Last Thursday’s column about 18-year-old Daniel Ganziano and his $229.10 in overdraft fees from TCF Bank seems to have struck a nerve.
Ganziano, you might recall, had a balance of $4.85, an amount so low it triggered a $9.95 account fee. The $9.95 fee pushed the teenager’s balance to $5.10 below zero, 10 cents over the threshold that activated a daily $28 overdraft fee.
By the time he figured out what was going on, he owed TCF $229.10. The bank refunded the money after the Problem Solver inquired about the case, but the column brought a swift reaction from readers.
Some said Ganziano got what he deserved for not reading the fine print. They said the fees were a costly lesson about modern banking.
Others sympathized with the teenager — and emailed with their own stories of incredible bank fees.
The response, from readers across the Chicago area and around the country, was so overwhelming that I’ve decided to run some of the stories, in hopes that the tales of financial woe will serve a greater good — warning people about potential fees and the need to read all contracts, letters and emails thoroughly.
One reader, who identified himself as Rajan from West Valley City, Utah, wrote to say he visited his local bank and was encouraged to set up to “free” checking and savings accounts.
He left his money in the accounts, figuring it was safe there. About a year later he checked the balances and found both accounts had been charged monthly “inactivity” fees.
By the time he closed the accounts, he owed $400 in fees.
“Too many people are getting duped by this practice,” Rajan said. “My savings account had $600 in it. The bank was using that money all the time, it was in their safe keeping. They were making more money with that money, they were lending it to someone else and making interest off that. And I’m made to pay for something that they gained something from …. It’s absurd. It’s illogical.”
Another reader, Sue from Salem, Ohio, said her son was $25 overdrawn at his bank — and wound up paying $800 in fees.
“They also took his savings money and applied it to overdraft fees,” Sue wrote. “This all happened in one week because they charged him $38 every time he used his debit card. …The bank didn’t notify him until all this damage had already been done.”
Gail, from Sunnyvale, Calif., said her son had a $7 overdraft while at school at the University of Michigan. The bank sent notices to his home — in California. By the time he was able to respond, his fees were nearing $400.
“So even though we acted on this right away, the incurred fees were already very high,” Gail said.
The Problem Solver had a thick stack of similar letters and emails.
Greg McBride, a senior financial analyst for Bankrate.com, said such fees are becoming more common.
“You’re starting to see more fees and more creative fees,” he said. “That’s all really a function of regulatory changes that created a revenue hole that banks are looking to fill.”
In 2010, the federal government enacted rules that restricted the overdraft fees banks can charge on small debit card purchases. Under the old rules, if a $5 debit purchase made you overdrawn on your account, banks could charge a $35 fee. Now, similar debit purchases are simply declined if there’s not enough money in your account, McBride said.
The second change came this year, restricting the amount a bank can charge when a consumer swipes his or her debit card.
The combined effect of those changes, McBride said, is that banks are looking for new ways to generate revenue.
The impact has been striking.
In 2009, 76 percent of banks offered free checking. This year, the number has dipped to 45 percent, McBride said.
“Overdraft fees pack the biggest punch,” he said. “But they’re the most easily avoided.”
With online banking, consumers have access to their account information anytime, giving them the ability to closely monitor their balances. Online banking also allows customers to link checking and savings accounts, so money can be shifted to cover potential shortfalls.
If people checked their accounts more often, many overdraft fees could be avoided.
“People will spend five hours a day on Facebook but they won’t spend five minutes to check their account balance,” McBride said.
He suggests reading all contracts, agreements, emails and letters from banks carefully, so you understand the potential fees — and when they kick in.
“The smaller the print, the more important the words,” he said. “It’s nobody’s idea of fun, but if you’re going to avoid fees, it’s something you need to read through.”
He also suggests shopping around for banks with lower fees and better customer service.
“Free checking accounts are still out there,” McBride said. “Savvy customers won’t stand for higher fees when they know other alternatives exist in the marketplace.”
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