Money: When Banks Aren’t Fair
For anyone out on a weekend spending spree (a.k.a. running errands), it’s pretty simple: you check your bank balance before you leave the house and do the simple subtraction in your head as you hand your debit card to the mega (and well-priced) grocery store, the cleaners, the coffee shop and wherever.
And, by Monday morning when you awake from your jam-packed weekend, you check again just to make sure you did the mental math right.
So what could go wrong?
Well, up until recently, a lot.
Let’s say you made three small purchases (plenty of money to cover these) then topped off the weekend with a pair of shoes you probably didn’t need but had to have. After the shoe charge went through (and it did because you have overdraft “protection”), you felt a tinge of “should I be doing this” but brushed the devil off your shoulder with the knowledge that you’d deposit that expense check first thing Monday. And it would be enough to cover the one overdraft fee you’d get hit with and then some.
But on Monday you get a big surprise: you not only have the one overdraft fee for the shoe purchase, but you have overdrafts for the three small purchases. Why?
Well, the bank saw your weekend as a moneymaking opportunity. And they did their own math, reordering your debit card withdrawals so that the largest (and latest) came through first, ensuring that it was not the only overdraft fee assessed. Instead of one overdraft fee, you are then saddled with four fees. And that’s a lot to wake up to on a Monday.
Thanks to a May 2011 settlement of a major class action against more than thirty American banks that used fancy accounting tricks to maximize overdraft fees, consumers no longer need to be worried about this particular shenanigan.
But the need for vigilance is not over.
Banks are looking for new ways to “make up” for the losses they incurred during the sub-prime lending debacle and consumers need to stay aware.
Baron & Budd played a lead role in this settlement and was recently recognized by The National Law Journal for its work to protect consumers.