@Eldritch: Near the end of the roaring 80s, I used to carpool with a gal who worked in the back room of a bank. Back then she said it cost the bank 25¢ to bounce a check — with a much higher level of human intervention than is required today, I'm guessing. I think at the time the penalty was $10 for a bounce. Today it's $25 or $30? So even if the cost has gone up to 75¢ in spite of automation, their (usurious?) profit margin remains about the same.

(...and even if it hasn't, what's another 50¢ among friends? :^P)

Uhh, no... they do it because if they paid from smallest to largest, then there'd only be 1 or 2 overdrafts of large amounts instead of 5-10 of very small amounts. You see, the more overdrafts, the more they charge you. It's simple: they pay it anyway, so whether it NEEDS to be paid or not, it gets paid anyway! And then you pay the penalty for them doing that.

They would be taken to court and the algorithms behind it would have to be analyzed. Fortunately, they will claim it is proprietary and refuse to release it.

The second my bank ditches free checking is the same second that I stop using that bank. What reason is there to keep my money in there and pay if I can just keep it myself and not pay? The reason banks will have free checking is that they get to keep the interest made off of your money while they have it.

I called up and queried the charge, and they confirmed why it happened. I pointed out that I had plenty of money in other accounts with them, and that I didn't want to pay it simply because they close off changes to automatic transfers at 6PM, and they just gave me the $25 back.

Most of the time, I've found Australian banks to be a lot more reasonable than ones here in Canada. Several said "Ooh, well yes you've got a bank draft, and a work visa, but you don't have a job, so we won't let you open an account". Fine by me, but you're the ones missing out here guys..

Yes, I agree banks and financial institutions need to make money, but do they need to make SO MUCH money? If they all agree that ATM fees are now $4 for each bank, or bounce checks are now $100...is there anything we can do to stop them? They are basically all working in collusion as-is. I think .50 is a reasonable ATM fee, and maybe $10 for a bounced check. Each year they raise more and more fees, and consumers lose more and more money. It is just a redistribution of wealth.

What about the cost of the CSR when the fees are disputed, huh?

NSF (Non Sufficient Funds) or "Bounced Check" fees have been around since dirt and have always been pricey.

In olden times (when you actually wrote a check instead of swiping a debit card, paying bills on your PC or having the electric company auto-debit your account), the bounced check was returned to the merchant unpaid. If this happened, you...

* Paid a fee to the bank.
* Paid a bounced check fee to the merchant.
* Risked humiliation (remember when Jerry bounced a check on Seinfeld?), and
* Risked being prosecuted and/or arrested if you didn't pay up quickly.

In the age of debit cards, much of the risk has been transferred from the merchant to the bank. The cashier at the quickie mart doesn't need to copy your drivers' license number, student ID card number and date of birth onto your check; the fact you used a debit card pretty much guarantees the store will get its money.

The old system of paying the bank and the merchant each $25 was just as expensive, more embarassing and more time consuming than paying the bank one larger fee. The simple answer for avoiding this? Keep track of your finances and don't overdraw your account.

This being said, banks should stop approving debit charges if the funds aren't there. Transfer the funds from a savings account? Get real. With banks paying .25 to .50 APR on savings, most people either have no savings account or have their nest egg stashed in a CD, investment account or other source that isn't easily tapped into on a moment's notice.

If an accidental overdraft happens, I'd rather have it tied to a credit card. Although a 5% cash advance fee and cash advance interest rates seem outrageous, they're nothing compared to NSF overdraft fees.

Shop around and you may actually find a bank or credit union offering a dedicated overdraft line of credit. I have one tied to my checking account. The last time I had an emergency and had to use it, I paid it back 10 days later. The total cost? Ten days of interest on a $200 loan at 18% APR: Less than a buck with no cash advance fees.

Not a problem :)

It all comes down to "reasonable profit" vs. "ridiculous profit." I'm all for the former, but I get angry when that turns into the latter.

My small community bank has does has not ever charged for my checking, they have never done a bait and switch like you decide and I have been there over 15 years, there is no minium balance and they don't charge ATM fees. If I WERE to over-draft they would go into the 1,000 credit protection I have, there is no fee when this happens(or to set it up), they charge 18% interest. Which means if I over-draft $200 it cost me less than $4.

These banks and CU's are everywhere. They are not that hard to find.

Banks are no longer banks. Banks don't loan money, they sell loans. Banks don't keep your money safe, they take it. Banks don't even make transactions safe, they won't even verify a check is good or not. The whole business model of banks and credit unions is to devise a system where most of its customers pay fees to the bank in the form of penalties. For example, they will woo millions of customer in with a "Free" savings account with only a $10 minimum balance. After they have enough customers who have a balance below $250, they will change the terms of service on that "free" savings account to require a minimum balance of $250. Then they soak the customer for $15/month. Then later they will change the terms of service so that "free" savings account requires a $500 minimum balance. Then after most of that revenue dries up, they'll offer another "free" checking/savings account with no minimum balance and start the cycle over. Of course, they will force all the customers to close that old account and start over with the new one. Great money generator. I think bank and airline execs share their ideas.

However, REASONABLE is the key word.

The problem that we now have stems from the fact that these penalties make up a substantial portion of the banks' profits. When a large part of your profits come from penalizing your customer base for mistakes, it is suddenly in your best interest (and in the best interest of your shareholders... thank you Sarbanes Oxley) to ensure that your customers mess up as often as possible.

Then you end up with situations where credit card companies mail their bill 15 days before it is due, so that by the time it arrives in the mail you have very little time to review the bill before you have to mail it back; grace periods disappear (I once received a late fee on a card because I made an online payment after 5 p.m. ET on the due date); banks process transactions largest to smallest to maximize the fees collected if an overdraft occurs; and on and on it goes.

Assume two banks have similar costs to deliver service, and both want to make a profit. The best customers, the people who put lots of money in the bank, look at things like interest rates. That means the banks, to compete for business, have to give good interest rates on deposits. This means they need to make their profit somewhere else. So they charge fees. This costs small customers a larger portion of their net worth but it attracts the bigger depositors. Since they have to match their competitors and make a profit, they make it with deposits. If they are required to charge only reasonable fees they will lower interest rates. (Which actually will shift the costs more heavily to the rich. COOL!)

It's a variation on the idea that bad money drives out the good. It happens in the airline industry too. Since most people shop for airline tickets based heavily on price if one airline lowers it's prices below costs the other airlines have to follow.

"However, there's a difference between a "reasonable profit" and outright gouging with late fees just because they can."

Oops, never mind. Sorry!

"All businesses need to make money and I don't think anyone would argue with that."

I would. The New York Times just began to explore if they could maybe be a quasi business/foundation to keep the newspaper business viable.

Who said banks have to be enormously profitable? Isn't it that very theory which just caused them all to lose billions and billions of dollars?

So therefore, in order to be profitable... you have to lose money? What? Huh?

It's the very idea that that they have to have absurd profit that causes them to lose money.

The fees are NOT going to pay the TARP money, and I don't think that should be used to influence the banks of these fees. Nowhere else are stockholders or investors demanding that the companies they own reduce customer prices. What a mess that would be. You would be micro managing the banks and the point would be to help make the banks more profitable, not less.

I am not sticking up for the banks, just that the TARP for many reasons should not be used as an argument. For one many banks did not really want the TARP.

As to this is all part of the "transfer of wealth" "program" no more than any human enterprise. It is a cynical way to describe any corporation, small business, many governments, charities, unions, and people, and adds nothing to the discussion except class warfare.

"profits are required."

You've been indoctrinated. There is no requirement that a bank or any other organization exist for the sake of profit. Nor is this a requirement for success.

You didn't what I said. I just said that the profit making banking system has not produced better banks or products and you said you can't banks without profits.

Not true. You could run a bank as a non-profit. Or run a bank not committed to egregious profits for a small cadre of executives. There are no laws requiring you to disgorge massive profits to your investors. Nor are you required to make your bank a public institution.

I think all fees are unreasonable. I demand everything for free.

@bohemian: I don't see them colluding to fix prices. If that were the case, there are already laws in place to take care of price fixing. If all elase fails.....PAY CASH. Don't deal with banks at all.

Yes, I think that banks shouldn't set their customers up to fail. But you can hardly blame them for charging people who bounce checks willy nilly. If you have an exception situation, they frequently waive fees. But lots of people seem to make bouncing checks a way of life? Why should the bank have to put up with that?

There is a VERY strong incentive for these execs to settle on a business model that allows them to make as MUCH MONEY AS HUMANLY POSSIBLE. It's all about those quarterly numbers, short term means squat these days.

If a bank wants to opt out of FDIC insurance, they can charge whatever they want. But pretending banks operate in a "free market" is totally disingenuous.

I really think if I'm going to take on the risk of insuring something, I should get a look at the books and business practices.

Wait. No, I'm pretty sure every credit union ever charges outlandish fees for the same things banks do. I worked at a call center for hundreds of different credit unions. Every single one of them had angry customers...I'm sorry, "members" that would call and be extremely pissed about things like 20-35 dollar overdraft charges, or $3 out of network ATM charges. My personal credit union used to charge $3 for a money order. I can get one from my current bank or the liquor store down the street for about 50 cents.

Credit unions aren't some magical financial fix to the problems of banks. I've never seen a credit union that doesn't do the same stuff as banks, usually even worse.

Now the banks have consolidated to an extent they never should have been allowed to. They ate up all the smaller regional banks to the point you have far fewer options other than one of the big banks. The industry wanted this big monopoly on a mandatory function of society, great, now they get regulated.

Even worse are banks that purposely let an overdraft for $10 go through so they can charge the customer $45 in late fees. Enough is enough. We just gave billions of dollars to some of these clowns because they screwed up..the banks should be nailed with billions of dollars of late fees for their mistakes and bad judgement. I bet they might be a bit more sypathetic.

Assuming that the bank coupled that with a "smallest to largest" processing system so that a single honest mistake didn't turn, overnight, into 10 or more overdrafts, I really think that would be a fair and responsible way to address the issue. Which bank do you use, if you don't mind me asking?

@frank64: I dunno, they only have to proove the fee is reasonable. There's nothing to say they can't make money off of the fee, but they shouldn't be making say 10,000% profit off an overdraft fee. If it costs 10 cents to process an overdraft, and they're charging $20, that's a pretty big markup.

See, if when you bought something and it would put you into overdraft and the bank sent a message to the pinpad or something that said you will be charged overdraft for this transaction, press ok to continue, there might not be a problem with high fees. Restaurants don't just start serving food and charging you for it before you even place your order.

In fact, if you want my opinion, you'd be pretty hard pressed to find an "enlightened" nation anywhere. Perhaps switzerland, or tibet, or perhaps canada, but I'm not even sure about those.

"While I'm all for supporting banks not gouging the consumer, people forget that banks are a business and they need to make money"

Why do they need to make money? Credit unions do just fine without outlandish profits and schemes for more profits.

The whole banking paradigm in the U.S. is bonkers. Private enterprise has absolutely not produced any better banks or products for consumers.

I am tired of the government making so many regulations to tell business' how to run and how to price their services. Anyone ever heard of Caveat Emptor? Buyer beware....educate yourself before buying into something. It seems like more and more people are whining to the govt about something they knew about and didnt seem to worry about until they experience it.

Its not up to the bank to make sure everyone know service fees beyong giving the client the info, it's up to the client to READ the info provided.....if people don't like the service fees....go somewhere else.

I have been a BOFA customer for like 20 years now.....when they were NationsBank, signed up for free Alpha checking, no fees as long as I had a direct deposit once a month. No problem there. Had 1 issue where they debited someone else' check from my account, small dollar amount, no biggie. They pulled the check in question and fixed without a hitch. No other problem in all the time.....

Bottom line people, do your homework before criticizing a banks, or any other business' practices. The info is out there, don't make yourself look ignorant. It's not like they make up stuff on the spot.

Oh, and no bank will top free checking. They would lose all their business. Smaller banks don't go fee happy and usually not only offer free checking but the one by me offered 2 free foreign ATM usage a month. Basically they pay the 3.50 ATM charge up to two times a month.

Banks look at things they see happen a lot and decide to add a charge for that purpose. It's not to finance free checking(usage of your money pays for that), it's to make crazy profits where there weren't crazy profits. To prop up the short term stock price.

In today's world, with these "excessive" fees, 60% of most banks customers are un-profitable. It seems everyone wants all the services a bank provides, but everyone somehow thinks a bank can just do it for free. The fact of the matter is that interest margins are much smaller today than at any time in the past. If the banks weren't charging these fees we'd all be screaming that loan rates are too high, or deposit rates are too low.

The bigger question is -- how many of you that complain about fees have actually taken the time to shop for an account with better fees? Have you checked for a local community bank or credit union? Have you looked into alternatives such as brokerage accounts? Most credit unions still over the automatic overdraft protection from savings accounts that Shoelace mentions. Problem is most people with overdrafts don't have money in savings to cover them.

For me the bottom line is that I don't want our government to be in the business of dictating to private business what they can or cannot charge for their services.

Right, so those laws, like any other law will be written by the 'big boys' lobbyists, in order to minimally impact them, but cripple smaller competition. This is typically what these laws you call for to 'protect' you do.

How about if you don't like your bank's fees, move your money some place else and encourage others to do the same.

People want to do way to do way too much American Idol watching, and want to slough off the job of protecting themselves to someone else (gov't) which in the end ALWAYS does more harm than good.

I remember when I opened my first bank accounts in the 1970's that I could 'attach' a savings or specific overdraft account to my checking account. If I overdrew my checking account the money would come out of the attached account, no harm, no foul, as long as I didn't also end up overdrawing the attached account. It was fair and it was easy.

Of course there is a cost to the bank when events happen like a check kicks an account into the negative ... or would do so if the check is honored, but doesn't because the bank chooses not to honor it due to insufficient funds. For example, there is a cost to send a notice to the customer that either an item was not paid, or that the account went negative because it was paid. That cost should be paid by the account holder. But it does not cost $35 to send it. And it most certainly does not cost $140 to consolidate 4 items into one letter.

All businesses should be making their money in their core business, and recovering their costs in everything else.

My bank has a tiered penalty system. You sign up knowing, for instance, that your overdraft fee is $41 at the time of sign-up, but could rise if your account is not maintained. My overdraft fee was $21, however. If I had gone 3 years without an overdraft, it would have been $11, and 4+ would have been no fee for up to three overdrafts before moving back down the tier, 11, 21, etc. However, you can also move up this tier, as high as $81 per overdraft, if you mess it all up that badly. Though, you have to be bouncing checks daily to get up that high. And if you get three $81 overdrafts, they suspend your account until you come in and fix it. So. I like the idea of benefiting the good and punishing the bad. But my bank isn't so bad, so I don't have any reason to punish them.

Is it THAT hard to find and join a credit union? Really?

There are always unintended consequences of these types of things. The rule will automaticaly turn the most profitable of customers into unprofitable pains. I could see some people getting their accounts closed.

Banks are business yes, but their "business" is that they hold your money in a safe place while allowing you access to it. As such they use your money to invest or loan out to other people and charge them interest.

A grocery store is also a business would you be ok with them charging you for purchasing to many apples in a month? Or leaving your items on the scanner for to long. Or how about charging for the right to use their self checkout isles?

Business are in business to do and make business, not to charge fees for insignificant reasons.

How about we extend this reasoning to record companies, movie studios, text messages, and Apple products? It would save us billions.

I really think when banks started doing this we should have closed our accounts there and opened up where they didn't. If we had, then the banks would have seen the value in not doing this. We didn't so, they knew they could get away with it.

Prior to the suit many people were submitting claims for unreasonable fees and were collecting.

They should make money on the difference between what they pay out in investments (savings, CDs, IRAs) and what they bring in in loan interest. They should also get rid of 'free checking with no minimum balance'. Checking accounts cost money and consumers need to be realistic. Of course, if the bank is making plenty of money off your business (a couple of savings accounts, a line of credit, perhaps a mortgage), the fees might be offset by other revenue.

Unfortunately, many banks have left the business of actually loaning money. They may originate a loan, perhaps even hold it for a while...but many sell it, perhaps as a security, so they can earn a quick buck. Something they criticize the consumer for doing.

If they care not for my woes, I care not for theirs.

Extra storage space for online statement for late fee: $39

_

Uh yes, uh you see harddrives cost about $5000 per megabyte so um..

I dunno, I somehow don't see this ending well.