Here is an article I wrote for the college newspaper about a year ago (Fall 2009). Since then the law has passed and now banks have to offer customers an option to "opt out" of the overdraft fees. Yeah!
I committed a “card”-inal sin! Despite being a graduate student in Economics, I have allowed myself to overdraw funds from my checking account at First National Bank; the CSU Ram’s bank, the bank where I am “always first!” There cannot be any excuse for my irresponsible behavior; my inability to balance my checkbook even though it was due to extraneous circumstances. The thing that really bothers me is not that the bank has charged me with such scandalous fees but that they are getting away with such actions.
Well, that is about to change! The Wall Street Journal reports that the FED, the central bank of the U.S., has put into place rules that will curtail banks ability to “hit customers with fees for overdrafting their accounts” (Fed Slaps Curbs on Overdraft Fees, www.wsj.com, Nov 13th, 2009). This rule will go into effect on July 1st of next year. I have already paid dearly for my error. So, I am writing this merely to inform my fellow Rams of the danger that lurks in the shadows of the Lory Student Center. Here are a few facts that you need to know about your accounts:
• Your debit card will go through even if you have no money (or not enough money) for transactions. In other words, the card will not be declined because of NSF (nonsufficient funds).
• So, if you bought a coffee for $1 then the bank will automatically enroll you in an “overdraft program” and charge you $36. In fact the Federal Deposit Insurance Corporation (FDIC) found in their research that “75% of banks automatically sign customers up” for such programs (see Executive Summary at http://www.fdic.gov/bank/analytical/overdraft/). The research found that in some cases “customers were not given the choice to opt in or out of the automated program.” An educated guess says that we are part of those “some cases.”
• FDIC reports that the “automated overdraft fees assessed by banks ranged from $10 to $38, and the median fee assessed was $27.” I guess we, with a First National Bank account, get the short end of the stick there as well. The NSF fee for First National Bank is $36. Note that this fee is applied to each transaction. So, if you used the card to buy a cup of coffee for $1 in the morning before class, in the afternoon at the library, and then a cup of decaf in the evening, your total for that day is $108 in fees and $3 for coffee. That coffee better taste good as the taste of the letter you will receive in a week will be bitter!
• The FDIC research finds that “a minority” (about 8%) of banks did inform consumers that funds were insufficient,” which allowed the customers to avoid these high fees. This courtesy call, clearly demonstrated by my ordeal, is not provided by First National Bank. We can’t blame them for thinking about their bottom line, even though the burden falls on the customer. After all, the WSJ article reports that banks bring in “$38 billion a year when customers overdraw their accounts.”
I think because of a few bad apples, banks and businesses get unfairly criticized. However, blatant robbery at the student center, in broad daylight, directly underneath everyone’s nose, does provide fodder for the criticism of the ethical disdain shown by these businesses. Actions such as this are not only startling but also disingenuous. It makes me question my allegiance to First National Bank as a CSU-RAM and doubt the slogan below the big smiling face of the Bank’s President that reads, “You’re Always First With Us.” Really?
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