Banks make $38B on overdraft fees
TEXT OF INTERVIEW
Steve Choitakis: Financial institutions these days are looking for ways to make money. And they certainly have found one tried and true way. A Financial Times report says this year U.S. Banks will charge their customers more than $38.5 billion dollars in overdraft fees. Tamara Keith joins us with more live from Washington. Good morning Tamara.
Tamara Keith: Good morning.
Chiotakis: So how are we ratcheting up more than $38 billion in these fees?
Keith: Well you know it’s quick cash for the banks. And The Financial Times reports that the recession has driven them to focus more on these fees to boost their balance sheets. And overdraft fees in some ways are like the motherload for them because they keep coming. The paper says that the fees collected this year will be nearly double those collected in 2000.
Chiotakis: So how much do these fees cost?
Keith: Well they are in the $25-$35 range. Most of us probably don’t even remember signing up for overdraft protection, but odds are we’ve got it. And banks provide this as a kind service to help us avoid bounced checks and things like that. And the banks are basically fronting us the cash. Say you go to the drug store and you want to buy a pack of gum, and you don’t have any money in your checking account. Well, instead of getting declined, the bank will just cover the $1 pack of gum and then charge you, oh say, $35 as a convenience fee. And advocates say this is basically unfair and abusive and that it’s hitting lower-income consumers the hardest.
Chiotakis: So they’re say this, but what’s being done about it?
Keith: Well, what’s being done about it is advocates are pushing hard for changes. One thing that they want in particular is to go back to the old days where if you used your ATM card to buy gum, and you should be declined, that you could actually be declined. And the Federal Reserve is looking into this, and it’s in the process of doing rule making.
Chiotakis: All right. Tamara Keith joining us from Washington. Tamara, thanks.
Keith: Thank you.
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