Wednesday, December 06, 2006

Getting Killed with Insufficient Funds or NSF Bank Fees?

Have you ever run in to tough times, been unable to pay your bills, run up a lot of Insufficient Funds bank charges? Most people have at one time or another been hit with overdraft fees, often times by depositing a check and writing a check against that account without giving enough time for the deposited check to clear.

After spending just a little bit of time working in a bank, it was east to see why checking accounts are the banks most profitable product.

The interest the banks make on your money is no longer where the banks may their money. If you don’t believe me, take a look at any number of public traded banks; their annual reports are usually available on their websites. Fees are where the real money is at for them. An average checking account is worth about $200 to a bank. NSF fees, the popular term used by most banks for insufficient funds, can run into the hundreds of dollars if you’re not paying attention. Often times, the people that can afford the fees the least, are the one that get hit the hardest.

Because checking accounts are so profitable, banks jump over each while trying to get new checking customers. Some banks now only offer their best CD rates to checking customers only, while others offer special offers to “new” money, new to the bank, that is.

If you ever had insufficient funds fees on your account, you can use this information to your advantage. Simply by asking a branch manager for a fee waiver, different banks will call it different things, but you get the point, you go down to the bank and explain your situation to them and get them to reverse at least some of the fees. 20% to 50% fee reduction is the norm. Believe me, they'll negotiate, especially if you hint at closing your account. They hate losing checking accounts, and will work with you. Washington Mutual goes as far as to promote one fee reversal per year in their marketing, so banks will be flexible if you stick to your guns.

A little known secret is that even if you don’t have an overdraft line of credit, banks give you about $300 credit over and above what’s available in your checking account. You can ask to opt-out, but then you’ll be hit with fees for bouncing checks from different sources.

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