Don’t begrudge the banks their overdraft fees. Poor things, it’s all that’s keeping them afloat
I’m actually not kidding.
Without overdraft fees, 45% of banks and credit unions wouldn’t have made money in 2008, according to research from Moeb Services.
No wonder banks are jacking up their fees as fast as they can. This is the first recession since 1969 where bank fees have gone up.
And up and up and up. The average ATM fee is now $1.97, for example. That’s up 11% from 2008.
The Big Daddy of fees, though, is the overdraft charge. Overdraft fees will bring in $38.5 billion in 2009, Moebs Services projects. Overdraft charges account for 75% of all bank fees.
And it’s not the little banks that are jacking up fees the fastest. The average overdraft charge at all banks rose to $26 this year from $25 in 2008. But the average overdraft fee at banks with more than $50 billion in assets–you know the Citigroups, Bank of Americas, and Wells Fargos of the world, is $33.
If you’re an investor in the financial stocks, you know what’s wrong with this picture. In the wake of the financial crisis banks are rediscovering the value of the money that comes in their doors as good old, plain vanilla deposits. For one thing it doesn’t run out the door quite as quickly in a crisis as the hot money banks raise by selling very short-term commercial paper. For another, the deposit market never completely shuts down as the commercial paper market did at tyhe height of the crisis. Banks who depended on that method of raising cash found the spigot shut down tight.
But you don’t attract lots of deposits by treating your customers like dumb chickens just waiting to be plucked. There’s a lot of rhetoric out there now about this bank or that bank wanting to re-invent themselves as a deposit driven, consumer-friendly bank.
At most banks, especially at most big banks, it’s just talk.
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excellent read Jim,
can you add a print easy function to the web site, i usually find it easier to print the article and then read it when i am away from my office.
cheers
I’ll bring it up with my developer.
Right on Jim. I’m ending a 19 year relationship with a well known financial institution because they’ve lost sight of the value of their depositors. They seem more interested in finding away to pick your pocket for $20 (literally, the straw that broke the camels back is a $20 issue) rather than creating customer value and loyalty.
My favorite straw is that a bank that I won’t name (but it rhymes with Citigroup) now charges me $10 to transfer money from my overdraft line of credit to my checking account to cover over-balance checks. Used to be free. That’s how they sold me on this feature to begin with.
One other web site request
Can you also post links to your videos as you make them on MoneyShow.com? If possible of course. I bet most readers of your blog will enjoy them.
Support your local credit union!
I use a local credit union and am very happy with their fee schedule. Their overdraft transfer fee is $10 ($35.00 for NSF) but in my 6+ years with the bank have never invoked it. And a BIG plus to a person who, like me, travel a lot: No foreign transaction fee! I have used my debit card all over Europe, NZ, Australia, and parts of Asia and have never had any problems. AFAIK, among major credit card issuers Capital One Visa is the only one that does not charge a foreign transaction fee — but that could change any time.
P.S. One exception: In Japan the bank ATM’s do not accept US cards, debit or credit. You have to go to a Post Office — yes, that’s right: the Post Office — to get cash from their ATM’s.
P.S.S. When traveling overseas, the banks that own the ATM’s do not charge a fee! All my ATM withdrawals are otally free and the rate in almost all cases is the current exchange rate. And, when it’s off, it’s only a few cents above as often as below the exchange rate. I kissed traveler’s checks good bye several years ago.
I wonder if part of the reason why banks are increasing fees is because other banks are offering to reimburse ATM fees? National City now PNC is a good example of this. It ends up being a indirect cost to the consumer because they have to make up for it in other ways. But I guess that would go for the lack of loan fees too. They need to get a certain amount in the coffers to weather the storms ahead and keep share holders happy.