The search for new ways to take our money

The search for new ways to take our money November 14, 2011

Banks used to take more than $36 billion a year from their customers. They just took it. They did this by reaching into those customers’ accounts and removing the money $30 at a time. This was called “overdraft protection,” and the banks pretended it was a service for those customers.

That practice has been reined in somewhat with new rules requiring banks to describe these “overdraft protection” charges more accurately and to convince their customers to allow them to take this money from them. As Eric Dash reports in The New York Times, that’s meant a loss of about $12 billion a year for the banks.

The flipside of that “loss” or “cost” for the banks, of course, has been a gain of about $12 billion a year for those banks’ customers. Well, not a gain, exactly, but the chance to keep a bit more of their own money in the bank accounts they set up for the purpose of keeping that money instead of watching those balances reduced $30 at a time by the banks reaching into them and taking out billions of dollars of money. When the balance in some customers’ bank account gets down to the last $15, at least now it doesn’t suddenly become -$15. Having only $15 in one’s bank account isn’t great, but it’s better than having -$15 — particularly when that -$15 will turn into -$45 tomorrow and -$75 the next day. (To the cumulative tune, again, of more than $36 billion a year.)

But as Dash reports, the banks are looking to recoup their “losses” by creating new excuses to reach into their customers’ accounts and take those customers’ money:

Banks can still earn a profit on most checking accounts. But they are under intense pressure to make up an estimated $12 billion a year of income that vanished with the passage of rules curbing lucrative overdraft charges and lowering debit card swipe fees. In addition, with lending at anemic levels and interest rates close to zero, banks are struggling to find attractive places to lend or invest all the deposits they hold. That poses another $8 billion drag.

Put another way, banks would need to recoup, on average, between $15 and $20 a month from each depositor just to earn what they did in the past, according to an analysis of the interest rate and regulatory changes on checking accounts by Oliver Wyman, a financial consulting firm.

For consumers, the result is a quiet creep of new charges and higher fees for everything from cash withdrawals at ATMs to wire payments, paper statements and in some cases, even the overdraft charges that lawmakers hoped to ratchet down. What is more, banks are raising minimum account balances and adding other new requirements so that it is harder for customers to qualify for fee waivers.

Even the much-maligned debit usage charges have effectively been bundled into higher monthly fees on checking accounts. Bank of America abandoned its $5 a month debit card usage fee in late October amid a firestorm of criticism. Yet, it more quietly raised the cost of its basic MyAccess checking account by more than $3 a month earlier this year. Monthly maintenance fees now run $12 a month, up from $8.95.

Open a basic checking account in Bank of America with $100 in January and without spending a dime you’ll have a negative balance before Thanksgiving — assuming that BofA doesn’t create other new fees in the intervening months to remove those funds from the account even faster.

Banks were able to transfer more than $36 billion a year from us to them through the larcenous “overdraft protection” racket in part by stroking our egos. We Americans love nothing more than being told we’re above average — that we’re exceptionally virtuous and responsible people who are better than our neighbors. By indulging that vanity, banks were able to suppress much of the outrage that might otherwise have accompanied the annual theft of $36 billion. They got us to pretend that this was just something that happened to irresponsible people who irresponsibly failed to maintain large balances in their checking accounts.

But this new generation of myriad fees and fee-hikes designed to recoup that same $36 billion a year can’t be as easily dismissed as being a useful expression of disapproval of the irresponsible, immoral, undeserving poor. These hit everyone indiscriminately, and even the most financially responsible and insufferably self-righteous won’t be able to pretend that these are excusable or justifiable or anything other than flimsy pretexts for the banks reaching into private accounts and withdrawing money simply because that money is there and they want it.

These new fees, then, may be the last straw for many previously complacent and compliant bank customers. The big banks’ new brazenness has finally pushed many of those customers too far, and the new conversation arising thanks to the “barbaric yawp” of Occupy Wall Street is making more and more of those customers aware that there are options.

Those options aren’t new. It’s the age-old American story: George Bailey vs. Old Man Potter. And it pleases me to see that struggle being framed in exactly those Capraesque terms:

That’s a video for the Move Your Money Project, which urges Americans to “Invest in Main Street, Not Wall Street” — to put their money to work for the good of Bedford Falls instead of Potterville.

That effort — spurred by the social-media driven promotion of Nov. 5 as “Bank Transfer Day” — has so far led more than 650,000 Americans to move their money into credit unions. More Americans opened credit union accounts last month than did so in all of 2010. That amounted to some $4.5 billion now available for housing and auto loans and investment in small businesses instead of being gambled on the securitized futures of securitized futures of securitized futures. That’s $4.5 billion of our money that won’t be siphoned away $30 or $12 or $8.95 at a time, but will instead be put to work creating real wealth in real communities.

That’s a good start.


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  • P J Evans

     Regional/local banks are good alternatives, too.

  • P J Evans

     Burbank Airport is now officially named for Bob Hope, which is better than Yet Another Public Facility named for Ronny. (He already has a freeway and several buildings in California named for him. No one uses the names if it can be avoided.)

  • Lori

     I’m in the same boat – there’s a credit union and a B of A on this side of the freeway, but I don’t qualify for the credit union (I checked). And since I don’t drive, I *have* to stick with the bank that’s within walking distance.  

    zmayhem has a good point. Being a member of any credit union in the same network should allow you to use the ATM at the CU nearest to you with no fees (making deposits and as well as getting cash). Everything else can be done online. I did it all the time when I was in DC and it was such a non-issue that I totally forgot that I my CU didn’t have branches in the city so I was using another CU’s ATM the whole time. 

    ETA: My guess, based on my experience with my CU, is that if you go into the CU near you and explain that you’re not eligible to join them but would like to know if there’s another CU you are eligible for that would allow you to use their ATM they’d be willing & able to help you find one.

  • Anonymous

    Yeah, I thought about that.  But National was renamed in 1998 — five years before the renaming of the Burbank-Glendale-Pasadena Airport.  If it was necessary to honor Bob Hope with an aviation facility, the Palm Springs Airport would have been just as appropriate.

  • Anonymous

    Do banks even bother to ask about “assets” on loans anymore?

    Yes, they do, and the thing about needing to prove you don’t need it is on its head.  If you actually have the money to pay the loan back, you’re a “prepayment risk” now, and it’s *harder* to get a loan.

  • Back in the late 1990s a buddy of mine down in the US got rather… creative… with his income level statements. Amazingly enough he scored a $50k limit Amex Platinum. (and they didn’t bother to verify his statements, pretty obviously)

    I shudder to think of what trouble that kind of CC could engender.

  • truth is life

    The analogy to a TFSA in the US would probably be an IRA–an Individual Retirement Account. There are several types with tax advantages, like the Roth IRA (you pay taxes upfront, but not on withdrawal) and the more common tax-deferred IRA (you don’t pay taxes until withdrawal).

  • If your credit rating is shit anyway….none! I got a car loan and lost my job, simply walked away. A week after they repossessed my car, they called and asked if I could make a payment and take the car off their hands!

    I’d watch out for garnishee laws, that’s about it. Where I am, it’s tax dodgers and deadbeat dads only. If you never have any hope of having a decent CR, I’d max the thing out and walk away. 

  • Yes, it’s the same Grover Norquist behind the no-tax pledges. What makes you think he wants politicians to do their jobs? One of Norquist’s most famous quotes is “I simply want to reduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub.” The no-tax pledges are one part of that strategy.

    The issue I have with Norquist’s no-new-taxes pledge is not that he is for low taxes (after all no one wants to consistently pay high taxes) but that it is inflexible about allowing taxation to be adjusted.  There are times when a government should lower taxes to help spur private sector growth, and there are other times when a government should raise taxes to meet certain pressing needs.  If a politician pledges never to raise taxes, then they would be too afraid to lower taxes during a good period to do so since they would be unable to raise them again during a period where the budget needs to be met.  

    Addressing his quote more directly, I would rather have a government that can function reasonably if imperfectly than no government at all, run by politicians who can be held responsible for the actions they take in office instead of being straightjacketed by pledges made in haste to a limited base.  

  • and there are other times when a government should raise taxes to meet certain pressing needs.

    The point here is that you and I understand that the government has legitimate functions which it needs to spend money on. It’s an axiom of Norquist’s ideology that there *are* no legitimate government functions – everything should be handled by the so-called “free market”.

  • True; a related issue though would be the scope of credit card fraud possible on such a CC. (O_O)

  • The point here is that you and I understand that the government has legitimate functions which it needs to spend money on. It’s an axiom of Norquist’s ideology that there *are* no legitimate government functions – everything should be handled by the so-called “free market”.

    Of course, assuming that there is no government, there are no laws and rights.  And there is a pretty big market “demand” to see Norquist punched in the face several times over… 

  • Wisefather

    You might like this.  I called my credit card’s customer service line to do some negotiating.  Having a bit of leverage, I thought it presented a great opportunity to mess with them a little and make a few points about the unfairness of the credit card lending system.  I made video of the call and posted it on my blog and Youtube.  It is quite funny even if you are pro-megabank.  Since it’s a protest at home, I called it my kitchen counterstrike against Bank of America.