Yesterday I said I was going to start my new series dealing with banks and why they suck. Today, I present with you the introduction.What is the single biggest problem with banks? The problem anyone making less than $50k a year most likely runs into?
Fees. Tons and tons of fees.
I was introduced to the "poor tax" system in 2002. I was only 17 and I had started my first checking account, thanks in large part to my first job that I took while starting college. Just like anyone with all this new responsibility and resources, I made the mistake of overdrawing my account. My assumption was that if I tried to go over my limit, my card wouldn't work. Instead, it did, and with a hefty price.
When it costs you $35 in fees to buy a candy bar, I think its safe to say its not only a problem but a tax on being poor. And throwing on another $35 fee on top of that for being over drawn, and you have a really, really, REALLY sick system.
This went on for a while. I would have months where I did nothing more than play catch-up and try to keep my account from going over the limit and months where things weren't just fine, they were great. This went on for about a year until I got so far behind that they finally just closed my account.
Over the years, much has been made about bank fees and how they essentially nickle-and-dime everyone who is just scraping by.
Now, lets just call this what it is: It's a poor tax. It's a tax for being poor. Forcing people to pay fees on top of fees for not having money is, by definition, a TAX ON BEING POOR. What, in all honesty, is the reason for this? They spend more money sending you a letter in the mail TELLING YOU you're over drawn then it most likely costs them to deal with your account.
So, a laundry list of the Poor Taxes:
- Overdraft Fee
- Overdraft Post Debit Fee
- Minimum Account Balance Fee
- Bounced Check Fee
- Fees for Taking Out Your Own Money
Lets run down these, shall we?
1. Overdraft Fee
Your hanging out with your friends one night and you decide to treat everyone to diner. Hey, it's no problem! You just got paid, just put in some extra cash, and you already have all your bills paid! Afterward, you head out and decide to buy a soda. The next day, you check your account. Everything's fine, until you see that while all your bills are paid and the dinner was fine, the fact that you bought a dinner actually put you over. You are now overdrawn.
Worst case scenario? You're not getting paid again for another 2 weeks. You're stuck with that fee for not having any money. Depending your bank, you're now are going to get charged that fee as much as DAILY. Some places will forgive it and let it go, but some will not and let you rot.
The Overdraft Fee, when re-occurring more than once a week, makes little or no sense to begin with. You have NO money. You're being penalized... for not having money! What, exactly, is it costing the bank to deal with this? The most they're spending is 40 cents to waste both your time and theirs by sending out a letter informing you that, guess what, YOU HAVE NO MONEY!
If it's reoccurring, it's even worse! WHY? Why charge the same fee on a daily basis for not having money? Why charge someone on a bi-daily basis? Why charge them at all for anything less than $10?!
2. Overdraft Post Debit Fee
We'll go with a different end of our last scenario. You just spent money on bills and food, and head out to work the next day. During the course of the day, you buy a soda, some chips, coffee... essentially, a bunch of little purchases. You should be fine, everything was OK the night before. Plus, your card is still working, right? You get home, decide to check your account, and are astonished to see you're not just over your account balance... you're REALLY over your account! Those little purchases you made, totaling only $12 in and of themselves, has just netted you an Overdraft Post Debit Fee of over $200!
Some banks are sneaky assholes, so let me explain: There's overdraft PROTECTION and overdraft POST-DEBIT.
Overdraft Protection is aimed at making sure that you're not embaressed when you go to the store and do something stupid, like go over your account. So with overdraft protection, you would have been covered when you bought that bit of stuff and just had to pay it back, and depending on the bank a fee for the service. In order to get this service, they do a credit check at some (if not all) banks. With poor credit, you can't get it.
With Overdraft Post Debit (though it has different names), you are FUCKED. The same person who was told they have a bad credit history and couldn't get protection will instead be able to get this. It allows you to not be embarrassed for getting turned down for a Kit Kat bar, but you are in turned charged for the service. The going rate is $35 PER TRANSACTION. Make a lot in one day, and it adds-up. Fast.
Its a little more understandable WHY this fee exists: If they're covering you to make a purchase made at a location, there are fees involved with it, but the fact that most places automatically enroll you in it, and even worse, charge you REPEATEDLY for it, is insane! Some places allow transactions under $10 to slide without a fee or a repeated one, but most places don't.
3. Minimum Account Balance Fee
Why? WHY does this exist?! You open a checking account and you pay your bills, you eat, you live. Sometimes your account isn't great, sometimes its not. If you're not making a lot, your average account balance may be anywhere between $200 or $10.
So why do banks charge you just to keep your money in their bank?
Most banks have student checking accounts, and the idea is that if you're in college, you don't have a lot of money. There are no fees for a monthly minimum balance, so we can easily rule out that they're needed to have an account to begin with. But WHY charge to have an account?!
4. Bounced Check Fee
This is the most understandable fee, but it can also be one of the most frustrating. Without going into a ton of detail, most banks will hold checks in order for smaller payments to go through. This practice allows for a large chance that it will, in the end bounce. When that's added with an overdraft fee... its really is ugly.
5. Fees for Taking Out Your Own Money
This is the largest problem, and its the one we all have to deal with. ATM fees (anywhere between $1 - $4!), fees to get a money order or cashier's check (anywhere between $1 - $10!), and they jut don't make any sense! Cashier checks and money orders are just other ways to sen cash itself! Its like writing a check, only they take the money straight from your account! WHY?
So what can you, as a consumer, do to protect yourself?
1. Don't carry your debit card around
It's a hard thing to do, and in some cases not a good thing, but on an average day you most likely don't need it. If you can, just carry cash around with you, and only enough for what you need. This will save you from a lot of the fees I listed.
2. Check your account daily
Most banks have online banking. Check your account daily and make sure you're still in the green.
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