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I often recommend people go hug their bankers. (with tongue in cheek, of course). But maybe your banker should come and hug you. Why? Because some of us out here are “cash cows” for the banks.
Banking has changed during my lifetime—a lot. I can remember when banks were considered your “friendly neighborhood bank” where everybody knew your name. Those were the days when you could go into the bank and open up a small Christmas savings account in preparation for buy Christmas presents, etc.
Those friendly neighborhood banks are a thing of the past. Banking is big business. And big money. Instead of carrying around a check book people now carry a credit card and a debit card.
The debit card takes the place of the checkbook. More and more people bank online. We’re all numbers now to the banks not people with faces and names. How many of you can name the manager of your bank, or even a teller at your bank?
If you watched the video about the 17 year old soldier, using his debit card to buy pizza when he didn’t have enough money in his checking account to cover the purchase the pizza joint happily swiped his credit card in payment and the bank happily approved the purchase even though the soldier didn’t quite have enough money in his checking account to cover the cost. So he overdrew his account.
So the bank, Bank of America in this instance, tacked on a $35 penalty charge to the $8.00 pizza purchase. That pizza then really cost the soldier $35+8=$43.00.
That $35 is pure profit to the bank. Those “overdraft fees” which could total $38.5 billion this year. Banks classify the fees as “loans.” Not bad for the bank. Next time the soldier deposits his pay check the bank will repay itself for all those outstanding “loans” leaving the soldier with a smaller account balance to begin the next monthly cycle. Those same banks which we all bailed out with TARP money last fall. Banks justify their end of allowing the overdrafts as a service to their customer who they don’t want embarrassed at the time of the purchase.
Of course that 17 year old soldier should have kept up with his bank balance and known he didn’t have the $8.00 for the pizza when he bought it. But I don’t think schools teach kids about balancing check books and the consequences of overdrawing one’s checking account. I doubt many parents teach their kids about it either, if the parents even know.
Moebs Services projects that the industry will make $38.5 billion off the fees this year, up from $18 billion in 1999, in part because the average fee large banks charge for each overdraft has climbed by $10, to $35.
Congress to the rescue!
But congressional Democrats, who pushed through new restrictions on credit cards this spring, now are promising a crackdown on overdraft fees, using words like “criminal” and “rip-off” to describe the practice of letting people overspend and then charging them fees without warning.
I can hear the clamor already—another government agency to police banks. Bigger government. More taxes. Another Czar. The American Bankers Association will resist any Congressional intervention. Increase campaign contributions, unleash an army of lobbyists on the senators and congressmen/women. The usual Washington picture.
Banks are corporations. Corporations are in business to make profits. Wall Street expects banks to increase their profits year over year else the shareholders will begin to sell off the stock diminishing the value of the bank. Corporations are not interested in the soldier’s failure to monitor his bank account. Corporations are interested in those $35 overdraft fees.
As Pogo says, “We have met the enemy and he is us.”
[Source: MSNBC]
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