Banking - Checking Account

Ugh. Did we just manage to get one annoying, expensive bank fee out of our hair only to turn around and find another one staring us in the face? Yes, we did, according to MSNBC's Red Tape Chronicles.

Here's the short version. The Federal Reserve is cracking down on banks that are slapping their customers with overdraft charges of up to $35 if they overdraw their account by even a few dollars. Beginning this summer (July for new account holders, a month later for existing customers), Americans will have to choose to be part of this racket. (Think about it; If you spend $10 you don't happen to have on lunch with friends and get charged $35, the bank is essentially loaning you that $10 at a 350% interest rate.)

Let's get the obvious out of the way first: We don't want you to overdraw your checking account. Spending more money than you actually have is not ideal, to say the least, and always winds up costing you more -- sometimes much more -- in the long run.

But banks made more than $38 billion in overdraft fees alone in 2009, so it's apparent that a lot of Americans are spending more money than they have in their checking accounts.

New rules about overdraft fees kick in this coming July. As we've pointed out in other posts, though, this doesn't mean you're off the hook if you try to buy something when you account balance is at zero. Rather, you'll just get slapped with an "insufficient funds" fee, which can cost as much as that overdraft "protection" fee you thought you were avoiding.

There's a lot of good stuff going on as far as the government cracking down on the way banks and credit-card companies have been treating their customers lately. The CARD Act kicks into gear next month, and Federal Reserve rules that come into play this summer will stop the frustrating practice of being automatically enrolled in overdraft "protection" programs that zing you for $35 if you go into the red. But there's a drawback to these reforms: Banks are still going to be looking for ways to make money.

Banks were expected to make $38.5 billion from overdraft charges alone in 2009, so they're going to want to make up that shortfall -- along with the money their credit-card units earn that will be curbed thanks to the CARD Act -- somehow. One way they'll probably do it is by reducing or eliminating free checking.

This Bankrate.com article points out that offers of free checking have been dwindling, and many "free" checking programs now come with conditions or catches, such as minimum balance requirements or direct deposit. The article also suggests that customers who want to keep free checking might be limited to online- and ATM-based transactions only. Translation: If you want to speak to a real human being, you'll have to pony up.

A bank just upped the ante to get your business. Last year, as we wrote about on WalletPop, banks were routinely giving out $100 in cold, hard cash to any customer willing to sign up for a bank account. Now SmartMoney.com is reporting that Capital One just began advertising that it will give $200 to anyone who opens a Rewards Checking account between now and February 28, 2010 -- that is, anyone living in New York, New Jersey, Texas and Louisiana, where the Rewards Checking account is available.

Other banks are making cash offers as well, with JP Morgan Chase offering $125 to anyone opening a checking account by January 15, 2010, and Bank of America willing to pay $100 to new checking account customers through February 28.

So this begs the question: Should you take advantage of these offers? For the most part, no. Absolutely not. Look at the offer, nod and walk on by.

When a $25,000 check turned up in the mail at a Charleston, S.C., Salvation Army office last month, the staff did what seemed rational: deposited it and spent the money on toys and food for about 100 families.

Friend or foe? Banks hope you'll think of them more kindly this year by offering a slew of new products aimed at making life easier for customers. But that convenience, along with pretty much everything else your bank offers, will likely come at a price. In fact, consumers should expect to spend a lot more on fees this year as banks look to replace the money they expect to lose once new credit card rules go into effect next month.

Come February, the Credit Card Act of 2009 will be put in place. The act is generally considered among personal finance experts to be a good thing for consumers -- for instance, credit cards are going to have to be more upfront about their fees and interest rates, and won't be able to raise interest rates on current balances unless a customer is at least 60 days behind on a payment. But the move is bad news for the banks, which claim that they stand to lose $50 billion a year due to these changes, according to The Wall Street Journal.

An online media maven is urging Americans to switch banks, and she wants her crusade to go viral. On the Huffington Post website, founder Arianna Huffington introduces what she calls the "move your money" campaign. The idea is to get Americans -- all Americans -- to close their accounts at big banks and transplant their personal finances to smaller banks. The budding cause has its own web site, moveyourmoney.info, including a link where you can plug in your zip code and find a list of smaller banks.

Huffington singles out the Big Four banks (that would be Bank of America, Citi, JP Morgan Chase and Wells Fargo) for particular ire, pointing out that they've curbed business lending even since receiving TARP money. She urges Americans to park their money at community banks instead of these TARP-receiving behemoths.

Remember when Uncle Billy in It's a Wonderful Life loses the bank deposit, and George's troubles ensue (and a holiday classic is born)? Or when Loretta Castorini in Moonstruck forgets a bank deposit as part of a series of comedic misunderstandings? Bank deposit bloopers happen in real-life as well, but the dollar amounts are considerably higher and the bank deposit bloopers are often caused by the bank, not the customer. And, the end-results of these bank deposit bloopers are, unfortunately, not always as heartwarming as in the movies.

Take Randy and Melissa Marie Pratt, whose perceived windfall turned into jail time, when they took an erroneous bank deposit and ran. Melissa made a bank deposit to FNB Bank in the summer of 2008 of $1,772.50, but the bank read the check as $177,250. When the central Pennsylvania couple saw the difference in their bank balance, they wrote checks to another account, quit their jobs, bought a new vehicle and moved to Orlando, Fla. They were in the process of buying a house before the bank deposit mistake was traced.

More than a million Americans lost access to banks last year, bringing the total up to 30 million people in this country who can't even open a savings account or write a check. The issue of the "unbanked," as they're being called, is a serious one, and the recession is only making the problem worse.

According to the FDIC, which compiled the stats, poor, immigrant and minority members of society are most likely to have trouble finding a bank. In total, a whopping 25.6 percent of all citizens are unbanked or "underbanked," a situation which makes their day-to-day financing more expensive and makes it extremely difficult for them to attain upward mobility.

Imagine a world where you don't have to write or mail a check, handle paper money or swipe your credit card -- all you have to do is enter some information into a Web site to make a financial transaction. That's the world of electronic payments, and if you haven't discovered the convenience of electronic payments, it's time to get with the e-program.

Whether you're shopping online, paying a bill or using online bill pay through your bank, making an electronic payment is as quick and efficient as a couple of clicks. If you automate your electronic payments, you can also eliminate the "D'oh! I forgot to make my payment" moments in your busy schedule. And as long as you make your electronic payments from a secure server, with a firewall, your privacy should be protected. Plus, you save trees and stamps.

The down side of saving a big chunk of change on Black Friday is that you usually have to spend a lot of money to realize those savings. That's why we at Walletpop were happy to see a Black Friday deal that is literally just about the savings.

On Black Friday, online bank ING Direct will announce special interest rates for opening a CD or the brand's signature Electric Orange checking account (they're keeping mum on the details of those rates until Friday but have added a teaser page to their Web site).

This blog has details of two other promotions, though: a $683 discount off an ING mortgage (the amount is the average dollar cost Americans spend on holiday gifts annually, according to the National Retail Federation) as well as a Cyber Monday 20% discount on trades through ShareBuilder, its trading subsidiary.

Is the personal check on its way out?

The Dallas Morning News recently suggested that -- and, no, they aren't the first to suggest it, nor will they be the last -- but they point out that several stores lately have made it their policy to refuse personal paper checks: Diesel, True Religion, Ed Hardy and Lululemon Athletica, which are all clothing stores. And maybe there's something in the water, since the clothing giant Gap is also exploring the concept of no longer accepting personal checks.

My WalletPop colleague Martha C. White has also written about Whole Foods no longer accepting checks in some stores, as part of a get-rid-of-checks experiment.

There's a lot of public anger at banks these days. Pick a bank topic, any topic -- bailouts, executive pay, interest rates, ATM, NSF, overdraft fees -- and it's hard to imagine anyone nodding happily. But all this anger begs the question: When we're frustrated and being thwarted by our bank, what can we do to make ourselves... well, happy?

If you've heard any of the following from your bank lately, here's what you ought to say in return.

"You have six overdraft charges." One or two overdraft charges certainly aren't fun, but five or more, and you can suddenly feel your monthly budget going to ruin. If your bank isn't one of those that's curtailing its overdraft fees (Bank of America), or it is but hasn't stopped yet (yeah, you heard us, U.S. Bank), you may, unfortunately, know that feeling.

Millions - possibly billions - of dollars are homeless, lacking a warm, dry bank account providing a roof over their heads. Although it might seem hard to imagine a day where we're stuffing mattresses with money instead of depositing paychecks in the bank, analysts say that scenario isn't too far fetched.

According to Directo, a company providing paycards to unbanked workers, the recession has sent the number of unbanked Americans soaring to about 50 million. That's up from the estimated 28 million unbanked consumers in 2007.

While you might assume those who are unbanked are jobless, low income or even homeless Americans, that's not the case. A majority of them are employed, middle-income earners, many of whom are parents.

It might be the ultimate early-morning eye-opener: imagine stopping in Dunkin' Donuts for a morning coffee and opening a checking account at the same time.

It's not a far-fetched scenario, as Citizens Bank this month opened the first full-service bank branch in a Dunkin' Donuts shop. And if the venture succeeds, the bank says it may roll out more partnerships with the breakfast-treat chain.

Citizens, which is owned by the Royal Bank of Scotland Group (RBS), opened the branch this month in Bellingham, Mass., a suburb southwest of Boston. Part of the bank's strategy is to provide banking beyond traditional hours, with the Dunkin' Donuts branch open seven days a week and from 6:30 a.m. until 6 p.m. on weekdays.