Ever since the government’s bailout of the banking industry nearly four years ago, the love-hate relationship between banks and their customers has stayed at a fevered pitch. After a series of moves designed to punish customers in the name of improving profits, banks may finally be getting the message that enough is enough.
JPMorgan Chase (JPM) recently announced that beginning next month, it will stop charging overdraft fees for purchases with debit cards that are $5 or less. But as a CNNMoney article pointed out, the bank made this fee-cutting move as part of a class action settlement with customers who alleged that overdraft fees were excessive.
Nickeled-and-Dimed (and $34-ed) to Death
Overdraft fees are just one way that banks have tried to recoup some of their lost income in the wake of the financial crisis, and the consumer protection reforms that followed it. Banks have cut back on rewards for using credit and debit cards, and pushed harder for customers to pay for expensive payment-protection plans. They’ve also made it harder to qualify for fee-free checking accounts, and raised fees on certain services.
But overdraft fees are particularly egregious, especially in the context of tiny payments. Overdraw your account even by $5 and you’ll have to pay a $34 fee — and no matter how small additional overdrafts may be, you can end up paying several times and owing far more in total fees than the amount you actually overdrew your account.
Just don’t pay!
Paying bank fees unnecessarily is a major drain on your budget, but you can stop them pretty easily if you put your mind to it. Because no bank is paying very high interest rates right now, choose your bank based on avoiding fees, looking for banks that offer convenient in-network ATMs and branches to keep you from having to use high-fee alternatives to get at your cash. Similarly, stick with simple accounts and make sure that you never go below minimum balances to avoid monthly account fees.
As nice as it would be for banks to treat you better out of the kindness of their hearts, that’s not going to happen. You really have to watch out for yourself if you want to keep banks from earning more than their fair share of profits on your money.
For more on smart money moves:
- “Little-Noticed Tax Hikes Are Raiding Your Wallet“
- “401(k) Fees: What You’re About to Learn Will Shock You“
- “You’re a Responsible Borrower? ‘So What?’ Say Banks“
Motley Fool contributor Dan Caplinger always watches out for his money. He doesn’t own shares of the companies mentioned. You can follow him on Twitter here. The Motley Fool owns shares of JPMorgan Chase.