Banking, Credit 

Banking and Credit Card Fees Are Good For You

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“Woah! What are you saying?” you must be saying to yourself. Do I really think that the $31 fee per overdraft charged by PNC Bank is a good thing? What about the advice I gave about asking for a fee or charge by waived by a banking institution? I don’t think it’s a good thing and I still do think you should ask to have fees nixed, but if you give me a chance to explain what the title means I promise it’ll be worth it.

If you read the story about “poor” Chris Keeley, you’ll learn something your parents tried to teach you when you were really young. I want to make the analogy of a horrible fee ($31/overdraft is excessive, so is allowing him to overdraft seven times) to a hot stove. When your mother says “Don’t touch that stove John/Jane, it’s hot and you’ll burn yourself,” you may or may not have listened. But if you touched it, you were burned, and you never touched the stove again. I think the same can be said for these ridiculous fees.

It’s been shown that Americans, in general, don’t save enough money, are up to their eyeballs in debt, and are generally financially irresponsible. I feel that these high fees and penalty charges is nature’s way of teaching you that you shouldn’t touch the hot stove and that you shouldn’t eat so many Big Macs.

Here are a few examples of what I mean:
Overdraft Charges: Listen… Keeley should have known how much was left in his account and he shouldn’t have used the debit card in the first place! Why not use a credit card and at least get a piddly 1% reward for it? You get no advantage from a debit card. But let’s extend Overdraft Charges to include Over-The-Limit Charges too. You should know roughly how much credit card debt is on each card – or you have too many cards or have overspent. It’s as simple as that.
High Finance Charges for Cash Advances: Every credit I know of charges you for taking out cash with your credit card. The answer? Don’t use your credit card for cash advances!
ATM Charges: Are you telling me you can’t plan far enough ahead to hit up an ATM with your bank’s name on it? If you have a major bank, you have ZERO excuses. If you have a smaller bank, you at least can lean on the fact that there are fewer ATMs but you still can probably plan your finances enough in advance to visit your ATMs!
Late Payment: Now, some banks are insidious and they change the date due each month. But for those of you without that excuse, how could you not pay your bill on time???

Of course, as I mentioned in the Late Payment example, some banks are evil cheats who are trying to scam you. When it comes to those banks, just cancel your card and get another one… let your business do the talking. I think people need to show some financial responsibility and instead of the media babying folks like Keeley, they should educate their readership and explain that he brought it upon himself. Quit using kid gloves on adults when it comes to finances and maybe they’ll grow up!

Agree? Disagree? Think I’m a lunatic? Let me know!

{ 7 comments, please add your thoughts now! }

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7 Responses to “Banking and Credit Card Fees Are Good For You”

  1. sean says:

    How about both (all three? ;)?

    Bank fees good for you? Up to a point, sure, and exactly in the way your example illustrates – do something stupid, get smacked upside the head for it. Only a complete idiot spends without having a clue what’s available to spend, so I don’t feel a ton of sympathy for Keeley. Nothing gets your financial attention quicker than the taking of some of those finances. But when the penalty wanders far into the usurious territory that Keeley’s did, a little common sense, nay, decency has to kick in on the part of the bank.

  2. jim says:

    That’s exactly right Sean, I’m glad what I was trying to get at. And you can’t agree and disagree, but you can definitely think I’m a touch crazy. 🙂

    I think one misconception a lot of people have is that the bank is like a person, knowing exactly what it’s doing. It’s a collection of computers and some incompetant (just kidding!) people, so when you add those together with some procedures they didn’t write – you get a poor kid getting dinged seven times for overdrafting. It’s not that they knowingly charge him, the computer program just follows the same rule seven times.

  3. Flexo says:

    I don’t have any problems with overdraft fees or cash advance fees as long as they are completely disclosed ahead of time. I think there are many types of banking and investing fees that are scams. Inactivity fees and termination fees for investment accounts are relatively unnecessary.

  4. sean says:

    I think one misconception a lot of people have is that the bank is like a person, knowing exactly what it’s doing. [SNIP] It’s not that they knowingly charge him, the computer program just follows the same rule seven times.

    Here’s where I’ll have to disagree – I believe the bank (or should I say, the decision makers for the bank) knows exactly what it’s doing. It’s not like it’d take great programming skill to throw a little code into their automated systems to, say, bounce everything after the first warning overdraft. They’re letting their system ding you repeatedly not only because they legally can, but, more importantly, because it’s extremely profitable, their customer be damned.

  5. jim says:

    That is true, it wouldn’t be difficult, I suppose ultimately it comes down to the decision makers not caring that their software doesn’t err on the side of the consumer. Understandable, since you are right, it’s very profitable for them.

    What I was trying to get at was that a person isn’t there making an active decision everytime they screw you. A person made a decision to screw you part of their procedures and when you’re unlucky, not careful, or stupid… they get you. 🙂

  6. Roland says:

    Just an additional comment on cash advances or more specifically balance transfers. For the heck of it I read the fine print of one of those balance transfer checks. Check it:

    We will allocate your payments to balances (including new transactions) with lower Annual Percentage Rates (APRs) before balances with higher APRs.

    Talk about taking you for a ride! First you get hit with the high transaction fee and then all your future payments goes towards your lower APR balances!

  7. jim says:

    Yeah, they’re really sneaky about it too. If you’re interested, it’s one of the things I mentioned in Pitfalls of Using 0% Credit Card Offers To Earn Interest. Essentially, for credit cards where you can get a 0% balance transfer if you make 2 purchases (Discover is notorious for this) each month – the new purchases are at APR 89743% and you’re paying off the 0% first.

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