PhilMur's thoughts on biz/tech/money/life

The service the banking world provides in holding money and clearing monetary transactions is critical — this really does go without saying. And yet, for such a service most of us pay little or no fees on checking accounts these days.  In exchange for virtually free banking, with most banks you will probably be limited as to the number of teller deposits you can do in a month, will pay for the cost of new paper checks, and you may experience other inconveniences. The truth is, however, if you follow the bank’s rules, checking account and savings account banking activities are for the most part benign, inexpensive, and even boring activities.

But… watch out!  Many banks are struggling to return to profitability as a result of losses on loans their borrowers are unable to pay back – mortgage loans, auto loans, business loans, etc. etc… What this means is that, even though a typical month or even year may pass in your relationship with your bank of choice without incident, when you do slip up, they may not be very gracious.  Don’t expect overdraft fees or other costs to be refunded to you simply because you ask.

The NY Times had an article in today’s issue entitled “Overspending on Debit Cards Is a Boon for Banks” where they warn consumers against the fees they could run up against when using a debit card and things go wrong, and the journalist makes the astute observation that “debit has essentially changed into a stealth form of credit”. The article discusses the case of a checking account holder and debit card user who had very little money in his checking account, charged several very small items on his debit card, and got hit with $35 fees for EACH transaction, most of which were just a few dollars each. I have had this very same thing happen to me, and like the person in the article, I could not get back much of the $300 or so of fees that hit my account as a result of just a few small transactions over the course of two days.

The bottom line is this: when banks are able to hit you with fees right now, according to the terms of your checking/savings account or credit card, they are going to do it and they won’t give much, if any of them back. Because the truth of the matter is that many banks are relying on such windfalls to prop up their earnings performance — this is to be completely expected right now, even if it is frustrating to us consumers and even if the practice is borderline on the ethics scale.

So, if you interact with a bank in any way (as you should!), just be very aware of the fees you could be subjected to in the event of checking or debit card overdrafts. Remembering to deposit that check on time has never been so important.