Things Your Bank Won't Tell You

(CBS)  The vast majority of Americans has a bank account of some sort, and chances are good that most don't know the tactics banks employ to help their bottom lines.

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:

Banks earned $1.97 billion in overdraft fees in 2006, the latest official numbers available

That represents 74 percent of all service charges collected by banks

Younger and low-income people are most likely to be hit with these fees

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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[rf35]

What kills me is the time some banks take to debit your account. This is especially a problem for service members like me stationed overseas. When I make a purchase off base with my debit card in the local currency, I'll have enough to cover the item (plus the inevitable "international transaction fee") at the time, but the bank waits a day or two to debit the account. By then, it's quite possible the exchange rate has changed and I can no longer cover the charges. This just happened earlier this week when the dollar went way south vs. the British Pound.

[gil600221]

to JCbollom;

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!

[chitown_isaac]

Years ago, I used to get lots of credit card late fees, Account Inactivity fee, Overdraft fee, etc. But, I made a move to purchase a smart phone, which has all my bill due dates to remind me, that avoided all late fees. Closed all unwanted accounts, and got them down to 2 checking accounts, 1 savings account, 1 paypal account, 2 credit cards - now i can better manage my expenses and avoided inactivity fees, and all most of my bill payments are over web. Also, with less number accounts to watch over, i have better awareness of how much money i have.
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.

[ssgtusmc31]

WoW.. JC, let them know how you feel brother..amen...

[jcbollom]

I was getting my car repaired this morning when I saw the segment on "Fees Your Bank Will Not Tell You". This is NOT true. Every bank account that is opened is given a notice of fees that could be incurred. It is up to the bank customer to BALANCE their checkbook and not overdraw their account! You did not point that out! If you don't have the money in your bank account, don't write the check or use the debit card. Somewhere out in the world, common sense is running around trying to get someone to use it. I can tell you that we at Bank of America are very willing to reverse any fees someone who has a new checking account or doesn't make a habit of overdrawing their account and they accidentally spend too much money. A chronic check bouncer deserves the charges and is usually doing the overdrawing on purpose. We lose way too much money on people who deliberately write hot checks and the business that takes that check suffers as well. Don't blame those fees on the banks. Blame the people who have no scruples about cheating everyone: you, me the banks and the business owners.