Have you ever gotten that dreaded letter from your bank saying that you have somehow overdrawn your account? You called up your friend who works at the bank, and after looking into the computers, he explains that there was indeed an accidental overdraft because a deposit was slow coming in, or a check came in a day early.
As an act of kindness and compassion, and due to your long-standing friendly relationship with the bank, your friend agrees that in this case, the bank will split the difference with you, and will waive half of the standard fee as long as you come down and cover the remainder of the overdrawn balance immediately. Sighing with relief, you agree and rush down to the bank, make the deposit and happy that you have dodged a financial bullet.
The next day, another overdraft notification arrives. This time, the notice states that several more checks have bounced, but once again were paid by the bank with the accompanying overdraft fees. You call up your friend at the bank again, and sure enough, he tells you that several other checks were charged against your account before your deposit was posted, and indeed, you now owe the bank several hundred dollars in overdraft fees.
He empathizes with your position, but now, there is nothing he can do to help. At least, he can do nothing unless you come down and sign up for some high interest overdraft protection account. If you sign up for a line-of-credit account, you will never again have an insufficient funds notice, but… you will also now be paying new monthly bank fees and charges.
Many people seem to forget when dealing with banks are that these friendly financial institutions are companies in business to make a profit. If you are a customer, then banks must be able to make your deposited moneys into a profitable asset for the corporation. If you are like many Americans, living paycheck-to-paycheck, you probably take advantage of one of the many ‘free’ checking accounts that has no minimum balance requirements. You earn no interest on your money deposited, but at least it doesn’t cost you anything. Or does it?
As a for-profit company, your bank has to have some way to turn your ‘free’ account into a profit. To do so, they design their system to ensure that at every possible chance, you are charged a fee. Whether this is a fee to withdraw money from an ATM (or even to check your balance at an ATM), a fee to ‘protect’ yourself from overdrafts, or by maximizing the fees charged on those rare occasions when you do make that accidental/intentional overdraft to cover an unexpected expense.
In so doing, many utilize your ignorance of banking laws, your unfamiliarity with debit/credit systems, and your trust in the friendly neighborhood banker to dissuade you from finding out that the bank really is ‘taking you to the cleaners’. Your questions to the bank are met with reams of bank statements and transaction listings meant to confuse more than to clarify. If a teller cannot convince you that the mistake was all yours, then the branch manager will be more than happy to show how the bank was obviously not at fault when they charged you hundreds of dollars in fees.
If you are like most Americans, you are now more confused then ever, and everything the bank has shown you says that it is your fault. It does not make sense what happened, but you simply want to get out of this embarrassing situation as quickly as possible. You agree to their overdraft protection, you agree to pay their monthly fee, and in return, they waive a good portion of your debt, allowing you to only owe them half of what you did before.
In essence, you have allowed them to bribe you with your own money.
What if I walked up to you on the street, said that you owed me $20, but if you gave me $10, I would forget the other $10? Would you give me the $10? Simply because I told you that you owed me $20? Of course you wouldn’t. But people pay off the bank every day in the same basic circumstances.
Banks must make a profit. One way or another, they will make their profit off of you. If they cannot, they will figure out some new way to pry those greenbacks from your wallet. The only way you can fight back is to understand their schemes, understand their relentless pursuit of profit, and understand that you can never trust your bank!