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  • Why rapid!
  • About us
  • PayCard
    • Cardholder
    • ATM Locator
    • Cardholder FAQs
    • Client testimonials
    • Case Studies
  • OnDemand
  • Financial Wellness
  • Disbursements
  • INDUSTRIES / VERTICALS
  • contact us

The Rewards of No Overdraft Risks

January 20, 2016 by rapid! PayCard

atmOverdrafts. The bane of our bank accounts. This is just one of the financial expenses imposed on hard-working consumers; not to mention the costs of foreign Automated Teller Machines (ATM) fees when there’s not a branch in sight when you need one.

It is of course clear that banks are a business. They provide a service and should be paid for it.

But there’s compensation, and then there’s compensation. In May of 2015, CNN Money reported that America’s three biggest banks: JPMorgan Chase, Bank of America, and Wells Fargo earned over $1.1 billion on overdraft fees. And if they stay on pace and you extrapolate those numbers, from this fee stream alone, a projection can be made for earnings of $4.5 billion in overdraft charges by the end of this year. Wow.

This same CNN article goes on to report that “Banks aren’t supposed to charge customers overdraft fees when they use an ATM to get cash unless the customer chooses or ‘opts in’ to get the cash despite the fee. That said, banks can still levy a fee if someone’s balance goes negative because a check is cashed or an automatic payment such as rent goes through and there aren’t sufficient funds to cover it. A 2014 PEW study found more than half of the people who overdrew their checking accounts in the past year didn’t remember consenting to the overdraft service.”

In a piece in American Banker this month, Susan Weinstock, who directs the consumer banking project at The PEW Charitable Trusts, concurs with how quickly fees mount. The Consumer Financial Protection Bureau (CFPB) and PEW’s research reveal these costs in lending terms: “If a consumer borrowed $24 for three days — the typical scenario with an overdraft — and paid the median overdraft fee of $34, such a loan would carry a 17,000% annual percentage rate. ‘Overdrafters’ in the PEW survey reported paying total fees averaging $69 during their most recent overdraft, with over half paying between $30 and $100. Moreover, similar to the CFPB’s findings, most had negative balances for four or fewer days, and the transaction that caused their overdraft was for $50 or less.”

With overdraft fees ranging from $35 to almost $40, PEW also found that most consumers surveyed would “prefer to have their debit or ATM transaction declined rather than pay an overdraft penalty, and they said they support greater regulation of overdraft products”.

One of the most glaring issues here is one of transparency. While clear disclosure of the terms and conditions on overdraft policies and an understanding of exactly what banking customers are agreeing to in the first place would make for a more cost effective and positive experience, who can tell what loopholes financial institutions will continue to find? Isn’t a sure thing better when it comes to our hard earned money?

So for something completely blatant, as a rapid! PayCard® cardholder you needn’t be concerned about hidden fees to which you are unknowingly agreeing. Our disclosure is instead rather cut and dry: There are NO overdraft fees. Period.

The information contained in this article and any other article do not reflect the views of rapid! PayCard®. 

Filed Under: rapid! Blog Tagged With: finance, overdraft, paycard

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