Four Ways Banks Wring More Money From You
Let’s forget credit card companies and the various ways they conspire to squeeze more money out of you for a moment. That’s a dead horse that’s already been beaten too many times with no resolution in sight. Instead, let’s focus our attention on banks. I can accept the fact that burying my money out in the backyard is not the acceptable way of “making it grow”. However, what I can’t swallow is all the sneaky, underhanded ways banks think up to use my money for their profit.
Fees for Foreign Transactions
Anyone would be excited to go on vacation, right? Most of the time, credit cards and travelers’ checks are sufficient to cover the cost of any expense incurred, and you won’t have to worry about not having enough money on you.
The bad news is, credit card issuers can charge up to 5% of the expenditure to grant you the convenience of using your own credit card outside the country. Not only that, there’s nothing stopping other banks from charging you a few extra dollars when you make a withdrawal from their automatic transaction machine, on top of the fees your own bank charges you. This adds up over time and can give you a nasty surprise. It took a class action lawsuit in 2006 to compel banks to disclose these “transaction fees” on account holders’ statements, and provide cardholders with an avenue to demand refunds (http://www.ccfsettlement.com/). However, it still doesn’t stop them from imposing the fees on the consumer.
Travelers’ checks are a good idea in case of emergencies, but remember that you’ll also have to buy them at face value from your bank, and the purchase is also subject to a fee. Cashing one also means having to fork out yet another processing fee. It kind of makes me rethink the whole idea of convenient cash.
Charges for Account Maintenance
I realize that banks know that storing cash at home is impractical, but why do they make it so damn hard for you to like the alternative? Banks welcome your cash with open arms, but they also charge you for taking care of your money, which I think is plain ridiculous. Let’s not even get started on the charges leveled on reactivating dormant accounts.
$8 a month, or a one-off reactivation fee may not seem like much, but when you take into consideration the number of account holders a bank has at any one time, then you’re looking at a pretty impressive sum indeed. Further, you’d be hard pressed not to feel murderous when you contrast the interest rate warranted by your own account against the amount earned by the bank off your money. So, vote with your feet and leave, or find a way around it.
Overdraft Fines
We’ve all been there before, or know someone who has – you’ve set up your account so that transactions for rent, utilities and suchlike are automatically deducted each month. Only, you don’t have enough money in the account just when those deductions are made, hence the overdraft status.
Ordinarily, this can be accepted as your due for not keeping an eye on your finances. On the other hand, being charged an overdraft fee for every transaction tends to test a person’s patience. Banks do this to make even more money off you, of course, but it borders on the absurd when an account holder is already struggling to stay afloat and can’t afford to pay off the fine in the first place. Not only that, some banks also charge you for leaving your account in overdraft for more than 5 days. Some banks may waive the fee, but those tend to be few and far between. The best protection against this is by preventing its occurrence (http://www.federalreserve.gov/pubs/bounce/).
Letting Your Account Slip Into Overdraft
At this point, we should be inured to the curve balls banks pitch at us. However, don’t you find it odd that a bank doesn’t warn you that your account is about to slip in the red? Incredible as it seems, there are many banks out there that will stand idly by as you spend more than you have, then gleefully penalize you for it. It’s nothing personal; just business.
This is why it’s important to clarify a bank’s stance on the issue when opening a new account. It’s likely there would be fewer debtors if more people knew they could disable the option to overdraft an account. Don’t let banks capitalize on account holders’ inability or ignorance of checkbook balancing (http://www.checkbookregister.org/checkbook-calculator/).
So, what does this all lead to? Banks can wield this much control over consumers because we’ve voluntarily handed our money over to them for safekeeping. There’s not much to like about that, but keeping yourself in the know about the tactics they come up with can help ensure that the money you earn remains yours to spend.
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