aka, How the Financial Grinches Stole Christmas…
Christmas is just around the corner. How do I know? Because one of my oh-so-thoughtful Facebook friends has already started the Christmas countdown. And, like so many people out there, my concern is with affording Christmas, especially given all the traps and fees associated with bank accounts, credit cards, prepaid debit cards and payday loans. So, to help sort things out, Pleading Ignorance is looking at the top four fees that are likely to have an impact on you this holiday season.
Why are we so concerned about fees? Well, people have complained to us over and over again that they had no idea these various fees could be charged (they’re called “hidden fees” because you’re not necessarily aware of them—like it’s some sort of game). So, while you’re out buying that super-duper, fancy-schmancy toy-thing that your child has always wanted and just can’t live without, you may find that in addition to the $50 price on the toy, you may be paying some very steep fees. That’s how the financial grinches can steal your Christmas. Here’s what they’ve got in their bag of tricks this season, and what you need to look out for…
I’ve already discussed this, but it bears repeating. Yes, some of the banks have agreed to change their overdraft fee policies. Yes, lawmakers are looking to rein banks in (although when we look at all the good it’s doing with credit cards, we have to wonder if it’s worth the effort).
The banks are being accused of automatically enrolling customers in overdraft protection, not telling them about that protection and then charging a fee for that protection (cue ominous laugh here). Even more terrible, they’re accused of reordering transactions to get the highest number of overdraft fees; processing debits before credits so that customers are forced into overdraft; or backdating transactions also to push consumers into overdraft and (once again) collecting overdraft fees.
So, you could be out shopping for Barbie’s dream house or whatever, thinking you’re safe because you just put a check in your account, only to discover that the bank processed the dream house transaction before it processed your check. That could cost you an extra $35 on top of the price of the house.
Of course we’re all familiar with credit card fees. We weren’t born yesterday—we know the use of a credit card comes with a price. But, with the Credit CARD (Card Accountability, Responsibility and Disclosure) act coming into effect in a few months, those cards are now coming with increasingly higher fees, all to make some extra dough for the banks before they have to be Accountable and Responsible to consumers (charge customers first, be accountable later seems to be their motto).
So, the fees could be in the form of interest rate hikes. They could be in the form of lowered credit limits, combined with a fee for going over limit (but with no warning that you could be over your credit limit). They could be in the form of cash advance fees or balance transfer fees. They could even be in the form of fees for not using your card enough. Go figure.
Prepaid debit cards are reloadable cards that can be purchased at any number of retail outlets. They’re convenient for people who can’t—or won’t—deal with the banks (and with the way the banks have behaved lately, who can really blame them?) The problem is that they can come with all sorts of ridiculous fees. At least one card has a fee of $1 per minute for talking to a customer service representative! That’s right, if you have a problem with your card and you want to talk to the card issuer about that problem, you will be charged a dollar for every minute that you take up the customer service representative’s time.
Then, of course, there are other fees. There are withdrawal fees, cash advance fees, purchase fees, monthly charges, balance inquiry fees, overdraft fees and lost/stolen card replacement fees. All those fees just because a company has provided you with a piece of plastic that you can use to store your own money on. Essentially, they are charging you to use your own money—that’s what it comes down to. You are paying them to allow you to use your money.
Christmas can be expensive (I have the bills to prove it). In addition to all the joy and merriment, there’s a pressure to spend money on loved ones…lavish them with gifts—even if you can’t afford it. Some people turn to payday loans to help cover the costs. The problem with these loans is that they also come with hefty fees.
According to an article in The Columbus Dispatch (11/09/2009), one payday loan company charges a $15 origination fee, a $10 credit-verification fee and $4 in interest on a $400 loan. But, if that weren’t enough, that company doesn’t give its customers cash—it gives them a check and then charges them up to $31 to cash that check immediately in the store. So, customers are paying $60 in fees on a $400 loan.
The whole thing reminds me of the Grinch crawling into the homes of Whoville to steal the presents from under the trees. However, unlike the magical story, there’s very little reason to believe the financial institutions’ hearts will grow ten sizes and they’ll give back all that money they’ve taken. They’re much more likely to either keep it or give it in Christmas bonuses to their executives.
Merry Christmas, indeed!