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No More $36.00 Candy & $39.00 Espresso

Another post from a while ago…..

Have you ever gone to the ATM machine to take out twenty dollars and later find out that that was really an overdraft and there was a fee of thirty or thirty-five dollars?  Or have you ever decided to make a real small purchase from a local store or from the dollar menu of your nearest fast food place and not realizing that you were out of money in your account turned a one or two dollar purchase into a thirty five dollar KitKat or McDouble?

Welcome to one of the greatest sources of revenue that many banks have; our ignorance or inability to balance our accounts.  It happens to everybody and our ignorance is the banks blessing.

The truth is we all had been given a this special “service” that many banks provide in which they will, in the unlikely event that I make a mistake with my balance, pay whatever I am trying to get and charge me a small fee for this service.

The thing that makes it hard to believe is that I could accidently bring my account to zero without noticing and then make several small purchases (lets say a dollar each) and incur a thirty-five dollar fee for each purchase.

Lets look at what that means.  Lets say I take 5 trips to the local gas station and get a one dollar coffee after my account has reached zero.

 5 $1.00 purchases X $35.00 fee each = $180.00

 That’s one hundred, seventy-five dollars ($175.00) profit that goes to the bank for loaning me five dollars ($5.00).

This great service that the banks are doing for me is an automatic part of many bank accounts you open in the United States.  In some cases it has been a service, but in many cases it has been a terrible punishment for a simple mistake. 

There are new laws in the works that will make two huge changes to this system.

The first change is that this “overdraft protection” has to be optional and a person opening an account has to opt in to this program.  Any person who does not want to have “overdraft protection” will have to have the option to opt out.

The other big change has to do with ATM withdrawals.  If a withdrawal is going to overdraft a person’s account the ATM machine is going to have to tell the person and inform the person of the fee that will be imposed.  In this manner the person is choosing at the time if he or she in fact wants to use this service or not.

Is this the end of the thirty-six dollar candy bar or the thirty-nine or forty dollar cup of coffee?  I have my doubts.  But I do believe that these new laws will at least allow people to chose if they want to spend a bunch of money they do not have and to chose if it is worth thirty-five dollars in fees for whatever they are trying to buy at the time.

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