August 14, 2009

Tired of Overdraft fees?

I AM. Banks love to charge outrageous penalty fees to your checking/savings account even if you go over your account balance by just $0.01! Why? Because it is estimated that some banks receive about 75% of their revenue from assessing penalty fees to its customers accounts.

You think they would cut us some slack given that we’ve just bailed them out with billions of dollars of taxpayer money (in which we, including our children, will be paying for in the form of increased taxes for years to come – while our banks posts record profits amidst a recession). “U.S. banks will likely collect $38.5 billion from their customers in overdraft fees by the end of the year, according to a report in Monday's Financial Times. Many banks reacted to the financial crisis by increasing the fees for overdrafts and credit cards to keep profits up.”

This is an outrage – and unfair – and the reason why I choose to bank with ING the self-proclaimed “bad boy” of banks, that does not charge overdraft fees per transaction, but rather a low monthly interest rate on the amount that you go over. But if you pay the over draft balance before the end of the month – then they charge you no fee at all! Here’s an example directly from there website:

“An Electric Orange Customer has $1,000 in his Electric Orange, and an Overdraft Line of Credit limit of $165. He buys a new laptop computer for $1,100 using his Electric Orange Card. This transaction will be processed using the $1,000 balance in his Electric Orange, and $100 from his Overdraft Line of Credit. His Electric Orange balance will now appear as -$100 on our website, which reflects the $100 credit used from his Overdraft. He will then pay a competitive interest rate on the $100 he borrowed until it’s paid down with his next deposit.”

Therefore, if today I decide to overdraft my account by $50 and I decide to wait a week until I make a deposit – I do not get charged a penalty or overdraft fee! As long as I make a deposit before 30 days – in which I would be charged an interest rate of 7.25% on that $50 - which is still lower than most banks.

Why would a bank do this? (Not to mention they pay a higher interest rate on the balances in your checking and savings account than most all other banks!) The answer is that they decided to put consumers first – their business model is different from traditional banks in that they believe they can be just as profitable and succeed within their industry by treating people right.

Now the only caveat in joining a great bank such as this is that you first must have a good credit score to be accepted – because unlike traditional banks, this bank does not accept anybody. But if I did have bad credit, this would be yet another motivation to repair it – so that I too could be a part of a bank that protects my money, is FDIC insured, and shows that it actually cares for my account and my business.


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