When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully.
So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks ”” and a $34 fee. He got the $6.50 student discount at the movie theater ”” but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws ”” and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity.
Mr. Means, who is 59 and lives in Colorado, figured employees at his bank, Wells Fargo, would show some mercy since each purchase was less than $12. In addition, a deposit from a few days earlier would have covered everything had it not taken days to clear. But they would not budge.
Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances ”” for a price.
Eh…usury schmoozery.
Read the Ts and Cs on your Agreements, people. They’re not there for show. Then know your balance.
Is this rocket surgery?
I thought the point of the debit cards was that if you did not have the funds, you would get declined?
There is a request you can make to the bank to make your card decline charges when your balance is low.
When I made that request of my mega-bank, I was told that only “some” people got that privilege, and that I would need to fill out forms to ask permission to have that added. I painstakingly filled out the request, calmly opened another account in a small local excellent bank, switched all of my bills to that account over a period of a couple of months, stockpiled lots and lots of money in my old mega-bank account . . . and at the right time and the right place, walked into my mega-bank and announced the closure of my account and the transfer to the new account, with the account closing in writing, please since I do not trust this bank.
Lots of flurrying and flustering occurred with “whys” and “what if you need to keep it open for bills you may have forgotten” whereupon I explained gently the several things they had done to make me obdurate.
It was one of the most — one of the *few* actually — satisfying come-uppances of a horrible vendor I have ever had.
My current bank has a cease-charges on my card, not to mention not making a large check to me wait 14 days to clear [that’s right — 14 days] along with vastly more personal service, along with free milk bones for my dog in the drive through.
Banks are in the business of making money, not promoting ethics.
Kind of like many politicians, I think.
BlueOntario,
It is my contention that, in the long run, ethical banks (and any business for that matter) will be more profitable that non-ethical ones. See Sarah’s #4 for examples.
YBIC,
Phil Snyder
Mafia loan sharks never had it so good. I imagine the loan sharks are pretty much out of business now. There used to be usury laws in this country. But, I guess they are out the window. It certainly seems fair for people to have to “opt in” for expensive “services” rather than opt out. To me, “fees” for time use of money are interest pure and simple and should be accounted for as such.
It is all well and good to say banking services buyer beware. Not everyone is able to resist temptation. Certainly consumers borrowed more than they could pay. On the other hand, it seems that big time bank and investment bank managers have little more will power than the hapless consumers at the bottom of the economic ladder. That is how we wound up in the sub-prime mortgage mess that nearly ruined the banking system. Moreover, these managers and have access to the economic and political power to bring congress to heel, no matter what party is in power.
If you want a scary account of this, find the 60 Minuites segment from two Sundays ago on credit default swap (derivative) legislation, snuck through Congress as the final act of a lame duck session in 2000. It passed the Senate unanimously. This essentially undid the gambling laws passed after the 1907 banking and market panic brought about by none other than the equivilent of the modern day derivative. This time around investment banks bought enough rope (from Congress) to hang themselves. Unfortunately, they hung us along with them.
People are all too human at all levels of society. That is why we end up needed at least a few laws to keep a society running.
Here is the video link on credit default swaps, illegal from 1907 to 2000:
[url=http://www.cbsnews.com/video/watch/?id=5274961n&tag=contentBody;housing] 60 Minutes Financial WMD[/url]
Well worth the 12 minutes of viewing.
Businesses, including banks, are not in business to make a profit; they are in business to stay in business. If they just want to make a profit, I suggest they start selling all their assets and lay off all their employees immediately. They will show a profit…but cease to exist.
[blockquote]Here is the video link on credit default swaps, illegal from 1907 to 2000:[/blockquote]
Wow, illegal eh? Considering they weren’t even invented until 1997, those must have been some prescient legislators.
An excellent idea, Sarah. We currently have money in the mega-bank, but I can’t persuade them to set up the deal where my debit card would hit only my checking account. As it is, if my PIN number gets stolen, mega-bucks could be stolen as well from various savings accounts. I think I’ll find a local bank with a checking account I like plus online banking and use that debit card when shopping instead of the credit card I use to prevent access to my bank account.
As to this man, unless he has no computer, he needs to understand that the online account status will show whether that deposit is available for use. You need to look at your balance, and online banking makes that so easy.
#10 The legistaltors were not prescient at all. They legislated against the financial “side bets” of the day. If you watch the video you will see a picture of one of the “betting” parlors, popular at the time, in which people could place “wagers” on the direction of the stock market that day without actually having any money in the market in question. It just so happens that credit default swaps fall into the same “side bet” category, hence, the reason for the lame duck legislation to make the genre of financial “side bets” legal again. Moreover, the legislation was made preemtive over all state laws to the contrary.
I had something similar happen to me a few years ago. I deposited cash (physical paper with Ben Franklin’s picture) and the bank held it for four days. The refused to return the fees, and I closed my account before leaving the building.
By the way credit defaults “swaps” were called “swaps” to avoid being perceived as credit default insurance. If they were considered insurance, they would have fallen under the miriad of state and federal legislation regarding insurance reserves. Investment banks selling them would, horrors, then have had to set aside reserves to pay off “claims”. As is, they called the “premiums” ordinary income and set aside no funds to pay “claims’ if the loans defaulted. The loans started to default and, presto, instant AIG, Bear Stearns, Lehman Brothers and so on. Reminds me of the demons that Jesus sent, at their request, to reside in a herd of swine, who promptly all jumped off the same cliff.
In response to Phil Snyder in post 4 and Sick and Tired in post 9:
I agree with you, Phil. But past experience makes me wonder how long Sarah’s bank will be “local” and “excellent.”
Sick and Tired, I agree with your “barebones” description somewhat, but in the end profit – either to the business or its owners/mangers/lenders – is the reason for keeping a business in business. It has to keep someone happy and that is usually with money.
Actually, sometimes it doesn’t matter if you keep track of your balance, they charge you a preemptive overdraft fee. This happened to my wife and I not that long ago. We use online banking to schedule our bills and had a particularly large payment scheduled to be processed and mailed on Thursday, let’s say it was for $1000. At the time, our checking account had less than $1000 in it, but I was paid on Sunday, and deposited my check on Monday–plenty of time for the money to go where it needed to, both to savings and checking, or so I thought. The bank charged us a preemptive overdraft fee, one evidently programed into their software, that kicks in if you have a large bill coming due within a week or so and don’t have the funds. We never actually overdrafted our account, but that didn’t matter.
We now write paper checks and pay for stamps, it’s a lot cheaper.