My bank account has been overdrawn for a while. I finally brought it back up today, but before I did, I got my monthly statement in the mail.
“Monthly service charge? So now I’m overdrawn by more than I was already! Jeez, good thing I found out here and not at the window!”
My account was unusable, but I was still assessed a service charge. For what? No services were being rendered. It wasn’t a penalty, just the regular monthly fee.
Is the service charge the price of keeping the account open, beyond the other services like processing checks and ATM transactions? I’m sure there’s a reason, buried deep in tradition, but I don’t want to ask the bank, because “Hi this is Dave how can I help you” probably doesn’t know, and would merely think I was protesting the charge. I know I wouldn’t get anywhere doing that, but I was just wondering what the reason was.
Don’t you pay the service charge every month? Just because you’re overdrawn isn’t a logical exception to standard practice.
Your claim that the account wasn’t usable isn’t really true, because you could have “used” it by depositing funds.
You could do what any sane person would do, and find a bank account that doesn’t charge monthly fees. BankOne (with direct deposit) and Comerica both offer free checking with no minimum balances, and no per-check fees. BankOne also doesn’t charge for teller transactions, or BankOne-ATM transactions.
It’s withdrawn electronically each month. What I’m asking is, what is the standard on which this practice is based? I thought, as I said already, that I was being charged for the service of taking care of my money and processing my transactions. As I said already, I didn’t have any money in there, and I wasn’t making any transactions. Is the charge like rent, like it’s what I pay each month just for the privelege of having an account at all?
**
Could of but didn’t of. I’ve been selling books and clothes for the wherewithal to pound the pavement for a job, and living on rice and potatoes. If I hadn’t done those things, there would have been no chance of my ever bringing the account out of the red. As I said already, I’m not arguing, just wondering.
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I’ve already looked into this. BankOne and Comerica are not in my area. BofA is the only bank in my area that has the benefits you describe, plus its ATM has the widest range of acceptability, and they charge very little for returned checks*. I bow to the monthly service charge in return for these benefits. I’m just wondering what service charges are for.
*Until now, I’ve only been overdrawn once, and in this case, it was because of an electronic withdrawal that I was helpless to stop. Still, I like knowing that if I do bounce a check, I won’t be crushed by a huge penalty. My first checking account, at a bank my mom chose, charged $17 for a returned check.
you are overdrawn, meaning you have taken out more money than you are entitled to. you are therefore using the account. until you repay the money they are entitled to charge you otherwise it’s just a free loan isnt it?
i must say however i hate banks cos they always charge rediculous amounts.
What would probably be a more accurate way of describing the arrangement is to say you are paying for their availability to take care of your money and processing your transactions. The fact that you weren’t financially capable of taking advantage of that availability doesn’t release you from your payment obligation.
Think of it like renting a storage garage. The space is available. You will still get charged if you store stuff there or not. On re-reading your post I noticed your rent analogy, that’s about right.
I’m not sure if that answers your question as to the standard on which it is based.
Ditto Tiglon. The service charge is very much like rent in that it pays for the computer space where your records are kept, the physical space where your paper records are kept, every internal report that has your account on it (like “Today’s Overdrawn Accounts”), not to mention the printing and mailing of the monthly statement.
The rent analogy is excellent. The bank attempts to make money from every account it services. It doesn’t work that way in practice, about 20% of all accounts are money losers for the bank, but we try.
There are three ways a bank can make money on an account:
A monthly service fee
Use of funds in the account
Get you to use (and pay for) other, related services
That’s why you can often avoid a monthly service fee by meeting a minimum balance requirement or by using other bank services like direct deposit, bill pay, etc. The bank would rather use option 2 or 3 because we can make more money by loaning/investing funds or providing other services and you benefit by avoiding the monthly fee.
Again, they take the monthly fee regardless of what my balance is. It’s an acceptable payoff, considering the priveleges I wouldn’t get from other banks.
Direct deposit and bill paying are not an option for me. Why would I be exempt from a monthly fee if I used them? I would have thought that there would have to be a fee for those services.
Direct deposit and bill paying means that you’ll always have money in your account. The bank wants you to have money in your account so it can lend it out, so anything that guarentees money in the account is a good thing.
Huh? I don’t have a steady paycheck, so how would I always have money in the account. Bill paying? You mean they “cover” me, so to speak; pay out money even if I don’t have it?
It depends on the type of account you have, the bank likely offers several. If you opened an account type which entails a monthly service fee, then you will be charged a monthly maintenance fee regardless of your balance, activity, etc. If you can keep a minimum balance (the balance requirement differs by bank, but in this area it’s usually around $1000) in your account you can probably avoid the monthly service fee by switching to a different type of account. If the bank knows that there will always be $X in the account then they can use that amount to loan or invest, thus making their money off someone else. Ask the bank which type of account would be the lowest cost option for you based on your history.
Then direct deposit is probably not for you. As Telemark said, direct deposit customers (those who have their paycheck sent dorectly to their bank acount) generally keep more money in the bank and are less likely to change banks, therefore they get a break on the monthly fee.
Nope, that’s usually called “overdraft protection” and is another feature offered on some checking accounts. The bank will automatically pull money from a savings account or creditline to cover any overdrafts.
‘Bill pay’ is a service offered by some banks (and other places) that allows you to setup, on their web site, a profile of all the companies to which you pay bills. When the time comes to pay, you log on, click which bills and how much to pay, and the bank sends the money directly from your account to the company. You don’t have to write checks and deal with postage and the bank charges a fee for the service.
You keep askin’, Rilchiam, we’ll get you through this!
I went into my bank one day, probably to deposit some coin rolls or something mundane. I saw a poster, “Absolutely free checking, limited time”. I was paying $8 a month, so I ask the nicely suited customer service person with the nice desk, “I’d like to get this - is there some kind of minimum balance or something?”
“No, no minimum”
“Well then, that’s what I’d like”
“Do you have an account with us now?”
“Yes”
“Well, this is for new accounts only, it’s a promotion”
“Oh, you mean, there’s no fees for 6 months or something like that”
“No, there’s no limit on that, but the offering time is limited”
“Wait, I have had an account here for several years, I have a payroll check on direct deposit, and a mortgage here. But you’re saying that the next guy that walks in the door, who you’ve never seen, can get free checking for life while you charge me 8 bucks a month?”
“Um, yes”
“But if I go over to that teller, and take out all my money and close the account, then drive down the street to the next branch office, and open one of these accounts, I can have free checking too?”
“Uh, well, yes… let me talk to my supervisor”
Gosh, I’m horrible at quoting TV shows on this message board, but I try yet again:
Fry [of Futurama Fame]: I’d like to start saving for my future and open a new account to deposit this dollar into.
Teller: You’re aware that we have a $10 per month fee?
Fry: No problem.
Teller: Congratulations. You’re account is now open. You’re now overdrawn by $9.
Fry: Whoo who! My future’s looking bright.
I’m sure someone will be along quickly to post the non-paraphrased version!
