The Perfidy of Banks, Part 3

Oh, the perfidy of banks knows no bounds! I just heard a report on Marketplace about banking "courtesy overdraft" fees which featured an interview with Eric Halperin of the Center for Responsible Lending. The Center has released a report on overdraft loans called "Debit Card Danger" which occur when a person uses a debit card to withdraw funds when they have insufficient funds in their account. Previously, those kinds of transactions would be denied, but now banks allow the transaction to go through, and then charge "courtesy overdraft" fees to the customer which can amount to as much as 4 billion dollars a year. Here's an excerpt from the transcript of the interview of Halperin by host Bob Moon:

MOON: So how much have these overdraft fees gone up?

HALPERIN: Well overdraft fees are currently at a record high. They're at over $27 and they've gone up over 26 percent since 1998. Our study found that nearly half of all overdrafts are from debit card point-of-sale transactions or ATM transactions. And at that point yes, the bank knows you don't have the money in your account and they approve it anyway.

MOON: Is this something consumers actually want? Going ahead and buying, say, a $5 burger and fries and in the end having it cost maybe $40?

HALPERIN: No, in fact we asked consumers that very question: 'If you were standing in a checkout line, would you rather have your transaction denied or would you rather have it accepted and pay an overdraft fee?' And over 60 percent of consumers said they would rather have that transaction denied. And then we also asked, 'if you were given a warning at your ATM machine that you were going to overdraft would you pay the fee or would you cancel the transaction?' and only 2 percent of consumers said they would go ahead and pay the fee.

MOON: Well didn't these banks have their computers set up to automatically reject these purchases in the past?

HALPERIN: Well exactly. In the past the way banks did it is if you didn't have the money in your account, they denied your debit card purchase or your ATM withdrawal. And now they've changed it.

MOON: Any idea how much this all adds up to for the banks?

HALPERIN: Well every year in overdraft fees from ATM and point-of-sale transactions alone, that number is well over $4 billion.

Thanks for the "courtesy," banks!

The Perfidy of Banks, Part 2

Way back in January 2006 I wrote a post about how much I hate banks entitled "The perfidy of banks." Well, the rest of the year has not dampened my antipathy for the banking system. I actually have reasonably good online banking experiences more recently with Washington Mutual, Bank of America and Citibank. Now, I have another example of banking oerfidy to share.

In preparation for my upcoming trip to India I have had to make an international wire transfer of funds from a U.S. banking account to an Indian banking account. Having become accustomed to nearly instantaneous wire transfers between my U.S. domestic bank accounts, I expected something similar when I initiated the transfer on Tuesday, December 5, 2006.

The funds did not get credited to their intended account until Tuesday December 26!

But what is so amazing is that I was told that this IS NOT unusual. After I started enquiring with Citibank where the $%$U&*!! my money was, they told me that an electronic wire transfer can take "up to fourteen business days" to reach its destination. The funds were sent through the S.W.I.F.T. network (Society for Worldwide Interbank Financial Telecommunications) which means the funds are routed from bank to bank using unknown intermediary banks. The SWIFT protocol only requires an initiating bank and a beneficiary bank. Inquiry messages about previous transfers also go through the SWIFT network! I was told that there was no way that the initiating bank could communicate directly with the beneficiary bank. In this day and age of instantaneous internet-based communication I was dumbfounded.

"How does one send money from the U.S. to an international account?" I asked increduously.

"This is the best way."

One explanation for the delay is the involvement of the Department of Homeland Security as well as the Federal Reserve in international transfers of U.S. funds to foreign accounts. I still don't understand how businesses could tolerate such delays.

Also, I'd like to know how all those people in the movies and on television are instantly transfering money to the Cayman Islands and numbered Swiss bank accounts. I guess that's why they call it "fiction."

How long do YOU think a transfer of money from a bank account in the USA to a bank account at a different bank in another country should take?

To me, I think I could have Fedex'ed or DHL'ed a check to the person and had them deposit nito their account and that would have been faster.