No loyalty from fee-happy banks

One thing that really gets me is seeing how banks have no mercy toward customers who make simple but costly mistakes.

Take Peter Means, who is described in an article in the New York Times today by Ron Lieber and Andrew Martin about debit cards. Means used his card for several small purchases in one day not realizing he did not have enough in his account. For each charge he made, for small amounts like $4.14 and $6.50, Means was charged $34. By the end of the day, he had racked up $238 in fees, which his bank would not back down on when he disputed them.

Granted, there are a few lessons Means could and I’m sure did take from the experience: know how much is in your bank account, perhaps try to use cash for more purchases, etc.

But charging $238 for one day of mistaken debiting is draconian. It cannot possibly cost the banks that much to handle overdraft, and as, the Times article points out, the threat of such hefty fees is what banks use to drive consumers to buy overdraft protection, itself an additional expense.

There is a wider trend of banks and other service providers, like telecom companies, leveling dubious fees against consumers–either the fees seem too high for the cost of the transaction or their whole basis is questionable. Yesterday, for instance, I wrote an article about a lawsuit by two users of T-Mobile against the cell phone provider for charging $3.49 for any user who wanted to receive a paper copy of his/her bill.

The bank’s argument in defense of  debit fees in the Times article is that they will have to pass on costs to consumers who do not incur the fees, in the form of yearly debit card membership fees. This would not be the worst thing. I rarely if if ever use my debit card, because it is more susceptible to damaging ID theft than credit cards (thanks, dad, for pointing that out to me).

But regardless, it makes me livid at the way banks expect continued profits while charging consumers draconian fees when many people are in the midst of financial hardship. It seems questionable for large banks to profit while individuals shoulder debt from medical expenses, education, and home loans. It will probably take our leadership to try to encourage us to pull together and take some mercy on people who are undergoing hardship, but when people are forced to go it alone and default on debts and such, it rocks the system just as badly, if not worse, for banks to seek to collect dubious fees.

Anyway, this tangent all occurred because of relatively small debit fees, but it does all seem to be related.