Overdraft, a Tax on the unwitting poor.
Every year, something like this happens. I’m at the gas station I go to load up on 87-octane, but I haven’t logged into my online bank in a while. After the day of hitting the usually Friday fair – book store, coffee shop, Target, and the Mall – I fill up my gas-addicted car no problem. I go home to see the damage I’ve done. WHAT!! Another overdraft fee. I was so careful this time, though.
20 Million Americans pay over $1,000 per year in bank overdraft fees.
I image this happens to all of us sometime or another. And I have to admit It happened a lot more back in College. But now that I’m working, have have some “back-up” cash, it hasn’t happened for a long time.
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.
According to FinancialTimes back in 2009, United States Bank collected $38.5 Billion in overdraft fees – especially from “financially stretched consumers.” There is a huge disparity in overdraft fees among the poorest customers at US Banks, and the middle-class to working-poor at US Banks.
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, Moebs discovered
The poor would be ideal customers of Credit Unions, or talking with their banks to discontinue their overdraft protection. For myself, I didn’t even know I had overdraft protection until I needed it – overdraft protection automatically came with the account – automatically opt-in. So If you are getting more than two overdrafts per year I urge you to find a local Credit Union or opt-out of overdraft.
He said banks earn about $40 million a year from overdraft charges and that some of the Social Security recipients in the suit lost 20% of their monthly income in a single day because of bank fees.
From LA Times , next will be piece on “How to avoid Overdraft Fees.”