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April Rudin Headshot

Bye Bye Big Banks ... We Want Choices

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In your mind's eye, you can picture it. Top banking executives gathered around the proverbial board room table discussing how they will increase revenue with the quickly falling interest rates combined with the number of loans decreasing. What do these great minds think of to replace the revenue? A combined loansharking operation and Ponzi scheme. How does it work? Here goes...

Large money-center banks decided that they would amend their policies and would begin processing the largest dollar transactions of a day rather than the chronological order in which the transactions flowed. Why? Its simple: this increases the likelihood of multiple small transactions each incurring overdraft fees. This, of course, is a structured way to maximize the fees incurred by a consumer for a single day. Brilliant and genius! Except last week a federal judge accused Wells Fargo of "profiteering" by creating such a layered intentional fee structure which inflate the fees at the "point-of-sale." It was the policy of most large banks not to disclose this fact but to automatically enroll their customers at the point at which they had insufficient funds. Just to clarify: at the point where a bank's customers had insufficient funds to cover transactions, the banks would overload the empty account with fees. So, in fact, if you were overdrawn by as little as $1.00, you could expect to pay up to $35 or so in fees.

The Federal Reserve has now halted this practice by forcing banks to refuse point of-sale purchases where there are insufficient funds. While this may create some embarrassment at checkout, it prevents consumers from going further into debt with each purchase by piling up bank fees.

Hallelujah! Now, many people will still opt-in for such a system but at least now they have a choice and furthermore, they are aware of the fees and consequences for this service. What are some of the alternative, more economic ways to cover overdrafts (it happens to the best of us!)

-Link your checking account to a savings account. If you have NSF (not sufficient funds), the money will be withdrawn from your own money in your savings account. Little or no fees will be incurred for such a transaction.

-Go online if you haven't already. Keep an eye on your balance via text alerts, mobile devices and the like. Know where you are in real-time; its easy.

-If possible, pad your account with some extra money to prevent embarrassment at point-of-sale. But familiarize yourself with the fee strucuture

-If you must, sign-up for overdraft protection from your bank but understand how it works and how much you will be charged!

Everyone should take a closer look and learn about more banking. Children should be educated from an early age to understand how saving money, lending money and commercial banks operate. We all know that knowledge is power. And in the words of Henry Ford, "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Perhaps it has just begun.

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