Banks had to find some way to offset the tens of billions they lost on their idiotic mortgage bets, and the taxpayer bailouts weren’t quite cutting it. So they raised their overdraft fees.
Saskia Scholtes and Francesco Guerrera, FT: US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s, according to research. The fees are nearly double those reported in 2000…
The most cash-strapped customers are the hardest hit by such fees, with 90 per cent of overdraft revenues coming from 10 per cent of the 130m checking accounts in the US. Regular use of overdrafts is most common among consumers with low credit scores…
The highest overdraft fees were charged by the largest banks, said Mr Moebs. At banks with assets greater than $50bn – a group including Citigroup, Bank of America, JPMorgan Chase and Wells Fargo – the median overdraft fee is set at $33…
At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350. Failing to repay the overdraft within a few days results in an additional $35 penalty.
And how do the banks defend this? It’s all about risk. They’re taking a huge risk paying those overdrafts, apparently:
“Overdraft fees are there for a reason, we take on a lot of risk,” a senior banker said.
So it’s just risk. Well then how about just capping the overdrafts and applying a reasonable interest rate then?
(A 15% annual rate on a $100 overdraft would be about $1.50 a month.)
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