Stupid bank tricks

Anyone who despairs over the current state of American ingenuity might take some comfort in a new report from the U.S. Government Accountability Office. The GAO report shows that the banking industry today is nothing if not creative in thinking up fees to stick us with.

The report focuses largely on overdraft fees, which have become a major source of revenue for banks, as well as a big annoyance for consumers. The average overdraft fee, according to the report, is now about $28.

At the same time, some banks are making it remarkably easy to overdraw. One way is by letting debit card transactions go through even if there isn’t money in the account to cover them. We covered that in a recent article in the Consumer Reports Money Adviser newsletter.

The GAO also notes that while electronic payments, such as debits, are processed virtually instantaneously, banks are allowed up to 11 days to process non-local paper checks. As a result, depositors can easily incur overdraft fees even though they think they have ample money in their accounts. 

What’s more, the GAO found, some banks process debits not in the order they occur but by size, starting with the biggest.

Say you have $1,000 in your account and make a series of debit transactions in this order: $25, $300, $10, and $750. Only that last $750 charge will have put you over the limit of your account (in this case, by $85). You might think you’d incur one overdraft fee.

But nooooooo……

If the bank reorders your debits as: $750, $300, $25, and $10, you’ll be overdrawn as of the second transaction and face three overdraft fees.

Lessons here: Keep an eye on your account balances, use that debit card with care, and if your bank starts pulling stuff on you, consider taking your business elsewhere. There are still plenty of banks to choose from. Our last survey of banks showed high levels of consumer satisfaction with many financial institutions. (The report on our survey is free, but the ratings are available to our subscribers only.)

Comments

[Robert McGee]

This is another "stupid bank tricks"...except the trick is on them. SunTrust Bank hires an off-shore call center to call customers with past due car loans. Except some of the customers are not past due. The caller, who has a heavy foreign accent identifies himself as being from Suntrust and asks for a persons social security number. Everybody with half a brain hangs up. After the second call I filed a report with SunTrust's fraud dept. They thanked me for the report, promised a full investigation and told me "you did the right thing."

After the third call I researched the caller ID and found it to be SunTrust. I wrote them a letter congratulating them on being the Stupidest Bank in the World."

[J. J.]

Here's a stupid bank story for you as well. Our mortgage was bought by US Bank, who provided we made our payments tended to leave us alone, and all was right with the world. Well, we had a plumbing issue that damaged a good portion of the house, to the point that we had to involve our insurance company, State Farm. State Farm was fantastic, they had a damage appraiser there the day we found the damage, he did a thorough assessment, and had his paperwork sent in the next day. The check came in the mail a week later, and all seemed right with the world; We started doing what repairs we could ourselves, using our credit cards to purchase the raw materials. When we went to cash the check, however, we were told that since it was over $7500, that we had to get the check endorsed by the mortgage holder, US Bank.

This is where the stupidity begins.

They told us that they had to get an inspector out to look at the damage, even though they required us to send the insurance company's estimate of the damages. THEN, they required not only a copy of our contractors license, insurance, contract bid for the work, and estimate, but also his W-9 form. Our contractor, a prominant flooring installer in our area who had done hundreds of jobs, had never heard of this. Neither had any of the other contractors we asked about this form.

Well, our contractor was coming to do the work the next day, so rather than spend another two weeks on a bare concrete slab of a floor, we paid him from our own funds for the first half of the work, confident that the bank would act in our best interest and speed the process along with the check.

Okay, we were naive.

We scheduled the inspector to come by, and were told over the phone that US Bank would release $10,000 of the funds to pay the contractor and cover the costs of materials that we had purchased with our own money. However, this initial contact was soon replaced by an array of "customer service agents" who each gave us a different story, a different list of paperwork required, and seemed unable to agree on what paperwork and forms they already had in their posession, or even if their contractor had been to the house.

Long story short, it has been almost a month since we got the checks, and two weeks since they were sent to US Bank as well as an ungodly amount of paperwork, and they STILL can't release any amount of the funds because they need a lien release from the contractor. Well, the contractor won't sign a lien release until he gets paid. We can't pay him until US Bank releases at least some of the funds, and US Bank won't release any of the funds until they get the lien release. Nice circular arguement. So while the insurance company and the contractor did an exceptional job, US Bank is turning what should be a simple repair job into a bureaucratic nightmare.