Beware the Credit Industrial Complex - The Fees they are a -chargin'

ttp://www.alternet.org/story/72522/
From "In These times"


http://www.alternet.org/story/72522/

My daughter is a freshman in college and is learning a lot, including how to manage her money. Recently, she got a powerful initiation into the predatory practices of banks -- a lesson more and more of us are learning each month. She made a miscalculation and thought she had more in her account than she did. When she went to make a withdrawal from an ATM machine, the bank let her, even though she was in deficit. Comerica bank continued to let her make such withdrawals, and charged her $32 a pop for doing so. A $4 charge at a coffee shop became a $36 charge with the fee. A $6 sandwich became $38. She had never authorized the bank to permit deficit spending. And she, like most people, had no idea that the bank would still let her use her card if she was broke. The bank doesn't tell you it will do this. Why? Because it's a huge source of profit for them.
Business Week reported on a student whose bank, Pittsburgh's PNC, allowed him to charge $230 on his debit card even though his account was in the hole. PNC charged him $217 in fees for the privilege. A PNC spokesperson says such a policy "helps our customers avoid embarrassment." The student said he would rather have been embarrassed than gouged.

In 2004, banks pocketed $32 billion in service fees, up from $21 billion in 1999. According to Business Week, such fees accounted for 76 percent of profits at the midwestern bank, TCF. Wells Fargo in San Francisco reportedly charges $2 every time someone with a low balance calls a service representative, and a whopping $30 an hour when a rep helps someone reconcile an account. Not surprisingly, the majority of these fees fall upon the poorest customers.

One out of five customers switches banks because he or she is so outraged by these charges. One estimate by Gartner Research shows that it costs banks less than 50 cents to return a payment request, while turning around and charging us anywhere from $25 to $40 for this "service."

read the rest of the article here:
ttp://www.alternet.org/story/72522/

but it might just teach her to use cash for small purchases like coffee and sandwiches.

It's really stupid to use a debit card for little stuff that mounts up quickly. It's better to have cash in your pocket so you can see how fast it's going instead of waiting for a statement at the end of the month to tell you that maybe you should have carried a thermos and made your own sandwich at home.

People who use debit and credit cards for purchases under $50 are playing with fire.

doesn't say it was a debit card. nothing wrong with debit cards, imo - the money is already there. it was probably a credit card. :shrug:

and that she ticked the box for "overdraft protection" when she signed up for it.

She expected the card to be declined when she reached the insufficient funds point.

Woops.

My advice stands no matter what kind of card it is, but considering her spending habits, she needs to cut a credit card into little bitty pieces and send it in before she's in real trouble.

;)

You see, way back when electronic banking was in it's infancy - it was being touted as a FREE service for the convenience of their customers. What better way to pay your bills -- swipe a card is FASTER than writing a check. Why carry CASH when you can carry a card.

I worked at Citicorp when they were developing the damned things. And always the emphasis on FREE.

Guess what folks -- you've been duped. BIG TIME. All those Visa ads with the kickass music and everyone swinging through the payment section -- just another sales pitch to get you to USE that plastic so the banks can keep collecting those FEES.

Banks originally paid depositors for the use of the depositor's money. Now they charge the depositor's FEES for the *ease* of using plastic.

WAKE UP.

For one, I absolutely refuse to do business with the megabanks unless absolutely necessary.

I prefer either small banks or credit unions - they treat their customers much better.

For another thing, I do try to build some savings - I know not everyone has the means to do this, but it's recommended if at all possible. For one, you have that emergency reserve so you don't have to resort to credit cards or predatory loans if your car blows up or you need to bail your uncle out of jail. For another thing, if you have a few thousand in the bank, for one, you can put most of it in money market accounts, CDs and such so the bank is paying you to rent your money. Also, since you have those thousands, those thousands can be loaned out to make the bank money, and gives them an incentive to be nice to you, so you continue to help them make money by keeping your money there.

There's a big difference between the way a bank treats a college student who has $30 in a free checking account, and a guy who has $10,000 in CDs put away.

Had it been an ATM card, she would not have been able to overdraw at the ATM. They still give "insufficient funds" messages when that happens. A debit card, however, that likely features a VISA logo somewhere on it, is a different beast.

Had it been an ATM card, she would not have been able to overdraw at the ATM.

This is not true. You can get the bank to turn off "overdraft protection" in which case your checks well actually bounce. Most of us who are responsible adults probably don't want to chance our rent/mortgage checks bouncing. It's better to pay a $32 fee than risk having the other possible consequences. Granted, those fees are ridiculous, but so is spending without knowing your account balance. NEVER let anybody auto debit from your account for bill pay. If you are going to use a bill pay service make sure that YOU are the one initiating the payments, not the other way around.

Is that banks are able to take your money without your permission, but if I go into my local branch and rob the place, I have to go to jail.

Not fair. I tell you, one of these days when I grow up, I want to be a corporation.

I don't know if that's changed in the 2 or so years since I opened a new bank account. It was a checkbox on the application. But even if it's an opt-out thing with some banks (or in some states?), it must be disclosed in the application to open the account. So must the fees associated with it, and the circumstances under which they are levied. Granted, opening a checking account is not exactly the same as signing a mortgage contract, but both are financial transactions requiring due diligence on the part of the people signing their names on the dotted line. Know what you are signing before you sign it - seems prudent.

And yes - authorizing the electric company or the cable company to debit your account is hella-stupid.

ATM card
From Wikipedia, the free encyclopedia
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For other uses, see Bank card.

In some countries: An ATM card (also known as a bank card, client card, key card or cash card) is an ISO 7810 card issued by a bank, credit union or building society.

Its primary uses are:

* at an ATM for deposits, withdrawals, account information, and other types of transactions, often through interbank networks
* at a branch, as identification for in-person transactions
* at merchants, for EFTPOS (point of sale) purchases

Unlike a debit card, an ATM card can only be used for transactions in person (and not by telephone, fax or internet), as it requires authentication through a personal identification number or PIN. In other words, it cannot be used at merchants that only accept credit cards.

In countries that don't have distinct debit cards (pure ATM cards without debit card function), such as Canada, an ATM card is also known as a "debit card".

In other countries: A cash machine card is used exclusively with cash machines. For making purchases, a debit or credit card is used instead. A physical card may sometimes be a combined cash machine card, debit card and credit card.


........................

A debit card (also known as a gift card) is a plastic card which provides an alternative payment method to cash when making purchases. Physically the card is an ISO 7810 card like a credit card; however, its functionality is more similar to writing a cheque as the funds are withdrawn directly from either the cardholder's bank account (often referred to as a check card), or from the remaining balance on the card.

Depending on the store or merchant, the customer may swipe or insert their card into the terminal, or they may hand it to the merchant who will do so. The transaction is authorized and processed and the customer verifies the transaction either by entering a PIN or, occasionally, by signing a sales receipt.

In some countries the debit card is multipurpose, acting as the ATM card for withdrawing cash and as a check guarantee card. Merchants can also offer "cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with their purchase.

The use of debit cards has become wide-spread in many countries and has overtaken the check, and in some instances cash transactions by volume. Like credit cards, debit cards are used widely for telephone and Internet purchases. This may cause inconvenient delays at peak shopping times (e.g. the last shopping day before Christmas), caused when the volume of transactions overloads the bank networks.

................................

For consumers, the difference between a "debit card" and a "credit card" is that the former immediately deducts the balance from a checking or savings account, whereas the latter allows the consumer to spend money they might not actually have (but promise to pay later to the card-issuing bank).

In some countries: When a merchant asks "credit or debit?" the answer determines whether they will use a merchant account affiliated with one or more traditional credit card associations (Visa, MasterCard, Discover, American Express, etc.) or an interbank network typically used for debit and ATM cards, like PLUS, Cirrus (interbank network), or Maestro.

In other countries: When a merchant asks "credit or debit?" the answer determines whether the transaction will be handled as a credit transaction or as a debit transaction. In the former case, the merchant is more likely than in the latter case to have to pay a fee defined by fixed percentage to the merchant's bank. In both cases, the merchant may have to pay a fixed amount to the bank. In either case, the transaction will go through a major credit/debit network (such as Visa, MasterCard, Visa Electron or Maestro). In either case, the transaction may be conducted in either online or offline mode, although the card issuing bank may choose to block transactions made in offline mode. This is always the case with Visa Electron transactions, usually the case with Maestro transactions and rarely the case with Visa or MasterCard transactions.

In yet other countries: A merchant will only ask for "credit or debit?" if the card is a combined credit+debit card. If the payee chooses "credit", the credit balance will be debited the amount of the purchase; if the payee chooses "debit", the bank account balance will be debited the amount of the purchase.

This may be confusing because "debit cards" which are linked directly to a checking account are sometimes dual-purpose, so that they can be used seamlessly in place of a credit card, and can be charged by merchants using the traditional credit networks. There are also "pre-paid credit cards" which act like a debit card but can only be charged using the traditional "credit" networks. The card itself does not necessarily indicate whether it is connected to an existing pile of money, or merely represents a promise to pay later.

In some countries: The "debit" networks typically require that purchases be made in person and that a personal identification number be supplied. The "credit" networks allow cards to be charged with only a signature, and/or picture ID.

In other countries: Identification typically requires the entering of a personal identification number or signing a piece of paper. This is regardless of whether the card network in use mostly is used for credit transactions or for debit transactions. In the event of an offline transaction (regardless of whether the offline transaction is a credit transaction or a debit transaction), identification using a PIN is impossible, so only signatures on pieces of paper work.

In some countries: Consumer protections also vary, depending on the network used. Visa and MasterCard, for instance, prohibit minimum and maximum purchase sizes, surcharges, and arbitrary security procedures on the part of merchants. Merchants are usually charged higher transaction fees for credit transactions, since debit network transactions are less likely to be fraudulent. This may lead them to "steer" customers to debit transactions. Consumers disputing charges may find it easier to do so with a credit card, since the money will not immediately leave their control. Fraudulent charges on a debit card can also cause problems with a checking account because the money is withdrawn immediately and may thus result in an overdraft or bounced checks. In some cases debit card-issuing banks will promptly refund any disputed charges until the matter can be settled, and in some jurisdictions the consumer liability for unauthorized charges is the same for both debit and credit cards.

In other countries: India The consumer protection is the same regardless of the network used. Some banks set minimum and maximum purchase sizes, mostly for online-only cards. However, this has nothing to do with the card networks, but rather with the bank's judgement of the person's age and credit records. Any fees that the customers have to pay to the bank are the same regardless of whether the transaction is conducted as a credit or as a debit transaction, so there is no advantage for the customers to choose one transaction mode over another. Shops may add surcharges to the price of the goods or services in accordance with laws allowing them to do so. Banks consider the purchases as having been made at the moment when the card was swiped, regardless of when the purchase settlement was made. Regardless of which transaction type was used, the purchase may result in an overdraught because the money is considered to have left the account at the moment of the card swiping.

"She had never authorized the bank to permit deficit spending". Yes she did. She agreed to the terms and conditions of the card she signed up for, including whatever the hell they change it to as long as they stuff some paper notice legalese in her bills.

If it truly was a one time miscalculation the authors daughter will forever remember the lesson of how greedy the banks can be. If the authors daughter is irresponsible with money this will be a continuing pattern that will land her in deeper and deeper debt.

I was looking up Comerica and found this...

"In January of 2008, the Treasury Department announced plans to offer prepaid debit cards for recipients of Social Security. Coamerica Bank was chosen as the debit card issuer, and the Direct Express card should provide users with safer, and more convenient, access to their Social Security benefits compared to today's paper checks."

will Comerica take as their "fee."

:puke:

"Debit Card Fees

The issuer of the debit card, Comerica, will make money from cardholder fees including interchange fees (which are charged to retailers when they accept a debit card as payment), and the float on funds in cardholder accounts. For example, the money residing in accounts can be invested by Comerica prior to its use by accountholders. Initial estimates, provided by Comerica, indicate they expect between 2.5 million to 10 million cardholders by 2013.

Cardholders are entitled to one free ATM cash withdrawal per deposit per month. Comerica will charge $0.90 for each additional ATM withdrawal. And just like existing arrangements with debit-card holders, users may face surcharges at certain ATMs. Other fees include a $0.50 charge for each online bill payment, and a $0.75 fee to receive a paper statement each month.

ATM surcharge fees can be avoided if cardholders utilize a network of more than 56,000 ATMs managed by 7-Eleven and PNC Bank. Balance inquiries and cash withdrawals at teller windows will be free of charge. There are also no overdraft, inactivity, or declined transaction fees. Cardholders can sign up for deposit notifications and account balance alerts."

I've never heard of that.

they don't charge atm fees.

I can't speak for all of them, but by and large they have less fees and are a much better deal than a regular bank.

It even happens after they check and find they have sufficient funds.

The courts have ruled that state laws preside over protecting consumers from predatory loans rather than any national laws. Most of us haven't realized this, since we had a lot of state laws that protected us as consumers from these credit card "sharks".

Then came along this case in 1996, where SCOTUS basically ruled that no longer could local state laws where a consumer resided protect consumers from credit card companies that were based in "credit card friendly" states such as Delaware and South Dakota, which have laws that sided with the credit card companies rather than the consumer. Suddenly credit card companies were free to charge what they wanted (within the laws of the states where they are based in), in terms of interest rate hikes and late fess, etc.

http://findarticles.com/p/articles/mi_qn4182/is_19960604/ai_n10090505

We need to find some way to reverse this ruling through newer legislation, either federal legislation that won't be overturned by a court that has traditionally sided with states in this area, or empower various states to protect their consumer residents again the way they used to before 1996.

Also, we need to demand that our Judiciary committee also DEMAND to get answers from prospective Supreme Court justices to indicate how they would rule on such cases, so that we can restore a SCOTUS that isn't "corporate friendly" any more at our expense.

Of course the corporate media doesn't talk about this case's influence over the state of affairs that happens now. It would destroy too much of the good thing that their fellow credit card companies enjoy now that allows them to milk us dry.

un-f***ing-BELIEVABLE - this is PURE GOUGHING.

I was two days late with my credit card payment (out of stamps) and they charged me a $50 late fee. WTF? I've got a balance and you're collecting interest on it (even the late portion), so how did what costs did you incur that are being offset by this $50 fee?

I shouldn't complain, I suppose, some credit cards serruptitiously raise their rates when you have a late fee.

the time I mailed it in until they acknowledged my payment. My rate jumped from 11.9% to 19.9%. This was about 1995. The customer service guy, and his boss gave me some crap about how their department is graded on timely processing of payments, so they have zero incentive to wait until the monthly deadline goes by before booking my payment.
I transferred my balance right quick.

because they said I wasn't paying it off fast enough. How's that for interesting logic? No late payments, no overlimit charges, nothing negative in my credit report.

Most of what I had on there was at 4%, few items at 12%, but when those 12%s changed to 24%, and they apply your payments to the 4% first... Let's just say I'm still digging myself out of that hole (with bad timing, I was unemployed shortly after this happened too!). Thanks to an installment loan at a local credit union, the card is gone and I'm making progress paying it off.

I made an electronic payment online (I know, I probably shouldn't have) at 4:45 pm the same day my payment was due. I do freelance work and had not received a check on time so was not able to pay early like I normally would. So as soon as I got the mail, I went and deposited the check, came home and paid the bill. I get my next statement and see a $39 late fee, so I call the credit card company to find out why I got the late fee. Turns out they have a policy that payments made after 4 pm are posted the following day, so they were in effect trying to charge me $39 just for making my payment 45 minutes too late - and it was still on the day it was due! I protested and got the charge removed, but how many people never notice things like that and just pay them? I'm going to have to look and see on my next statement if they raised my interest rate or not.

The number you call to get an employee who has the authority to lsiten to you is not usually the same as the normal 800 number.

And it seems like it is a whole lot harder theee days to have the first emplyee tell you about the "resolution" number.

Or at least it should become so STAT.

It doesn't cost the fucking bank $32 worth of inconvenience if someone overdraws, so why are they allowed to charge that to the customer?

they would do whatever it took to get those fees. I switched banks after they held on to a deposit an extra day so they could squeeze in a few more $32 fees. Funny, with my current bank I have never had a problem...

charges first THEN my deposits for the day

that'll screw you up bigtime.

I closed the account

They would hold my deposits all the time or process checks written against my account before posting deposits, so that then they could charge me bounced check fees. Once I figured out what was going on I closed the account. They had done that often enough and charged enough each time that when I closed the account they tried to tell me I still owed them $400. I refused to pay it and it showed up on my credit report for a really long time. I fought it until I finally got the charges removed, but it did damage my credit report.

the concept of the debit card is different..it IS a credit card that's "attached" to your bank account.. An ATM cuts you OFF when your account is empty..a Debit card allows you to deficit spend..up to whatever "limit" your bank gives you...but there's a "bounced check" aspect to the debit card.. They say they do it to avoid "embarrassment" when you pay for goods..and to protect merchants..Hah!

Banks used to offer overdraft protection, but they can make a TON of money on 'debit cards", so I'm guessing that banks don't offer OD protection much anymore..

My son had a similar experience.. His $2 soft drink ended up costing him close to $40..

I have my bank account set up with overdraft protection tied to a savings account with the same bank because the husband isn't so good at keeping track of what he spends...they have the audacity to charge us $15 every time we use the overdraft feature, even though it draws from our money, which we could transfer online for free if we felt like it! Needless to say we only let that happen once. Fifteen fucking dollars.

And don't even get me started on the credit card whose interest rate jumped to 28.99% after one late payment.

Bastards, the whole lot. This is an area that seriously needs some attention. :mad:

A debit card but only an ATM card.

We asked that of our bank when our income could not match our medical expense outflow.
We don't want a debit/credit card with the Visa insert. All we want is a debit card.
No way to do it said our bank.

Then came a time when we were overdrawn for a full month. The bank screwed up in a minor way and I made a major case over so their screw up. So finally after our fighting them, they kept our bank account intact. But they said, you cannot have a debit card now - we will only give you the bank's ATM card.

We were both so steamed!

from all 3 banks we use.. I prefer the debit card, just because it's accepted more places.. I am pretty sure the bank makes more money from the debit cards, so no wonder they push them..

I remember asking them why the debit card had a $5k "limit" .. they mumbled something about how with "larger purchases", it was a "convenience' for us :eyes:..

Basically, a debit card is an electronic CHECK.... the bank will "cover" it ..up to whatever your limit is...but you will pay dearly for it, if your account is short the amount you use it for...

an ATM is an electronic cash TRANSFER, that's totally limited to what you have..no "borrowing" the difference..

husband's debit card number and used it to charge $800 worth of crap at Walmart. We didn't have $800 in there. Not even close. More like $20. The bank let the charge go through. I'm still waiting for the situation to be resolved. When I asked the bank manager why the bank allowed the charge to go through even though I didn't have any money, she said simply, "They do that." What she didn't say after that was, "Because the associated fees bring in big money for the bank."



Edited to fix ambiguous meaning.

They treat you much better than the megabanks, and they actually still go for the old way of making money by renting your money and loaning it to others to make interest, rather than gouging you with fees.

Also see my earlier post about making the banks pay to rent your money, and if possible (I know, a lot of people are struggling, and can't build savings :( ) build some savings - if you have a few thousand in reserve for emergencies, you don't have to borrow if something happens like your car breaking down, and the bank treats you so much better when you have a big balance with them.