Drop the (Bank) Charges - We're Innocent!
I have been using banks since I was 16 which is a long time and I decided that it was time to have my say. They have had a very strong influence in my life and not always in a positive way. My bank and I have had quite a turbulent relationship. When it is good, it is OK; when its bad, its awful. The bank charges saga has got me once again feeling the need to rant at the sheer injustice of it all. It is estimated that in the United Kingdom that banks make about £2.6 billion a year from overdraft fees - alone. That is about £150 per person which seems a little steep. In the United States, it is about $17 billion (about £10.2 billion) which is just unthinkable. I cannot imagine how this can be...it seems unjust. There are those who will say that you should budget better and not go over any agreed overdraft facility with your bank. That is very true, but sometimes it is not as cut and dried as that. Despite budgeting, there are still times when finances still fall short especially in the current climate and the overdraft facility is needed - to pay bills, to do the grocery shopping, to put petrol in the car (if you haven't already sold it!) and carry out the everyday things that they need to do to survive.
Having a bit of a chequered past with my finances especially during my university days, I know what it is like to be the subject of overdraft and credit card fees. I appreciate that banks, like any other business, need money to survive but some of the things that they do leaves me speechless (which is not easy to do, I can assure you!). I mean, does it really cost £25 ($35 approximately) to administrate an account that is £2 overdrawn? I do not think so. I was reading an article on the BBC which states that it costs the bank about £4 ($6) to do so. Of course, a representative of the banks rejected this saying that so much was not taken into consideration. Perhaps this is the case but if they were banks were more transparent with their customers. They should not bury the explanation in 'bank-ease' and quasi legal-ease and then adopt an 'we told you so' attitude when their customers complain. I agree that there should be a penalty when a customer goes overdrawn, but the issue is one of moderation and proportionality. The charge should be enough to cause the customer a little pain so that they know not to do it again, but not too much that they have to resort to borrowing to cover the costs. I find that the banks will charge your account causing you to go more overdrawn; the customer struggles to pay, remaining overdrawn; the banks then attach more fees which the customer cannot pay and the dreadful cycle continues. That cannot be fair - give the customer the chance to redeem themselves before bringing out the financial big guns.
One of the most disturbing things that I heard is how the banks in the USA can directly (and indirectly) cause the customer to go overdrawn or to remain overdrawn. Two of the methods used are:
* Many of the banks are changing their policies about debit card transactions. Before, if you did not have enough money in your account, your card would be declined and that would be the end of it (minus the slight embarrassment at the store or institution where your card is denied). But instead, they are approving the transactions and then charging for each overdraft. This is not something that a customer found out, it is something that the Centre of Responsible Lending found. About half of all the overdrafts came from debit cards transitions and cash withdrawals for small amounts.
* Banks are clearing cheques from the highest to the lowest amounts. This can cause customers to overdraw more often which, of course leads to higher fees. So here is an example. If you have $250 in your account and then you write four cheques $200, $40, $20, and $10, then the bank would clear the biggest one first and then be hit for two fees rather than just one if the banks cleared the lowest one first.
That is not only morally unfair but it must be illegal and unconstitutional to boot.
In the United Kingdom, there has been a campaign for people to reclaim their credit card and bank charges back. This includes letter templates and specialist organisations claiming who almost guarantee success. Initially, the banks were paying some of the fees back (some more reluctantly than others) . Then there was the legal challenge made in 2007 over the fairness of the fees that the banks charged and two years on, it is still continuing. This is because the banks have been appealing the decisions made. So it could be another 12-18 months before any progress is made. So if you want to know more, please click on the following links:
So what should you do if you want to "fight the charges?" Well, let me just caution you that it may not be easy and despite what the campaigners may say, it may be some time before you see the results. You may be determined but so are the banks. For more impartial advice and suggestions, please click on this link. If you still want to continue, then here is a video from the Money expert, Martin Lewis to help you. I don't know how this will work in the United States but there are still some tips that could help you including letter templates.
Banks do have a right to make money and we, as customers do have responsibility to look after our finances properly. This is something that is undeniable. But it is not always easy to do sometimes especially when unexpected bills have to be paid. The current climate is making it difficult for normally financially responsible and disciplined people to be as prompt with their payments. What is called for is some flexibility and understanding on the banks' part and some comprehension on the customers' part that an overdraft and credit cards are not free money and they do have charges and interest attached to them. What I do object to is overcharging people and hiding charges in small, unreadable and sometimes incomprehensible terms and conditions. It surely does not cost £25 to administer an account that a few pounds or few dollars overdrawn and profiting from it to the tune of billions of pounds (or dollars). There are many lessons that have to be learned and the sooner they are learned, the better.
Let me know your views and stories...Take care and God bless readers
© Ngozi Nwabineli - November 2009