Various fees and charges from banks have hit both college students and the general public hard. These charges are mostly bank overdraft fees, which center on the idea of banks charging their unsuspecting patrons disproportional fees. In recent times, the Federal Reserve System addressed these issues in response to increased customer dissatisfaction. The Fed released a rule Thursday that requires banks and credit unions to obtain customers’ permission before charging steep fees to pay ATM and debit overdrafts. This rule will come into effect by July 1, 2010, for new customers, and August 15, 2010, for existing customers. Amid intense scrutiny of bank practices, Fed Chairman Ben Bernanke hopes that this would be a step toward better customer protection. According to a USA Today article, he said, “[This] represents an important step forward in customer protection.”
The question is whether this newly-introduced rule will do enough in terms of limiting irresponsible spenders. After all, the rule states that a given customer may be asked if he or she would like to overspend and eventually receive an overdraft fee. If that customer has the intention of spending the money that he does not have, he will go through with the transaction. This problem may befall a great majority of people due to America’s tendency to spend money, which it does not have. “The Fed is acting 10 years late to partially solve a problem that Congress is going to completely solve,” said Ed Mierzwinski, a consumer program director for the U.S. Public Interest Research Group, in the article. Perhaps this rule is the least with which the Fed can get away with.
On the other hand, the introduction of this rule becomes a safeguard for customers who do not know whether they will overspend and be overcharged. These people, of whom students are a big part, could have been charged inordinate amounts of money for a small overdraft. According to Moebs Services, banks are expected to reap a record $38.5 billion in 2009 from checking account overdrafts — nearly double the amount, $20.5 billion, they expect to collect from credit card faults. According to several banks, customers could be charged between $10 and $38 for an overdraft of just a few dollars. This pitfall traps many previously responsible customers and drags them into further debt.
The introduction of this rule, therefore, would limit the number of such cases and aid responsible bank users. A question arises from this rejection of people’s debit cards. Would you rather be embarrassed by a card being turned down, or would you entertain the idea of overpaying later in exchange for immediate monetary funds? On one hand, customers should follow their spending tendencies and limit themselves accordingly. That, however, is not on the mind of most Americans. Therefore, the majority of people should be in favor of this new rule limiting the treachery of overdraft fees. Those overdraft fees could recur if the sum is not paid in a given period of time, thus leading to further repercussions.
In a lot of cases — statements, online and on paper — are delayed and have mislead their recipients. Although a part of consumers has a responsible spending tendency, such technological deficiencies might cause unexpected charges even for the best of bookkeepers. Some purchases do not “go through” right away, thus becoming outstanding charges on a customer’s books. Supermarkets, cafés and gas stations may be immediate purchases on a card, however, smaller shops do not follow suit. In essence, the embarrassment of getting a debit card rejected is far outweighed by a benefit of automatic overdraft protection. We, as students, are just as much affected by these charges as the rest of America; therefore, a rule that limits fees would very much be in our favor.
In a time of such economic turmoil, the last thing that Americans need is an overdraft fee. These charges have long been a profit center for major banks and have recently become a significant part of banks’ incomes. While this Fed-imposed rule may not address all points, it is a step in the right direction. Rules such as the one made by the Fed would only serve to benefit the majority of our population and limit the banks that impose such fees. Major banks profit heavily off such customer expenses, and this would serve to simply safeguard one’s funds. Despite America’s tendency to overspend, this rule would serve to make customers think twice before continuing with a transaction.
This card has been rejected
Editorial
Published: Sunday, November 15, 2009
Updated: Sunday, November 15, 2009
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