Loving the San Francisco Bay Area... Community development, urban ministry, trying to defeat poverty, faith, religion, politics, good music, the quest for the perfect pizza, the Yankees, motorcycles... All in a 'day's life'

Tuesday, April 08, 2008

Rubber check fees and why you should move your accounts to a credit union

CNN.com recently had a article on the fees in banking, credit card and cell phones. It showed how these fees are boosting profits and becoming a key part of profit margins for these companies. I would like to highlight the overdraft fee issue.  The article states:
- In '07, consumers paid $63 billion in credit card fees, over - $38 billion in bank fees (overdraft and other fees) 
- Credit unions often have lower fees than banks
- Being late with credit card bill can trigger fee of up to $35
- Credit card cash advance can carry 23 percent interest, plus fee
It began with a story about a pizza:
Terri Lovin and her husband, Harold, may have had the world's most expensive pizza ... at $117 a pie. No, it's not gourmet dining. A cashier charged the couple twice for the $22.50 pizza. That caused the Lovins, who live in Hawaii on a fixed income, to be overdrawn on their bank account by less than a dollar. And that resulted in multiple banking overdraft fees of $24 each.

And that's money the Lovins didn't have. So, the couple had to take out a payday loan to cover these fees.

"It was the most irritating, most expensive pizza I've had," says Terri. "I was in tears for days."

In many business transactions, such fees have become customary. And as the fees grow, so does consumer frustration.

"People are pissed," says Ira Rheingold of the nonprofit National Association of Consumer Advocates. "But they have no idea what to do. It's everywhere. It's become an everyday part of life."
Here's how it works: Most banks, when presented with overdraft items will pay the largest items first, then domino the whole account. An example would be if you have $100.00 in your account and write three checks: one for $5.00, one for $1.00 and one for $101.00. The bank would process the $101 item first, (most likely) pay and charge you an overdraft item fee. Then they would process the $5.00 check (producing the second overdraft fee) then the $1.00 check (third overdraft fee). 

If, like some banks can be, your fees are $34.00 than the total fees would be $102.00.

Community Trust Credit Union (as do many) would process the smaller items first, the $1.00 and $5.00 items (which would clear without an issue). We would then process the $101.00 item (which would be charged an over draft fee). Our fee is currently $18.00. So, your small mistake would cost you $18.00, not $102.00. 

(However, check with the CTCU agreements and staff to confirm. I'm speaking merely as a 'citizen' here and not as a employee of CTCU - since I'm not.)

One thing to also note: when you use your Visa or Mastercard debit card as a credit card, it's the same as writing a check. The above example would also apply to those types of transactions (where you don't actually write a check). 

This sounds like a predatory practice to me! To me, this clearly articulates just one more reason why you should have your banking relationship at a member owned, non-profit, deposit insured credit union! 

Why do banks do this? Because they made almost $40 billion last year on fees! The trend is for fees to continue to rise as banks try to recover their recent losses due to the sub prime market debacle. 

ATM Availability
While I'm ranting about the subject of banking - let me say one thing about ATM availability since it seems to come up all the time. Most credit unions are part of the 'co-op network' meaning you can do your business at most credit union ATM machines without cost. This includes withdrawals and deposits. You can also do your banking at most 7-11 stores free of charge. Also - Community Trust has a relationship with Bank of the West - so we can use any of their ATM machines. This literally increases our ATM availability into the thousands of machines nationwide!

Q.  So - when will you change your account to Community Trust or another credit union???

Even if you never bounce a check - wouldn't you rather be a part of an institution who's bottom line is the well being of it's members, other than making stock holders happy and fat? 

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