After reading the last post, you may already be upset about how much your bank is eating up your money.
Now new banking reform rules intended to help the general public avoid overdraft penalties could end up doing more harm than good.
Starting next week, banks all over the United States will be required to give customers the choice to opt out of overdraft protection for ATM and debit card transactions. That means they won’t be able to charge you a fee if you overdraft. Instead your card will simply be declined.
But it could also be the end of free checking at many banks and credit unions. Not to mention a wave of new fees.
It’s important to note that these new rules do not apply to personal checks. But it could have a major effect on what you’re charged to open and maintain a checking account as well as how much your bank charges when you order checks.
Consider This…
According to the Government Accountability Office, the revenue financial institutions have collected from checking and savings accounts jumped around 50% within the last 10 years.
Overdraft fees nearly doubled in the last decade reaching more than $37 billion according to banking industry analysts. Of that $37 billion, half of it came from fees paid because of overdrawn ATM and debit card transactions.
But when the new overdraft rules kick in next week much of that money could disappear. Many banks are concerned that they’ll lose tens of millions of dollars.
They’re going to have to make that money up somewhere.
Where Will the Money Come From?
“I think higher fees are inevitable,” says senior financial analyst Bob Meara with Celent in Atlanta.
Meara believes people will have to deal with fees for services they’re used to getting for free, and possibly even an onslaught of checking accounts that don’t allow paper checks.
You might have to pay a fee to receive your monthly statement in the mail. You could be charged for conducting transactions at the bank with a teller. Some banks may charge monthly maintenance fees for everyone with an account that isn’t profitable.
It can cost between $250 and $300 a year to maintain one checking account. If your account isn’t generating that much revenue, your bank is losing money.
Plus, because of the slow economy brought on by troubles in the financial industry, many banks had been relying on non-interest income to stay afloat. The Government Accountability Office says fees make up 27% of banks’ revenue.
No one is going to shed any tears about the hardships of most financial institutions. Many of us blame them for getting us into this economic mess in the first place. But the bottom line is that everything is connected and it will come back around to affect you and your life.
What Can You Do?
At Check Advantage, we obviously hate to hear about the possibility of banks creating checking accounts that don’t include personal checks. That really doesn’t make sense when you consider that the latest Federal Reserve Study indicates more than 30-billion checks are written every year.
But what we hate even more is hearing that hard-working people like you are being taken for a ride.
You can avoid some of the extra costs banks inflict upon their customers when you order personal checks online from Check Advantage. Our every day low prices are as much as 75% less than what your bank would likely charge you.
Hopefully, the change in rules will have a mostly positive effect on banking customers.
The impact may not be as severe as some are predicting. Many banks report that only about half of their customers are opting out of overdraft protection. The rest want it to continue.
However, getting rid of unnecessary overdraft fees might be a smart idea. Wouldn’t you rather use personal checks, cash or even a credit card after your debit card is declined? Or would you rather pay a $20 to $35 fee?
Image: Simon Howden / FreeDigitalPhotos.net
