- SHNS
- Scripps Newspapers
- Abilene Reporter-News
- Anderson Independent-Mail
- Boulder Daily Camera
- Corpus Christi Caller-Times
- Evansville Courier
- Henderson Gleaner
- Kitsap Sun
- Knoxville News Sentinel
- Memphis Commercial Appeal
- Naples Daily News
- Redding Record Searchlight
- Rocky Mountain News
- San Angelo Standard-Times
- Treasure Coast Newspapers
- Ventura County Star
- Wichita Falls Times Record News
- SHNS Partners
- Scripps Broadcast
- Scripps Networks
- Scripps Blogs
Don't let overdraft fees drain your bank acccount
Submitted by administrator on Mon, 10/08/2007 - 10:13.
By KARA McGUIRE
Minneapolis-St. Paul Star Tribune
Monday, October 08, 2007
It was late Friday afternoon. With a thin envelope from my bank in hand and a sick feeling in my stomach, I sped to the nearest branch to beg them to reverse about $100 worth of insufficient funds fees. Fresh out of college, I couldn't afford the charges and was frustrated and confused about how I had screwed up to begin with. Fortunately, the banker took pity on me and reversed three of the four fees.
Flash forward to today. Last week, I wrote a story about a Center for Responsible Lending report that found that 18- to 24-year-olds pay about $1 billion per year in overdraft fees. I was relieved to find that many of the students I spoke with about the findings had never overdrawn their accounts. Some others, such as 21-year-old Nadia Labyad, a senior at Hamline University, have tried to no avail to get their banks to reverse some fees. "I'm fine with one (fee), but six?" she complained.
But I was surprised to hear more than once from college professors and financial counselors that many students today shrug off their errors as if it were an unavoidable cost of banking. Credit-card debt and student loans are the financial focus for the campus crowd.
But to me, the fact that overdraft fees aren't much of an issue is an issue. This is the time when young adults are developing lifelong financial habits. If they accept hefty fees as an inevitable expense, financial institutions will be able to nickel-and-dime them for decades.
Banks argue that this isn't their problem; consumers must take responsibility for their accounts and keep track of their balances so they don't incur fees. I agree. Parents should also be teaching their kids decent banking habits.
But I also think that banks should help their customers of all ages. Otherwise, it seems that banks are gladly reaping profits from their customers' ignorance and irresponsibility. Banks could simplify the lengthy manuals explaining how checking accounts work, mandate education for customers who slip up, and notify account holders who are about to enter the red. I don't know about you, but I'd leave the latte at the counter if I knew it was going to cost me $33 in fees.
Some tips to help avoid overdraft fees:
Shop around. Most consumers choose the most convenient bank rather than the one that has the best products and customer service. But you deserve both. Comparison shop for the lowest fees, most advantageous accounts and plentiful cash machines. With online banking, branch location doesn't matter as much as it used to, and some banks will reimburse customers for ATM fees.
Go online. Online banking makes it easier to keep track of your account balances. But make certain that you understand your bank's online accounting policies. Also, remember if you have transactions that have yet to clear.
Track your cash. I know that writing checks is so 20th century, but the check registers that accompany them can be handy for jotting down your purchases. If you refuse to pick up a pen, there are some online services such as Mint.com that will e-mail or text message you when your checking account balance is low or you are slapped with fees.
Keep a cushion. "Most students are playing it close to the edge," said Cathy Solheim, a University of Minnesota associate professor of family and social science. As hard as it can be for those who have limited funds, try to keep $100 in the account at all times so that that late-night pizza won't burn you.
Consider overdraft protection. The report recommends that young adults should select a bank that will link a checking account to either a savings account or a less expensive line of credit.
Ask for forgiveness. "It's OK to be proactive," Augsburg College financial aid counselor Carly Eichhorst said. If you've never had an overdraft before or have a good excuse for why it happened again, ask the bank to waive or reduce the fee. The worst the bank can do is say no.
(Contact Kara McGuire at kara(at)startribune.com. For more stories visit scrippsnews.com)
overdraft fees
Unfortunately, banks have now taken it upon themselves to actually CAUSE the overdrafts in the first place. My bank tracks several balances instead of one. The posted balance is money that has completed the transaction entirely. Processing balance appears on the posted screen of the website, but does not affect the posted balance. Those transaction do impact the "Available Balance" instead. I click a link to view "Check Card Holds", which also are counted against the "Available Balance". The number on this screen change frequently, such as a cashier erroneously double processes a transaction and recalls one of them, or the tip for a pizza delivery has not been added in yet. The holding transactions are calculated into the Available balance as-is, regardless of any errors or incompleteness in the transaction. Finally, there is an invisible, unnamed balance that also affects the Available Balance. These transactions make less money available to me without telling me what the transactions are. If I go to the bank, anyone with a computer can tell me what those transactions are.
I am currently showing -35.46 Available with the last transaction being a $35 fee. My posted balance is several hundred dollars, and indeed, if I add up all of my unprocessed transactions, I will be under by 46 cents. The problem is that I have already bounced for some mysterious reason, and that fee will cascade tomorrow into several hundred dollars of fees for all of my unprocessed transactions.
The culprit is the Available Balance. Even though funds are no longer available because they have been applied to my processing transactions, when those transactions process, they will not be ushered safely across the void into processedness by the money reserved for them. Instead, they will bounce because the very funds reserved for them are not available, due to the funds being RESERVED! The bank account almost literally is trippiong over it's own two feet!
Unerstand who you're doing business with
Number one Banks are businesses, and they try to increase profit.
There are three categories of profitable customers.
1. The wealthy - They make banks a lot of money, just consider how much stuff they get for free.
2. The quiet customer - They rarely or never cause a bank to spend its most expensive resource (People); These customers do their own work instead of a bank employee doing it for them. (Most Banks marketing efforts taget these people, they make the bank a little income, with very little expense.)
3. The overdrafters - A lot of us who don't keep track of our accounts. Overdrafters cause a lot of behind the scenes work, and so banks figured of how to get them to re-imburse the expenses, additionally as people get conditioned to the NSF fee it has turned into a major profit center. (example, one Bank sent me an advertisement that they'll waive my first NSF fee - Hey, just because I rent an apartment.)
Since I don't know how to make a lot of money, the only advice I have is a method to save some money on fees. It's a lot easier now with on-line banking and electronic transfers.
***Solution***
My Bank didn't offer a linked account (one that automatically covers overdrafts), and I didn't qualify for their line of credit, so I had to get creative.
1. Mentally view your checking account as having a minimum balance. (I know it's hard to not touch that money - view it as an insurance policy against NSF fees) $200.00 might be enough, for me it's my rent payment. (I used some overtime pay and my tax refund.)
2. Open an account at another Bank (I opened another account at the same bank, it was too easy to get at the money) that you only use for emergency reserves (note read the fine print and avoid fees) - Link that account electronically to you main account. - Deposit at least $35 (I did $20 per month automatic transfer) per month into that account (yes the amount of a NSF fee)
3. Figure out a method to track your account balance DAILY(yes every day), Internet; Telephone (I called my banks automated system daily); ATM; Go into the bank and ask a teller, or keep a register.
4. If you go below your minimum - Tranfer money from your other account. and wish I'd thought of this "charge yourself" $35. (Total transfers when you get next pay check and pay that back to your reserve account)- Note: I had to do all of the work, I would make a transfer via a phone call, or if it was a rough month, in person (Banking law says I can only make 6 transfers out of my savings account, - Supervisor at the bank explained to me, I could make a transfer in person as many times as I wanted.)
5. Don't write a check until after you deposit the money that your spending, What floats also sinks. Note my Bank made my funds from deposited checks available the next business day.
6. Learn who the supervisor is at the local bank, be willing to ask for help. - If you ask they will explain NSF policy, and you are viewed as a good customer, and when you make a mistake they will help you.
I know it sounds complicated, but I didn't balance my checkbook for years, and NEVER paid a short check fee to the Bank
Post new comment