-paid debit card. There are some fees associated with cards like this, but in most cases they are not nearly as bad as what many bank fees would be over the course of a year. If you have a difficult time keeping your checkbook balanced or living on a budget, this may be the perfect financial tool for you. Once the card runs out of money, that's it. There are no bounced check or overdraft fees to ever worry about.
Other Fees To Watch Out For
ATM Fees
Credit Card Fees and Interest Rate Increases
Cash Advance Fees
Stop-Payment and Returned-Deposit Fees
Miscellaneous Fees
Watch This Video To See How Banks Clear Checks To Create The Most Overdraft Charges
Being Banned By The Banks
Perhaps the ultimate big stick that a bank can threaten you with is the prospect of banning you from the banking system altogether. Banks can report you to a service called ChexSystems. Here's how it works: Let's say a bank cannot collect from you an overdraft fee, ATM fee, or any other fee for that matter. You end up closing your account and disappearing from their radar screen. They simply go online and report you to ChexSystems. Your name is now on an official bank blacklist. You will find it difficult, if not impossible to open another bank account for at least five years. Additionally, your credit may now be ruined completely.
More News Stories On This Issue:
Help From The Government?
The Federal Reserve plans on instituting a rule this year on overdraft practices that would apply to banks and credit unions. But they have provided no details as of yet. Don’t expect our elected officials to bite the hand that feeds them. The banking industry is one of the strongest lobbying groups in Washington.
Helping you make the most of God’s Money!
James L. Paris Editor-In-Chief of www.ChristianMoney.com
Follow Me On Christian Chirp www.christianchirp.com/jameslparis
Great information. I'd like to share my experience in this area.
A few months ago I found an FDIC insured checking account that fits my needs perfectly. I have bill-pay, online access, a free debit / ATM card, great customer service, and overdraft protection with NO OVERDRAFT FEES ever.
Although it may not be the perfect fit for everyone, check out Probity Checking from Probity Financial Services ( www.probityfinancialservices.com ).
Posted by: Bill Giltner | August 13, 2009 at 10:44 AM