Fees rising as banks hunt for more fast cash

ATM

Watch out for new ATM and overdraft fees, as you may be better off getting a payday loan. Image from Wikimedia Commons.

Overdraft and account fees are the way banks get a lot of fast cash from their customers. Granted, a fee of some sort is not unreasonable in some situations. However, bank fees generate quite the pay day for the typical banking institution.

Fees rise as laws force banks to find more fast cash

Legislation passed earlier this year forces banks to adhere to new rules concerning overdraft fees and other account fees. For instance, customers now must be asked whether they want overdraft protection. Customers also have to be asked if they would prefer to get a cash advance from the bank to cover overdrafts or just opt out of a transaction. However, because practices that omitted that information are no longer legal, banks and credit unions now have to find more ways of generating income from customers. For instance, according to CNN, ATM fees have risen by 5 percent this year. Overdraft fees rose 3 percent on average, and the average overdraft fee is now $30.47 per occurrence. That’s actually about the same cost as a small payday loan.

Interest in excess of what is excessive

The interest rates on overdraft fees are insane. For instance, let’s assume a person spends $200 more than he has on his debit card, which a lot of people will do this holiday season. Assume also that the person has done this with three purchases, at $30 per occurrence, for a total of $290 that he will have to repay the bank when he gets his next infusion of payday cash. That’s 45 percent in simple interest, but in APR, that’s 2,340 percent interest.

Banks make a lot of money from fees

Overdraft fees are the greatest method of generating revenue from bank customers. Considering that the average person pays $620 per year in fees or more, the average person may be better off getting a payday loan a few times per year to head them off. You can read more in the Payday Loan Facts and Statistics Report on Personal Money Store.