Wednesday, February 24, 2010
(graphic: personalmoneystore.com)
Banks are determined not to lose billions of dollars from overdraft fees despite the financial industry reforms adopted last year by Congress. Even though lawmakers have restricted the imposition of such fees on consumers who exceed their account balance, banks can still collect in these situations if they get their customers to opt in for overdraft protection. Between now and the summer, many banks will be aggressively badgering consumers to keep their overdraft protection, warning of dire financial consequences if they don’t.
Institutions such as Bank of America charge $35 per overdraft, which helps explain how the industry made $20 billion in 2009 on these charges alone.
Meanwhile, banks are pursuing other avenues to make sure they don’t lose money as a result of last year’s reforms. For instance, annual fees are making a big comeback, after largely disappearing 10 years ago. In the fourth quarter of 2009, 43% of new credit card offers came with annual fees, compared to 25% during the same period in 2008. Other tactics being employed include charging for paper statements, raising the fee on balance transfers and charging higher interest rates on new credit cards.
-Noel Brinkerhoff
Banks Apply Pressure to Keep Fees Rolling In (by Andrew Martin and Ron Lieber, New York Times)
Mixed Blessing: Credit Card Reform May Shock Some (by Eileen AJ Connelly, Associated Press)
Banks Gain $24 Billion a Year in Overdraft Fees (by Noel Brinkerhoff, AllGov)
The Insidious Growth of Overdraft Fees (by Noel Brinkerhoff, AllGov)
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