NEW YORK, June 1, 2009
Things Your Bank Won't Tell You
Vera Gibbons On Ways They Make Money On You That You Need To Know About
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Play CBS Video Video Banks' Dirty Little Secrets Harry Smith spoke with Financial Contributor Vera Gibbons about the dirty little secrets banks use to make money.
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(CBS)
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The Early Show ConsumerWatch Be informed! Our correspondents keep you posted on scams, faulty prodcuts, dangers, and more. Also -- on where to find the best deals!
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The Early Show Monday, financial contributor Vera Gibbons shared some of what might be called these "dirty little secrets."
Fifty-three percent of a bank's income today comes from fees, such as ATM fees, minimum balance fees, etc.
To make matters worse, many of these fees can sneak up on you.
OVERDRAFT FEES
Industry experts Gibbons spoke with confirm that overdraft fees pose the biggest threat to bank customers' pocketbooks.
A recently-released Federal Deposit Insurance Corporation study found that:
The vast majority of banks allow you to make a debit card purchase or withdraw money from an ATM, even if you don't have the cash in your account to cover the cost, and they DON'T alert you that you're overdrawing. If you don't realize you're overdrawing your account, you're likely to continue overdrawing all day long. You'll be hit with a fee of around $30 each time you do that. To make matters worse, about half of banks don't simply deduct the money you spend as you spend it from your account. Instead, they look at everything you've spent in a day and subtract the largest check/debit item first, and then so on down your list of expenditures.
So, let's say you start the day with $1,000 in your bank account and you make the following purchases:
* $5 latte
* $150 grocery store
* $8 car wash
* $3 greeting card
* $900 rent
If the bank only charged you when you officially overdrew your account, you would receive one charge of $30, because you would not overdraw until you wrote a check for $900. But, banks say they want to "help" you by paying your biggest charges first, claiming they assume these big-ticket items are more important and must be paid with sufficient funds. So, in that case, you wind up with FOUR overdraft charges, for a total in fees of $120. And yes, this is totally legal.
You can avoid overdraft fees by doing the following:
Opt out of the "protection plan": Banks likes to position overdraft protection as a service, though it comes at a big cost to you. Typically, they sign you up for this automatically when you open an account. Tell your bank you don't want their protection; you will simply be turned down when you try and make a purchase you can't afford.
Sign up for alerts: Many banks will automatically e-mail or text you once your account reaches a certain balance. Go online to set up this service.
Link your accounts: At most banks, you can ask to have your savings account linked to your checking account. When you overdraw your checking account, money is automatically transferred from your savings account to cover the purchase. You may be charged a small "transfer" fee, but it will be nothing compared to the overdraft fee.
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Your banks are a bunch of idiots who have employees that are incompetent! Let me explain.
I recently found out that in 1999, someone opened up a credit card in my name in Georgia (at the Bank of America branch) and at that time I was living in Kansas. I then found out that in 2003, this person ran up a total bill of $7500 and did not make payment on this bill so in 2003, Bank of America closed the account and then eventually sold this account to another company (which is a common practice in the banking/credit industry) When I found out about this a few months ago from Bank of America at my local Bank of America branch, I wrote a letter to the corporate headquarters of Bank of America requesting that they straighten out this mess as I had nothing to do with this mess that the bank did as they did not even ask for ID from this scammer, in my case. While HQ's sent the appropriate message to another branch across the country to handle it. That branch told me that they could do nothing about it now or ever as it was out of their hands. I did not create this mess that was now affecting me, Bank of America did by allowing someone to opening up a credit card account in my name and not checking for the proper ID before allowing this to happen. So now I am "Back Peddling" trying to fix this problem! Bank of America will be another large bank to fail if they keep treating their customers like crap, then all of you incompetent employes "JCbollom" will be in the unemployment lines!
And in the worst situations, where I missed a payment, or Inactivity fee kicked in, my banks (Citibank, Chase, CharterOne) were all courteous to remove them when I requested with a sincere apology! Most banks do it couple of times in a year, if you dont do it often.