Beware of Bankers Bearing Gifts (and Opt-In Notices)
As if it weren’t difficult enough to avoid being tricked by your credit card company into fees, higher interest rates and variable rates that only ever go up, Andrew Martin and Ron Lieber of The New York Times report on the aggressive campaign by your bank to get you to agree to accept fees even the Fed thinks are outrageous. The best part: They want you to think they’re doing you a favor by charging you!
Before the Fed stepped in — and only because Congress was talking about legislating the practice out of existence — banks were treating debit card transactions differently from checks when an account was overdrawn. Instead of declining the transaction if the account was empty, which is what most people expected would happen, the bank would approve the debit and then charge customers about $35 for each overdraft debit transaction. Sketchier yet, they would often order transactions largest to smallest at the end of a business day to enable them to charge multiple overdrafts: If a customer had $20 in an account and, over the course of the day, used a debit card for $10, $10 and then $25 (expecting only the last charge to be an overdraft), the bank would reorder the transactions to $25, $10 and $10 and then charge the customer $105 in overdraft fees.
Banks made $20 billion off those practices last year alone — covering checks or automatic payments that would otherwise normally bounce, even when a customer doesn’t have overdraft protection, only netted then $12 billion. So the banks are now spending a great deal of time trying to convince their customers to opt into the per-transaction fees.
As Martin and Lieber note (and this author personally experienced), one Chase opt-in notification is designed to scare customers into believing that even their normal overdraft protections will be ended, and that their ATM and debit cards will no longer work properly if they don’t “opt in” to the new overdraft protection.
But in recent weeks, Chase has been fanning special letters out to consumers with an offer that it urges them not to refuse.“Your debit card may not work the same way anymore, even if you just made a deposit. Unless we hear from you,” the message, emblazoned in large red type, warns. “If you don’t contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 — even in an emergency,” with “even in an emergency” underlined for emphasis.
Martin and Lieber describe other hard-sell tactics, like consumers being told that holds on their cards will leave them without any access to money. The banks don’t plan on stopping at one mailing: Consumers who fail to opt into the banks’ new version of overdraft protection — a per-transaction fee of around $35, not that banks will ever call it that — can expect more hyperbolic mailings, personal phone calls and emails. After all, there is $20 billion in customers’ hard-earned money at stake for the banks.