It's Time to Ditch the Banks

Like many of you, I am living on the edge of going completely broke.  Last month, due to other people who shall not be named, I got dinged for some "overdraft" fees against my credit union account.

Now, you'd think that it's a credit union, it belongs to the members, it shouldn't have those huge, outrageous bounce (and, hence, overdraft) fees that the banks do.

You'd be wrong.

The credit union where I have most of my accounts, which I can no longer in good conscience call my credit union, charges $29 per bounce or overdraft

Now, if this is going to be charged for checks larger than $29, or for ATM/debit card "charges" in like amounts, fine, I can live with that.  I don't make those kinds of mistakes very often, and they're painful enough that I do my best to remember and prevent them.

But these were credit charges (as in, like those made using a credit card), on a debit card, which means that they were approved for processing by the credit union based on how much money was in the account at the time the charge was made.  Yes, they really do that.  So do the credit card companies (i.e., banks).  In the mean time, more charges than there was available money in the account piled up, so when they all came in, they mostly went over the account balance and nailed me for overdraft charges.  There were five of them, totaling $145, on charges that totaled less than $20 - three of them under $5.

(Don't ask me why the person who did this did so - I cannot fathom the mind of people like that.  All I can say is that it wasn't me, and they were warned.)

I know an elderly lady who has two Visa accounts that were overcharged similarly, only these were actual, real credit cards, with credit limits that the bank chose to ignore and approve the excess charges anyway.  Some of them were pretty large, and now she has over-limit balances that exceed her ability to pay them back - NOT because she can't pay off the charges, but because they don't handle over-limit charges the same way as under-limit charges, even they were the ones who approved the over-limit charges while the card was already over the limit in the first place.

You read that right.

Then there's the matter of how long they take to process a credit card payment.  Most of them "say" that they'll post the payment on xxx date, but if you read the fine print it can take anywhere from 4 to 14 days longer, effectively giving them the interest on that amount for that long and denying you the credit for the duration.

Well, says you, that's no big deal, it's only a few dollars for a few days.  This is true, until you consider that the banks handle MILLIONS of accounts this way, which means BILLIONS of dollars in transactions.  They can make MILLIONS of dollars on this kind of delay, and in today's world of electronic funds transfers that take fractions of a second to occur, this is effectively stealing your money.

(This is called the "float" of a transaction - the time between the fund transfer initiation and when it completes.  Banks have been making tons of money off of this for years - the time between when your check is cashed at the recipient's bank and when the fund transfer clears yours.  During that time, the money "exists" in both places and earns interest for the banks - both of them.)

What to do?

There is a movement afoot to ditch the banks.  I believe we need to do that in the biggest way possible.

Banks only respond to the movement of money, and they notice really fast when that means less for them.

So, don't use them at all, if you can.

Okay, that's not easy - you have your paycheck going into direct deposit, half of your bills (or more) are paid automatically from your checking account these days, and so on.

On the other hand, you can't overspend what's in your pocket.  If you don't absolutely have to have a bank account, get rid of it.  Use cashiers checks and money orders to pay your bills (although, be warned, the banks make money off of the float on those, too).  Or just pay them in cash wherever you can.

But wait! you cry - what about my interest???

Have you looked at your interest rate lately?

Your bank charges you 5% to 30% interest on loans, fees, credit cards, and so on, and they pay you, what, 0.5% interest on your savings?  If you're "lucky" and have an orange account (or other online investment savings account), maybe you get 1-2%?

If your account has millions in it, then that's "real" money.  If not, get serious.  You lose more in fees and charges than you do by not wasting your money in an "interest-bearing" account that earns more money for the bank than they will ever give you.

So, ditch your banks.  It's the only way they'll ever pay attention to how much they're ripping you off and the fact that there is something you can do about it.