Banks Make $50 Billion A Year From Fees

Things seems to have gotten out of hand when banks are raking in $50 billion a year just from service charges, MSN reports. Consider how banks maximize over-draft charges:

In recent years, changes in federal laws have all but eliminated “float” — the time it takes for a check to clear from the writer’s bank account. What used to take days now often takes hours or less. What hasn’t been speeded up is the time it takes for deposits to clear and be available for your withdrawal.

In other words, your money goes out faster than ever, but comes in as slow as ever. Which leads to… overdrawn checks. Which leads to… nice, juicy bank fees.

Fee-generating tools at banks’ disposal include charging for “potential” overdrafts, offering “courtesy overdraft” protection, and charges for using personal-finance software.

Read the whole piece how they’re working to turn your money into their money, and what you can do to fight back.

Maybe grandma wasn’t crazy to stuff it all in the mattress… FREE MONEY FINANCE

When Banks Turn Evil [MSN Money]
(Photo: zakgollop)

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  1. enm4r says:

    And yet, none of this excuses someone paying with money that they don’t have as available funds in their account.


    There is also a noticable difference in how fast checks deposit. While it is true that they don’t deposit as fast as they withdraw, anyone who says it takes the same amount on average as it did 10 years ago has an extremely biased sense of time.

  2. quantum-shaman says:

    How is it that the checks don’t deposit as fast as they withdraw? Because every deposit is, of course, a withdrawal from somebody else’s account. That makes it seem to me like the banks have engineered any “float” to be clearly in their favor. Since banks are basically creating money out of thin air, you’d think they would throw the little people a bone and let them benefit from the float. But no.

  3. SaveMeJeebus says:

    Is USAA the only bank that has “pending deposits” that you can spend a day before actually being paid w/o overdraft? And also the ability to scan checks online for instant deposit? I guess that is the difference between for- and not-for-profit banking–you can’t serve two masters (shareholders vs. customers). Credit unions are also in a league of their own as well.

  4. enm4r says:

    @SaveMeJeebus: Yes, I think USAA is the only current bank to allow you to scan your own checks. I’ve never used it, but I would hook up my scanner if I felt like the 3-4 days it takes in the mail were too long. I honestly liked the QuickPost envelopes better, but they were probably more expensive overall.


    @quantum-shaman: I imagine the bank’s excuse is that it would have something to do with the way checks are credited/debited.

    1. You write a personal BoA check
    2. Give to me, who banks at USAA
    3. I give to USAA
    4. USAA communicates with Federal Reserve Bank
    5. Federal Reserve Bank debits BoA (this is when you see the funds transfer)
    6. USAA receives notice the check has cleared (this is when I see the funds in my account)

    So really, you’ll always have the debit posting before the credit, which is the way it should be. There shouldn’t be a time when I see the money at #3 when you don’t see the money missing until #5. As a liability, it makes more sense for neither of us to have the money for a short time, than for both of us to have the money for a short time.

    That will never change, but what should change is the day or two lead for each step after #3, so that they become as instant as possible.

  5. KenyG says:

    And how much are they making from ATM fees?

  6. The Bigger Unit says:

    Gotta love Canada. I deposit checks from my US bank account to a bank in Canada to make car payments…and they post immediately. Funds available, even though the check doesn’t make it down to the states to post in my account until like a week or two later. It’s great not having to wait 2 days, and I imagine the lack of waiting period is great for people who live paycheck to paycheck.

  7. ElizabethD says:

    Is that artwork a Banksy? (how appropriate, if so!)

  8. saigumi says:

    Actually, this is a problem I have been having with Commerce NA for a while. It all started a few months ago when my home loan took out two payments one month on accident, which of course caused a lot of stuff to bounce. Well, a lot of these payments were $2 for things like lunch or whatever and each got a $30 fee slapped in there. I’d try to work up some more cash, and put it in but the fees kept overriding the cash I was putting in.

    The worst of it was, I handed them $2000 in cash at 1 PM on a Thursday to try to get everything straightened out. It took them until Monday-Tuesday Midnight to put it in… with a few more automatic payments I had set up failing,getting fee’d and return.

    All in all, I had over $3000 in fees…. and now I have a new bank.

  9. mac-phisto says:

    @enm4r: your logic is infallible (except that no “notice of clearing” is given – just a “notice of not clearing”). however, let me ask you this:

    you & i exchange checks for the same amount ($500) & deposit them on the same day at our respective institutions. will your check to me be available by the time my check to you clears? in almost every case no. & the same goes for you.

    so the bank has succeeded in almost completely eliminating their exposure to risk for check loss, maintaining their ability to collect on float & increasing their income from fees in relation to this reduced risk.

    nice.

  10. enm4r says:

    @mac-phisto: I was merely trying to envision the response given by the bank, as to why there remain some float on the credit side, but not debit.

    Interesting that no notice of clearing is given. I was under the impression that the bank was notified either way. In which case, I almost understand moreso the bank’s delay as they have to allot a minimum time in waiting for a reply that might never come. I’m not sure of what the “maximum wait time” that it would take to learn of a bounced check, though I’d assume most happen at most 3-5 days. That means that after the 2-3 days the bank holds my funds, they’re exposed for the remainder of the time. I think it’s unrealistic and unreasonable to ask the bank to be exposed from the second I deposit the check.

  11. swalve says:

    mac-phisto: Of course they’re eliminating their risk, it would be silly not to. How much do you pay your bank for your checking account?

  12. mac-phisto says:

    @enm4r: there’s an “assumption of clearing” within 48 hours, but this gets really convoluted due to the fact that check 21 is voluntary & there are still many institutions that don’t take part due to setup costs & higher processing fees for paper items processed electronically vs. paper items processed using the classical “courier” method.

    what does this mean? until banks are near the 100% conversion mark, don’t expect hold times to change. until then, realize that even though a bank has received credit for your deposited item, they have the legal right to treat it as pending under the guidelines established by regulation cc.

    @swalve: well, i only belong to credit unions – the checking is free & my checks are available same day in almost every case (& neither of my credit unions use electronic check processing). despite their continued exposure to risk, they consider it “good business” not to hold checks to the maximum length allowed by law.

    you’re right insofar as they’re living up to their responsibility to protect the interests of their investors. whether or not their compromising their ethical responsibility not to screw their customers is up to you.

    & before you say it – i know. they’re a bank. they don’t know what “ethical” means.

  13. wezelboy says:

    @ElizabethD: It definitely looks like Banksy

  14. Trackback says:

    I have become increasingly turned off by big banks (I use Wells Fargo). Maybe it’s the 80% of my friends who hate dealing with their banks.

  15. Trackback says:

    Homeland Stupidity looks at the heckuva job FEMA’s still doing; T-Sides gets loud and heavy, then adds a couple more versions of “These Days” to the pile; Ickmusic has a killer boot two-fer: Live Petty & The Heartbreakers (1980) and live Miles Davis (1971); Consumerist looks…

  16. cleaninglady says:

    I have direct deposit with Wachovia the money is in there or considered available as of midnight on the 14th. (for the 15th) Anyway, a check goes thru (they say on Monday) I dont have proof of whether it was monday or tuesday. I check my balance every day and Mond and Tues I had a positive balance in both available and checking. Weds morning I check online and theres an NSF fee? Well I figure worst case I got charged the 35.00 but they will redeposit the check and it wont be late. Wrong, its been 10 days now. They are a bank cashing a check made out to them and they dont redeposit, even when they know you have money in the account. What a joke…So I called them and they informed me about how they send it back regular mail. Its sure taking a lot longer for me to get it back then it took them to get it and deposit it in supposedly less than 2 days. Its been 12 days now and I still dont have the check. We have our checking and savings and morgage with this bank, I will switch to a credit union in a heartbeat.

  17. AmyCU says:

    On a related topic:

    A woman received a child support check from a government agency. She deposited the check, thinking it would be treated like any other government check. The next day, she paid bills. But, without her knowledge her bank held on to the funds from the government-issued check longer, and, as a result, her bill payments bounced. One check that bounced was a large sum to a credit card company. The company charged her an enormous late fee.

    Even though banks receive funds much more quickly, due to faster processing times, they have no incentive to reduce the check holding time because a law (Expedited Funds Availability Act) protects the banks that make consumers wait for their funds. We have to change this law! Please help by telling Congress and the banks to reduce check hold times. If we’re successful, we get our funds faster, can pay our bills more timely, and save lots of late fees.

    Consumers Union is running a campaign to change the check holding times (https://secure.npsite.org/cu/site/Advocacy?cmd=display&page=UserAction&id=1381). To talk to the Federal Reserve Board, your bank or any other creditor about check holding times, check out CU’s contact list (http://www.consumersunion.org/pub/core_financial_services/001370.html) how to send your complaints.

    If you are not sure who are your Congress representatives, check out “Who Represents Me?” (http://cu.convio.net/site/PageServer?pagename=Whorepresentsme)

    The more they hear from us the more likely we can win this!

    Amy
    FinancialPrivacyNow.org
    A project of Consumers Union

  18. gtr225 says:

    Hey Commerce Bank will actually make payroll checks available to me as soon as I deposit them (w/a teller). Regular check deposits clear overnight (as long as they are deposited before 6pm).