This article looks at the way banks exploit customers with NSF and overdraft fees. It contrasts this with the alternative of using payday loans savings and proposes that these are in fact cheaper than bank fees. It goes on to show how banks lobby aggressively against the payday industry fearing cuts in there fees. The findings are based on a US study by the federal government and is freely down loadable.

An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. The commission is managed by 5 people who constitute a board of directors. They are all appointed by the President and confirmed in the Senate. No more than three can be from he same political party.

In 2006 legislation allowed banks to apply automated overdraft programs – much to the detriment of consumers. This is a system where the bank honors customers obligations using computer rules to determine non-sufficient qualification for overdraft coverage. Data and information were gathered through a survey of a sample of institutions representing 1,171 FDIC-supervised banks, and a separate data request of customer account and transaction-level data from a smaller set of 39 institutions.

The Federal Deposit Insurance Corporation (FDIC) published the results of a two year study on the use of overdraft programs operated by FDIC-supervised banks. Astoundingly the study found that customers pay in excess of 3,500 percent APR on a NSF check – on average.Customers in low income areas were more than likely twice as certain to incur these fees.

The FDIC study reinforces the payday loan industry’s position that short-term cash advance loans are significantly less expensive than traditional bank overdraft fees. The study also found that, unlike payday loan companies that offer on-demand products, most banks (75.1 percent) automatically enrolled customers in overdraft programs that carry APRs and other fees far more expensive than the typical cash advance loan.

The study concluded that a typical customer would incur fees of $27- for each $20 overdraft over a 2 week period. A $60- ATM overdraft in 2 weeks would incur an APR of 1,067 percent. A customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173 percent and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067 percent. Oddly enough the faster one pays down the overdraft the higher the APR turned out to be.

Some consumer advocacy groups like the CRL are lobbying to ban payday loans. This leaves customers with no option than to pay overdraft fees to the banks. CRL and others recently led the charge to pass HB 545, a law effectively banning payday lending in Ohio . In 2006, Ken Compton, CEO of Advance America, said, “Contrary to the CRL’s spin, responsible uses of the payday product provides consumers firm footing to overcome unexpected financial circumstances”.

Some key findings;

Over 90% of banks completed overdraft fees without informing the customer.Very few banks (less than 8%) inform customers that they are about to incur insufficient funds. There is little opportunity to cancel the transaction so avoiding the fee.

Bank customers complaints about overdraft fees were received by twelve percent of banks.

Almost 9 percent of consumer accounts had at least 10 NSF transactions during a 12-month period. 4.9 percent had 20 or more NSF transactions.Clients of banks with 20 or more NSF transactions are charged $1,610 per year.

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UK Payday Now

If you are like me, you know very little about banking investments. You may think of investing as something you do through the stock market. While this is something that many do, this can be very risky, and may not pay off much if you don’t have a lot to invest when you start. You may find that this is something that you can not do on your own, and that means paying someone else to do it. What you should know is that there is help for you right in your own community and you don’t have to drive any further than your bank to find it.

You may not think of banking investments if you are looking for the get rich quick type of investment. Though there are many times when this can happen, you really have to get lucky for something like that to occur. The best investments for most families are the ones that slowly, yet steadily, gain through the years, and those are the banking investments that many rely on when they are trying to save for retirement, a second home, or to put their children through college. Think of investing through the bank as a more secure way to save what you earn, and to have that earn more for you.

What you will find with some of the banking investments that you can get is that some are covered by the FDIC. That means that you can be sure you will get your money back, up to the limit of coverage, should something go wrong and the bank were to fail. These accounts are not only safer, they can earn steadily through the years, though they are prone to bad times when the economy is not on an upswing. Money market accounts are usually covered as banking investments, and they are guaranteed by the FDIC. That is just one option.

You can find out more about other banking investments options from your bank by going in and asking to talk with a financial advisor. Not only can they tell you what they have to offer, they can also help you put your money in all the right accounts. At times, we may have money in one type of account when another may have more of a benefit. Savings is good, but the interest rate tends to be lower than other types of accounts. Your money should be making money, especially when the economic future seems a bit shaky at the moment.

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Banking Investments