Wednesday February 8, 2012
Remember the practice of shuffling checking account transactions to maximize overdraft fees? Banks are now paying for it, although they still came out ahead.
Chase used to re-order all the transactions that came through your checking account each day. They claimed that it helped you make your most important payments (generally the largest payments like rent, mortgage, and insurance premiums). Consumer advocates saw it differently: by blowing out the majority of your account balance in one transaction, those small debit card purchases could produce more overdraft fees.
According to MyBankTracker.com, Chase agreed to pay $110 million to settle complaints about the practice, and other banks may have to pay up as well.
Most banks have stopped the practice, and they're not even allowed to charge overdraft fees in many cases without customer consent. However, MyBankTracker founder Alex Matjanec notes that 100 million consumers have opted-in to "overdraft protection" programs.
Further reading:
Thursday February 2, 2012
If you hadn't noticed, fees are rising at the bank. Almost everything costs more now, and things that used to be free now result in a fee.
It's not news that fees are rising, but you may be surprised at the activities that create fees. Services you used to consider standard features of a bank account -- online bill pay, the ability to make unlimited withdrawals with a teller -- are being redefined as "premium" features.
Why all the fees? You can blame it on two consequences of the recent financial crisis: weaker banks and stronger regulation. Don't expect those things to change anytime soon.
The Financial Brand published a thorough review of the new world of bank fees -- it's worth a look if you want to know what to expect in the coming years. You might conclude that you'll either need to work harder to avoid fees, or learn to accept them.
Wednesday February 1, 2012
It's the time of year when tax preparation services fight to win your business. One of the ways they get you in the door is by offering quick cash. If you've got a refund coming, they'll give you access to that money today.
When you get an instant refund, you're really getting a loan. These "refund anticipation loans" might be helpful, but they're generally expensive. You have to pay a fee as well as an interest charge, and any fee on a small refund equates to a high cost. Waiting the short amount of time it takes the IRS to process your return is probably worth it.
Your best bet is to borrow from a lender, and get your taxes prepared by a tax preparer -- keep these services separate. If you really need a loan, apply for one that does what you need at the lowest cost possible.
Thursday January 26, 2012
If you want to use plastic when you purchase, you have quite a few options. In addition to the debit vs. credit card decision, you can choose among different types of debit and credit cards.
It starts to get confusing when you consider prepaid debit cards and secured credit cards. From a certain perspective, they're the same thing: they don't let you get yourself deeply in debt. However, they are very different, and you should be sure to choose the product that's actually going to do what you need. MyBankTracker.com explains the differences between secured credit cards and prepaid debit cards nicely.
In short, the fees (and reasons for fees) differ, and the effect on your credit is different. Secured credit cards can help you build credit, while prepaid debit cards do not affect your credit. There may come a time when prepaid debit cards help your credit, but we're not there yet.
Further reading:
