It’s expensive to have no money -- even if that lack of funds is a temporary shortfall in just one of your accounts.
Felix writes this morning about
one of the more surreptitious ways Citibank hits its customers with
hidden fees. After an overdraft, Citi signs some customers up for a
loan, rounded to the nearest $100, and buries any mention of the loan
deep in your monthly statement. “Citi was doing everything in its power
to try to keep me in the dark as to the amount that I had
unwittingly borrowed, and to try to ensure that I remained in debt to
them for as long as possible”. Free checking, though sold as a “fundamental banking right” over the last decade, is anything but.
You don’t even need a bank account to get hit with bank fees with the rising popularity of prepaid cards. A few weeks ago, Sarah Jaffe wrote about a recent lawsuit brought by Natalie Gunshannon, a former McDonald's employee in Pennsylvania. She’s suing the franchise she worked at for refusing to deposit her paycheck into her bank account. Instead, the franchise only pays its hourly workers via prepaid debit
cards. The suit alleges that because of the fees associated
with the cards, Gunshannon’s $7.44 an hour could turn into less than
Pennsylvania’s $7.25 an hour minimum wage. The list of fees include:
“$1.50 for ATM withdrawals; $5 for over-the-counter cash withdrawals; $1
per balance inquiry; 75 cents for online bill pay and $15 if she lost
the card or had it stolen from her”.
Prepaid cards have become popular with government agencies
as well. Several states use the cards to hand out things like
unemployment benefits; the fees vary by state. California forces everybody to get a prepaid card, even if they just want to set up direct deposit into
their bank account. New Mexico, meanwhile, charges a $10 fee for going
to an out-of-network teller. Consumers in Oregon pushed back against US Bank’s ReliaCard fees back
in 2011, prompting the state treasurer to renegotiate the contract. The
ReliaCard in Oregon now allows more free withdrawals.
There are, of course, plenty of reasons that prepaid debit cards might be better than a check if you are one of the almost 10 million households in the US who are unbanked. A study by the National Consumer Law Center found that the cards were actually cheaper than the average check-cashing establishment. -- Shane Ferro
On to today’s links:
HealthcareBetween 2004 and 2010, the cost of giving birth in the US increased by more than 40% - NYT
EU MessEuro zone unemployment at record high this month, again - ReutersThe EU will regret terminating a banking union - FT
InvestigationsEU accuses banks of colluding to prevent CDS competition - Bloomberg
RegulatorsRegulators have missed 63% of Dodd-Frank rulemaking deadlines - Davis Polk
HilariousVisualizing US pot seizures at the Mexican border - Climateer Investing
Possibly Useless Data"In Japan... a typical household owns an average of 3.1 pedometers" - 10,000 Steps Australia
Up Remains AboveMorgan Stanley: We now think "good is good and bad is bad" - Sam Ro
Your Daily OutrageCUNY is paying David Petraeus $150,000 a year to work 3 hours a week - Gawker
StartupsPaul Graham's optimistic take on the state of the startup world - Paul Graham
BitcoinThere is a Bitcoin 1%, and people are angry about it - P2P Foundation
Strange Bloomberg Headlines"Who goes to cash shows extent bonds will become bear market" - Bloomberg"Bernanke-Draghi policies MIT lessons Fischer says of his pupils" - Bloomberg
Ugh"Adjusted for inflation, tuition has increased more than 50 percent since 1999" - Bernie Sanders
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