Banking on Fees
By Dian Vujovich
Banks aren’t about to let this recession get them down. While government stimulus programs have helped plenty, looks like those billions weren’t enough. Next on the gotta-have-more list is to raise the fees that they charge their customers.
A recent Financial Times story stated that U.S. banks are set to pick up over $38.5 billion—that’s with a “b”—this year thanks primarily to overdraft fee charges. The research is from Moebs Services and that total fee estimate slated to come from both overdraft charges and credit card fees.
According to the piece, the median overdraft fee is 26 bucks. Sounded low to me so I called Wachovia to find out what they charge. Answer: $22 for the first overdraft you have each year and $35 for every one thereafter. (Nope you have none.)
Anyway, Moebs said that more than 75 percent of the various service fees charged to customers come directly from overdraft fees. “Banks are returning to a fee-driven model and overdraft fees are the mother lode,” says Mike Moebs, the company’s founder.
But wait, there’s more. And this data comes in another piece from BusinessWeek.com. It points out how banks are coming up with all sorts of goofy schemes to get folks to do business with them such as corporate credit lines tied to derivatives and payday-loans. Jeez, talk about adding salt to already open wounds.
Big banks, like Fifth Third and U.S. Bancorp, are getting into the payday-loan business that once upon a time used to be dominated by small non-bank lenders. Perhaps that’s because the payoff can be beyond great: Interest rates on them can run as high as 400 percent! Double jeez.
The piece pointed out that some states have capped the interest rate amounts that banks can charge. That said, Fifth Third, home-state Ohio, has something called an Early Access Loan that carries an annual interest rate of 120 percent.
Read the entire story and get more of those-greedy-pig details at http://tinyurl.com/neczce.
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