Bank Charges that are a Crime
If you did a survey of the top ten most distrusted professions, right up there next to lawyers and politicians would be bankers. It’s amazing that we have such a negative view of the banks in light of the fact that almost everyone uses a bank.
Have you ever wondered how banks make money? In the last few years, it seems that every bank in town advertises “totally free checking”. Offering these fees for free is so common that most of us have probably forgotten when we paid a little fee each month for these services. Competition has driven banks to give away checking. So you would think that has hurt their bottom lines.
But it hasn’t. Banks of all the business institutions are doing great, even in a day and age of exploding costs and dwindling personal savings. So how do they do it? Well, banks do make money off of our money. When you put $1000 in the bank, we might like the idea that our money is in a vault waiting until we start using it. But the reality is that the bank immediately loans that money out and makes interest on those loans. That is one way that banks make money and it’s completely legal as well.
But despite the demise of checking fees, banks make a ton of money off of bank charges that they can still legally charge. One of those fees is the cost of printing checks. If you have ever ordered checks from your bank, you will see a pretty impressive charge for those checks show up on your next bank statement. But one thing they don’t tell you is that they don’t have a monopoly on printing checks. There are plenty of perfectly good services in the world that will print up checks for your checking account for a much reduced fee. As long as those blank numbers along the bottom are readable by a machine and are correct, the check is legal. So save yourself some money and don’t order checks from the bank.
But one charge that always seems over the top is the overdraft charge the bank imposes each time one of your checks bounces. It seems that these fees are extraordinarily excessive. Many times the bank will charge you as much as $35 or more for each bounced check.
Amazingly, these charges are perfectly legal. The law says they are allowed to charge you enough to cover their costs for covering and processing the returned check. So that might include notifying you, returning the check to the person you wrote it to and the necessary account management. How do we know that the huge tab they charge is not more than they need for their costs? We don’t. And as consumers there isn’t any way to fight back, short of not using the bank at all which isn’t realistic.
So how can we protect ourselves against excessive bank charges? One way is to find a bank that will set up a line of credit that will kick in and put the funds in your account from a bank loan if you overdraw. It’s all done by computers so the costs of notification are eliminated. And generally the charge is much less for this service, perhaps $5-$10 for as many checks they have to cover in a day rather than $35 per check.
Your checks don’t bounce so you don’t have problems with who you are trying to pay. And it’s a much easier way to protect your bank account than letting the banks hit you for those out of control overdraft charges just when you need extra fees the least.
