Consumers ripped by banks, yet we’re in a credit crisis?
Of your checking account, that is. Last year, congress approved a bill (on behalf of the big bank lobbyists), that would allow for instant debiting of your account when you wrote a check, which basically meant that you couldn’t count on writing a check and then depositing enough to cover it when it cleared in a couple of days. Of course, this bill doesn’t work in reverse.
In other words, the bank can wait on a check you deposit to “clear” before allowing it to be “available” to count against the checks you’ve already written. This can take anywhere from 1 to 7 business days, and it ALWAYS works in the bank’s favor. What’s truly criminal about this whole scheme is the fact that virtually any bank can electronically transfer funds to or from another bank and make your deposit available immediately. But, evidently what’s good for the goose is not good for the gander.
Now, throw in the exotic fees for covering a check you’ve written, thinking that the deposit you made will cover it, when it overdraws your account. The national average for such a service, even the so-called “overdraft protection”, is $29 per check. But we’re not done yet. Say you write three checks for 4.99, 57.99, and 129.00 on three consecutive days. The next day, all three checks come in. Your deposit is not “available” yet, and so your actual balance is around 90.00. Your bank will count the largest check first so that all three checks will overdraw your account, and you’ll wind up paying almost an additional $90 for this great convenience they were kind enough to offer you.
If you’re confused, let me just say it flat out. Your bank will screw you over any chance they can, thanks in large part to the impotent regulation of the banking industry by our government. But hey… at least the economy is booming!
And if that wasn’t bad enough, we’re beginning to see signs of the banking system pushing towards doing away with checking accounts altogether. Has anyone else noticed how difficult it is to write a check these days? And I’m not just referring to places like the Quick-E-Mart either. The other day I made a purchase at a national chain. The total was over $50, so, after providing them with my driver’s license, and then watching them punch in the bank routing number and account number, then running it through one machine, then through the register itself, I still had to wait until they tracked down a manager to sign off on it. The whole process took about 7 minutes. Meanwhile, I had a line of customers behind me who seemed to regard me as a child molester or something. Two days later, I made another purchase for around $70, used a credit card, and was out in 30 seconds.
And now we see the wonderful commercials that show the smoothly running machine of commerce in various settings like a fast food resteraunt, garden store, or coffee shop, where everyone dances around in a ballet of buying prowess as one by one they tap their debit or credit card against a little box set next to the register. Then someone writes a check, or even pays with cash (gasp!), and everything comes to a screeching halt as flowers wilt, storm clouds brew, and flying food misses the intended target and winds up hitting the floor, and the offender is given the evil eye until the transaction is complete and the great cogs of industry can once again churn away.
Mark my words. This will only get worse, and the day will come when check and cash users will indeed be looked upon with scorn (which is funny, because it used to be the other way around), until eventually we live in a totally plastic society. Here’s another prediction. While debit cards are now being offered by banks at no cost, with no cost per transaction, as soon as this plastic revolution is over, you’ll be seeing more and more creative ways of charging you and over-charging you for the service.
And don’t buy into the spin they’re putting on how much better and safer credit cards and debit cards are either.
The banks and financial institutions may try and convince you that Credit/debit cards are much safer than checks, but the reality is quite the opposite. After doing some research about the costs of fraud in the U.S. for both credit/debit cards and check fraud, I’ve discovered the following:
It appears (both from speculation and from other reports) that the credit card industry is VERY tight-lipped about the exact amount lost each year due to fraud. What I can report is that in 2005, of the 350 BILLION dollars in fraud losses tracked by the FBI, the agency reports that the MAJORITY of the total fraud losses is attributable to credit card fraud. So let’s be more than fair and cut that 350 billion dollars in half. Total credit card loss due to fraud: 175 billion dollars.
In 2005 the reported losses due to checking account fraud/bad checks totalled 15 billion dollars. The majority of that total resulted from fake payroll checks or non-existent accounts. Very little was from compromised existing individual checking accounts.
Now, I’m no conspiracy theorist, but this whole thing smells pretty bad when you try and figure out why the financial industry would back the credit/debit system when the losses are 10 times that of checking accounts, and why businesses are becoming more and more reluctant to accept checks. I’ll tell you the REAL reason banks want debit cards to become the standard.
Look at your debit card agreement. Do you see anything important missing in there? How about account protection? My guess is, you either see that you are totally liable for the full amount if your card is stolen or cloned, or, if you’re lucky, the first $50 of loss is covered. In other words, the protection against illicit charges or theft we’ve enjoyed with checking accounts and credit cards is NOT being carried over into debit cards, which means the burden of theft will no longer be on the banks but on the users.
If that isn’t bad enough, there’s another nice little ploy that can drain your balance with overdraft fees: The Freeze. If you use your debit card for certain services, such as reserving a hotel room or renting a car, the hotel or rental service will often immediately freeze a substantial amount in your account to cover the full amount of your room fees or any amount of potential loss. If your account balance goes below this reserved or frozen amount, you incur overdraft charges at your bank.
The bottom line is always profit. We’ve seen that in the recent housing crisis, as banks and lending institutions (funded largely by bank investments) got greedy and bent the rules to increase profits. Debit cards mean less hassle than checks, because no one needs to handle or enter any paperwork. Less paperwork (automation) means more profit by reducing payroll, but that’s just the tip of the profit iceberg. They can and will play the same games with your debit transactions as the currently do with checking accounts and worse. They already are.
Here’s a few tips that you can use to keep yourself from getting ripped off by your bank, and even a way to get BACK some or all of your overdraft fees.
- NEVER use your debit card in a way that results in you not entering a pin number. The transaction might result in a freeze. Even gas stations have the ability to place a freeze over the amount of your purchase if you don’t enter a pin number because the money is not deducted immediately from your account. They do this to cover any potential loss just like a return check charge, but usually at a much higher amount.
- Don’t use a debit card to reserve a room or rent a car, equipment, make a down payment, etc. Definite Freeze.
- Change your pin number often, and check your transaction record daily. Report any suspicious activity immediately.
- Don’t use a debit card.
- If you incur overdraft fees on your checking account, call the bank and plead your case. There’s an “unwritten†rule at most banks that if a customer requests or pleads for a removal of overdraft fees that some, and sometimes, all overdraft fees will be refunded, at least upon the first occurrence, and often beyond that if there is a substantial period of time between occurrences.
- Be creative when you ask for a refund of your overdraft fees. Plead illness, hospital stays, family emergencies or whatever. If the bank can be creative, so can you.
If you hadn’t noticed, not all credit cards are created equal.  Armed with fiscal responsibility, knowledge and a bit of common sense, your next step is to do a balance transfer  and start that business you’ve been planning.  Our business credit cards will help you get your dreams off the ground.
