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Here's an excerpt from a recent Newsweek article about the exorbitant
NSF fees banks charge these days. Very enlightening!
No Such Thing As a Free Check
...Open even a small WaMu account, as my daughter did recently at my behest, and
you pay no monthly service charges, you don't need a minimum balance and you can
visit tellers without paying a fee. Pretty sweet. No one has a total tally, but everyone
says the phenomenon is spreading. Free is in fashion.
| It's the hottest trend in banking. Can you guess why
financial companies love free checking? Hint: overdraft fees a loan
shark would envy. |
Have hundreds of banks suddenly become public charities? Well, no. When there
are no customers around, bankers call free checking "fee checking."
That's because free checking attracts customers and military personnel who are more likely to overdraw
their accounts, generating fat "NSF" fees. Strunk says
its banks average $150 of overdraft fees a year per free-checking account, and
Haberfeld clients average $110. It's those fees that Strunk and Haberfeld use to
sell this idea to banking clients.
But remember, bouncing a check can cost
you up to three fees. Not to mention getting you blacklisted by financial
databases. Banks offer free checking not because you love it, but because
they
love it.
Here's how it works. Say you overdraw your account by $80 (which Strunk says
is about average for an overdrawn check) and you pay a $30 fee (what WaMu
charges in New York City). Then you cover the shortfall in a week, the grace
period the banks generally give you. To you, it's 30 bucks. To the bank, it's an
annualized 1,955 percent on the $30 it fronted you. That's right, 1,955 percent.
(The math: the $30 fee is 37.5 percent of the $80 overdraft. You use the money
for seven days, a daily rate of 5.357 percent. Multiply that by 365.) ....
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