Stop Getting Ripped Off: Why Consumers Get Screwed, and How You Can Always Get a Fair Deal - Softcover

Sullivan, Bob

Softcover

ISBN 10: 034551159X ISBN 13: 9780345511591

Verlag: Ballantine Books Inc., 2009

Inhaltsangabe

The author of the best-selling Gotcha Capitalism explores the reasons behind unbalanced consumer experiences from educational shortfalls to ineffective government, counseling readers on how to obtain better deals from credit card, mortgage and other financial arenas. Original.

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Bob Sullivan has been a reporter for nearly two decades. For the past twelve years, he has covered computer crime and consumer affairs for MSNBC.com. Today his work appears on MSNBC.com's "Red Tape Chronicles" blog. He also appears regularly on MSNBC television, NBC Nightly News, the Today show, and various local NBC affiliates. He is the winner of the prestigious 2002 Society of Professional Journalist Public Service Award for a series of articles on online fraud. His first book, Your Evil Twin: Behind the Identity Theft Epidemic, investigated the root causes of credit card fraud and other identity-related crimes. His second book, Gotcha Capitalism, exposed the hidden fee economy that attacks family budgets. He lives in Maltby, Wash. with his golden retriever, Lucky.

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Chapter One


The Twenty-First-Century

Checking Account

I recently overdrew my checking account at Chase Bank by 60 cents, and my unemployment check was set to be electronically deposited later the same night. The overdraft would only exist for a few hours. The bank charged me $35 for a 60-cent overdraft. If this were interest, it would be 6000%, but since it is a fee, it is okay.

--Kate Hank,

a Red Tape Chronicles reader

Once upon a time, a checking account was simply for depositing paychecks and writing checks. As long as you noted the checks in a register, you were safe. If you bounced a check, it probably was your fault.

Those days are long gone.

Now, check writing is probably the least of your checking-account worries. Today, your checking account can be accessed at least six ways--ATM withdrawals, signature debit purchases, PIN debit purchases, online bill pay, and other electronic transactions such as wire transfers. And, of course, checks. In industry terms, your checking account has far more velocity now, making it far more vulnerable to hackers, and, more important, far more difficult to keep track of your balance.

The result? In 2007, Americans spent $17.5 billion making banks richer through overdraft charges, probably the most lucrative hidden fee in America. The notion of a free checking account is largely a charade. Banks created the overdraft phenomenon and stoke it by quietly adding features such as "courtesy overdraft protection," all the while tightening the screws more and more with each passing year. Overdraft fees now cost nearly $40 per transgression, and because the fees are often "stacked"--one overdraft leads to another, then another, and so on--one single lapse can easily cause a $5 hamburger purchase to ultimately cost $200. That means it's more important than ever to protect yourself, and your checking account, from heading south of zero.

It's not easy. There are other bank-designed booby traps, such as "Check 21." This new electronic processing system for checks means banks get your money instantly when someone cashes a check you write (no more "float"), but can still hold on to checks you deposit for long stretches of time (up to eleven days). In short, the money comes out much faster than it goes in. That's a recipe for overdrafts. Banks even vary by deposit type how quickly they credit your account when you deposit money. (Hint: At one major bank, online transactions are credited at 10:45 a.m. every day, in-person teller transactions aren't credited until 2 p.m., and deposits at newer ATMs don't make it until 8 p.m.!) Not knowing these rules can be costly.

But how would you know them? In 2007, 20 percent of banks were in violation of the Truth in Savings Act, a federal law requiring clear and conspicuous disclosure of their fee schedules. Quick: What does your bank charge for an overdraft?

In total, Americans donate $36 billion in fees to U.S. banks every year, or about $400 for every adult American. Virtually all of that spending is unnecessary. Anyone using the right tricks can have checking and savings accounts for free. This chapter will show you how.

BALANCING YOUR CHECKBOOK MONTHLY?

NO, DAILY

You'll hear plenty of old-fashioned advice about balancing your checkbook to prevent accidental overdrafts. If you're the type to do that every month, God bless. Software can help, too. But balancing a checkbook today is so much harder than it used to be; and even a monthly balancing won't really protect you from the $39 overdraft fees I'm talking about. Anybody can make a string of unexpected debit purchases during a month of bad luck (but not if you follow my advice and don't make debit purchases). Anyone can misunderstand checking-account deposit-credit policies. Anyone can accidentally click twice while using online bill pay and suddenly find their accounts unfunded.

Checking accounts are misnamed at this point--their real name should be something like "electronic transaction accounts" or "e-accounts." And for these accounts, we need a whole new branch of personal accounting.

In a moment, I'll tell you that you don't really have to balance your checking account to the penny every month. I want you to set up your finances so they run on automatic for you, without any fear of overdraft fees, and I'll show you how. But first, I want you to consider the simple proposition that change is good.

Here's the fundamental flaw introduced into your life by the debit card: There are too many transactions yanking money out of your primary wealth-holding account. For the vast majority of consumers, the modern checking account is the staging ground for most of their money. Paychecks are automatically deposited into it; money sits there earning paltry interest while you wait to pay bills, then you spend it. Think about it; if your after-tax paycheck is $1,500 twice each month, then $36,000 flows into your checking account every year. What do you get for that? If you have to claim more than $20 in interest earning on your federal taxes each year, then consider yourself lucky. My point is this: Whatever bank you use for direct deposit of your paycheck, you are giving that bank a hell of a deal. Why be loyal? If you suffer an overdraft fee and your bank isn't playing ball with you, break off the relationship. Join a credit union or a smaller bank. These almost always have lower fees, less brutal policies, and higher interest rates. Save yourself two overdraft fees and earn yourself an extra 0.5 percent interest, and you've just pocketed more than $200 annually. Then buy your spouse something nice for Christmas. That's sure worth the trouble.

But even if you don't switch, the knowledge that you can switch is really valuable. When you're having a protracted conversation with a bank manager about excessive fees, the most convincing argument you have is the front door, because if you announce you are walking out the front door, you'll often find your foe will come around to your point of view.

One special note about switching banks. Many of the suggestions I make rely on effective use of online banking tools. These are still evolving, particularly at small banks. Most are now free, but they are not all created equal. Before you sign up with a new bank, ask to see a demonstration of its website and its online bill-paying tools. Ask friends who use the site. If a bank's online tools are hard to use or come with any fees attached, you should probably keep shopping around.

Now, back to the concept of the everything-but-the-kitchen-sink checking account, the place where you "stage" all your money. This is a bad setup and I want you to change it immediately. You should never make ticky-tacky purchases or weekly cash withdrawals from the main staging place for your money. That's a recipe for disaster. Eventually, you're going to trip up, screw up, and be hit with a fee. You're also going to lose track of your balance and the normal ebb and flow of money into and out of your account. Using one account for all these things is a big mistake.

What you need is an allowance debit card.

Here's what I mean. I want you to set up a second bank account, either at your primary institution or, even better, at a second bank. Then each month, I want you to automatically send yourself spending money. That's the only account I want you to use for debit purchases or ATM withdrawals. In fact, you can go to your primary checking-account bank and ask them for an old-fashioned "ATM card" rather than a debit card to help you avoid accidental purchases out of your number one account.

When you divorce all those workaday transactions away from your "staging" account, a funny thing happens: You will be stunned at how easy it is to balance your checking account. One or two deposits each month, then...

Details zur Ausgabe

• Verlag: Ballantine Books Inc.
• Erscheinungsdatum: 2009
• Sprache: Englisch
• ISBN 10: 034551159X
• ISBN 13: 9780345511591
• Einband: Taschenbuch
• Anzahl der Seiten: 309
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar