Guilting your money away

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Last month, I posted a comment about bank fees on J.D. Roth’s fantastic blog, Get Rich Slowly. (Get Rich Slowly is probably my favorite of the personal finance blogs — J.D. combines excellent, level-headed advice with frequent updates, and has drawn a strong community around the blog as a result.) The comment was about how Washington Mutual made off with $180.00 of my very favorite dollars:

I once set up a Washington Mutual savings account, and they told me the minimum balance was $1,000. I put a little more than that in the account. At some point I needed to withdraw a bit from that account, and it went below the minimum. For months, I would get a $10 “low balance� fee charged against that account, and I’d blame myself for not doing a better job of saving.

Finally I brought the account over $1,000, and waited to see the fee go away the following month. But it didn’t. “Oh, I must have deposited too late in the month,� I thought. The next month, the fee was still there. What the hell? So I called Washington Mutual, and they said, “We raised the minimum balance to $3,000.� Aha. That’s quite a trick! (It would be called “bait and switch� were in not for the miracle of fine-print terms & conditions bill inserts!) Now I have my savings in a bank with no minimum (USAA — in my experience, a great bank).

You can lose a lot of money by blaming yourself for fees, charges, and penalties. In fact, many businesses are set up to profit generously from blame that you turn on yourself, when really you are being set up to fail. This is a great personal finance tip that is dirt-simple to catch, as soon as you know to look for it: whenever you see a fee, blame the company that charged you for it, not yourself.

A news story about Washington Mutual (WaMu) from a few years ago (I believe in the Wall St. Journal) taught me about this. The article talked about how WaMu was increasing the amount that it charged customers for bounced checks, and said that they were leading a change in the way banks viewed these charges. Rather than seeing customers who bounced checks as a problem, WaMu had started to see them as a source of profit. Once, too many bounced checks would get you a stern letter from the bank warning you to manage your finances better. Now, no such letter would arrive, but WaMu would charge you more than nearly any other bank (currently, $25.00) for each bounced check. The article described the push as trying to get consumers to see bounced check fees as “short-term loans” — mind you, loans with absurd, usurious interest rates. Of course, they knew that you’d feel so badly about bouncing a check that you were very unlikely to complain.

My experience with the low-balance fee is another good example of this. Did the cost of providing savings accounts suddenly jump, so that WaMu needed to change the minimum balance from $1,000 to $3,000 to make ends meet? Hardly — instead, changing the minimum allows them to collect low-balance fees from more people, like me, who turn the blame for the fee to themselves.

Banks and credit card companies make up to one-third of all of their revenue from these kinds of fees — not including interest. Likewise, you’ll find various fees tacked on to nearly every bill you regularly pay (if you’re not afraid to lose your appetite, take a look at all the fees tacked on to your local phone bill). As a consumer, your question should be, what am I getting for that money? Nearly always, the answer will be, “nothing,” and the only way they can sell you something of no value is by making it seem like it’s your fault, not theirs, that they charged you for it. Don’t buy it.

I took my experience and my money to a bank (USAA) that has no minimum balance, and in fact also reimburses me for ATM fees charged by the ATMs I use — killing two fees with one stone. When you learn to look for these fees, you’ll see that: (1) they’re everywhere; and (2) you almost always can avoid paying them. Look for a bank that is hungry for your business, not one that’s so well-established that they need to drive up fees to make more money. The hungry banks are more likely to be a good deal.

13 Responses to “Guilting your money away”

  1. Tony Stubblebine Says:

    Marc,

    I just noticed that my bank was charging me a $3 service fee on my savings account because I wasn’t maintaining a minimum balance. But I had loads of money in my checking account. It wasn’t a matter of not being able to properly fund the savings account just a matter of not taking the time to. I wonder if other people do this?

    So I called to get rid of the fee one way or another. Instead of feeling guilty I asked directly, “Am I getting anything out of this account?” They actually answered no and were very polite in helping me cancel the account.

  2. J.D. Says:

    I’ve mentioned this elsewhere, but I used to have all my money with US Bank. As a perpetual poor money manager, I always got overdraft fees. And all sorts of other fees. I was charged $8/month for even having the account. Then there was the time that they changed their loan payment address WITHOUT NOTIFYING me. I started racking up late payment fees because my checks were being mailed to Minnesota instead of Tennessee.

    For *years* I did nothing but take this. Well, I’d complain about the fees, but there was never anything U.S. Bank could do. Finally, last year, I’d had enough. I switched to a small local credit union and I’ve never looked back. Do you know how many fees I’ve paid to the credit union since opening my account? $1. I had one overdraft and it cost me $1. (And now that I actually have saved a buffer, I hope to never see an overdraft fee again.)

  3. jolly Says:

    Another dirt-simple tip is to “read your statements”. Don’t throw them un-opened into a pile to be opened when you do your once-in-a-blue-moon Quicken data entry. I know for a fact that bookkeepers and CPA often get shoeboxes of unopened statements from their clients. Great for racking up the hourly bills for the bean-counters, but a terrible practice for the poor client. If you don’t have time to at least rip open the envelope and give it a once-over, you probably have too many of whatever-type-of-accounts (banking, credit card, brokerage, subscription bill, etc.) it is that is sending you those statements. Cancel and consolidate! You don’t have to punch in the numbers in your personal finance program immediately (or ever), but at least read the statements. If you get online statements, take a few seconds to browse them online and scan them for any glaring charges. After all, it’s your money!

  4. allan Says:

    After years of bad experiences With banks of all sizes and stripes I finally switched.

    I now use a credit union for personal accounts – they are very helpful, friendly, and most important – reasonable.

    I’ve been paring down my credit cards for the same reason – unreasonable business models. I figure the businesses should cater to the customer, not the other way around.

  5. Stephen Says:

    I appreciate what you’re saying, and I agree that banks often take the fee thing too far and sneak a lot into the fine print they know the customers don’t read, but… Let’s not shirk personal responsibility here. It is you’re job to make sure you don’t bounce checks, not the banks. A $25 fee is exorbitant (I’m sure it doesn’t cost the bank that much), but it was still you that bounced the check and charging you a fee when you do it is not really out of the realm of decency. Just as the bank agrees to abide by certain rules and store your money for you, you agree to abide by certain rules and manage your money responsibly, though I agree whole-heartedly with the idea of looking for banks or credit unions that keep fees to a minimum and give you the benefit of the doubt.

    Banks could do a better job of giving more leeway to those with long, responsible account histories. I’ve had an account with the same bank for nearly 20 years, I have direct deposit, and I’ve bounced all of about 10 checks in the time I’ve been with them, I’d think they’d be able to reduce or forego the fee on those rare occasions that I do lose track. Maybe it’s time I looked for something new.

  6. Marc Hedlund Says:

    Hey, Stephen,

    You’re absolutely right that bouncing a check isn’t a responsible use of a bank account. My complaint is with banks that increase fees for bounced checks because they are trying to increase profits when their customers run into trouble like that. In the savings account case I mentioned at the top, I don’t think I was being irresponsible — I think I’d just chosen the wrong bank!

    I still agree with your point, though. My tip to people is just not to let feeling badly about your finances cause you to ignore a bank trying to make your situation worse when you’re already having trouble. Better to give your business to a bank or credit union that charges below-average fees, or none at all.

  7. Steven Thraen Says:

    I also have a huge beef about how some of these banks make money – Washington Mutual decided they would up my interest rate to 25.74% from 16.99% because they periodically review finiancial metrics and make adjustments. Now – I have a good creadit report – never have had a late payment with them or anyone else and have interest rates on my other credit cards from 9.99%-16.49%. So I didn’t rally get why they wanted to erxtort money – except of the obvious – they could and I can do nothing except close the account and tell lots of people to NOT DO Business with WAMU unless you want to be a victim!

  8. Bruce Siperly Says:

    Wamu just scammed 1100.00 dollars from me with their “check bouncing”scam. After over thirty years with the bank, they turned out to be anything but a “Friend of the Family”. they became my family’s worst nightmare. They allowed access to unauthorized companies and used lots of lag time to notify us that our checking account was in minus territory. This started an avalanch of uncovered checks multipal times per day until we were notified. They did nothing to help rectify this and it has cost us big. they were the rudest most inconsiderate snobs I have ever delt with.

  9. Rob Locihfer Says:

    This topic rocks.
    I have been given the bitchslap treatment by the wamu group too.
    It is going to end in court. Not small claims either, but superior in California.
    My overdraft charges started in 2005. They originally were 23.00 dollars per overextended debit card. As you know this is simply a plastic check. TYe next round was 25.00 dollars per OE DC. Now the latest round comes in at 27.00 per OE DC. ANd I keep a close eye on my balance. These fools think they are so slick. Errors abound in the online version compared to the monthly mailer.
    THen ther is the WAMU FInancial Services sister company. THesew crooks charge sky high fees for buying or selling common shares. With this usury practice the investor sees so liottle a gain he might as well go to vegas or reno ..
    I propose a class action upon the WAMU fudiciary swindlers.
    THey lie straight to your face. Why? Becuase the U.S. dollar they control is wholly transacted as CHinese YUAN. THese bastards suck tHey are most unpatriotic. I plan to sue for pain and suffering along with the lost account balances and 18% of that total.
    Lets see if this can snowball. WHat the hell we are close to having adepression again.
    THanks
    Rob Locihfer

  10. janice wiecking Says:

    My son just got hit with 13 $32 overdraft fees all in one evening. I will contact them today, but it looks like it will be in vain.

  11. Karney Hatch Says:

    Janice et al: Take your bank to small claims court and get your money back. The banks are terrified of bad publicity on this issue right now, partly because there’s a bill in Congress (HR 946, the Consumer Overdraft Protection Fair Practices Act) that will address some of the abuses of the current system.

    I filed a small claims action against Wells Fargo to get my overdraft fees back, and seven days later they called and said they were giving in – they paid everything, including the “sustained overdraft fees” they’d been charging me all week, AND the 47.50 court filing fee. It was exactly what would have happened if they had actually gone to court and the judge had found 100% in my favor.

    The statute of limitations for small claims like these is a minimum of three years, depending on your state, so even if it’s been a while, if you have a record of it, file!

    If you win, let me know and I’ll talk about it in my movie, Overdrawn!, coming this summer.

    -Karney Hatch

  12. Karney Hatch Says:

    Two notes on other subjects:

    1) It’s our fault on not the banks. This is a fallacy. 70% of Americans no longer balance their check books, _because they don’t write checks_. They use their debit cards and pay for things online. We have cell phones and email, online banking and instant everything, but the banks manipulate the system in numerous ways, from the “float” (the time between when you deposit a check and when it shows up in your account) to reverse ordering your debits from largest to smallest, all to maximize their fee income. They also notify you about overdraft fees the old slow way, by regular mail, when they could be pinging your email or calling your cell phone, which could all be easily automated. They have the technology to stop robbing us.

    2) Where to take your business instead of the thieving national banks. Small credit unions are good, as are community banks, but many larger credit unions are just as bad as the big banks. Also, if you really want to keep your current bank, just tell them to take you out of the overdraft protection program. I did that with my B of A account – I was overjoyed when it got refused when I was having breakfast with my son at a neighborhood restaurant. Confused the waitress, but it proved that you can make your account work in a reasonable way.

  13. Eric Says:

    I just got back from vacation and saw that Wamu charged me 16 $32 fees totaling around 600 dollars. I only overdrafted on groceries and gas. As you can imagine Wamu told me to suck it. Now I need to either file a small claims suit or write them a threatening letter to urge them to refund the fees. I am a student and do not have the money to pay. Nor do I think it is moral or reasonable for wamu to charge me hundreds of dollars without notifying me by phone or email. I am waiting for a call from a “senior specialist” call back. I will post the end result here, and I will be finding a credit union as soon as I can shed these bastards.

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