Business Checks

Bank overdraft fees to total $38.5 billion

Just 10% of consumers paying nearly 90% of the record windfall as fees jump despite recession, research report says.

NEW YORK (CNNMoney.com) — U.S. banks will collect a record $38.5 billion in overdraft fees this year, with nearly all the revenue paid by just 10% of customers, according to a research report released Monday.

The windfall is nearly double the $19.9 billion collected in 2000, as overdraft fees drift higher despite the recession, said Mike Moebs, chief executive of research company Moebs Services.

“Overdrafts are the mother lode of all service-related charges, and they’re often the only source of capital,” Moebs said. “Still, we had never seen fees go higher in any recession until now.”

The national median overdraft fee rose to $26 from $25 in 2008, while larger Wall Street banks charge a median of $35, Moebs said.

Moebs Services collected data from 2,000 banks and credit unions, and the firm found that 44.5% reported a net overdraft revenue higher than their net income. Fee hikes have helped banks boost profit amid the recession, Moebs said.

“Most people paying these fees have a credit score below 590 or so,” Moebs said. “Beyond that, they’re a whole gamut of people: rich and poor, men and women.”

Government-mandated overdraft fee increases “are leading the charge,” Moebs said. For example, he said, a local U.S. post office decides to increase its overdraft fee to $35. Area retailers note the increase and in turn raise their own fees. Finally, banks follow suit.

“I doubt anybody in Congress is aware of this,” Moebs said. “The customers are angry, and they have a right to be angry.”

The Federal Reserve and other lawmakers are discussing rules about overdraft fees, Moebs noted, but he thinks cash-strapped customers need more transparency — and soon.

“We need to do everything we can for consumers: send e-mails, text messages, voice-activated alerts,” Moebs said. “It’s essential that we send a wake-up call, especially to Wall Street banks.”

A JPMorgan Chase (JPM, Fortune 500) spokesman told CNN that his company did not raise overdraft fees from last year, saying that the bank charges overdraft fees depending on number of times it occurs ranging from $25 to $35.

A Bank of America (BAC, Fortune 500) spokeswoman said although her company sent customers letters earlier this year about possible increases, it decided not to raise the $35 fee. Overdrafts of less than $5 incur a $10 fee, she said, and the bank may waive unemployed consumers’ fees on a case-by-case basis.

This does apply for all business checks, and personal accounts as well. Best thing is, if your main business checking account is getting low on money, to make sure you have the account connected to your business savings. It will be alot of pain to try to recover from multiple NSF, and it would make your busienss loose money

Did you open up a new business? Do you have a new business checking account? Are you using one of the two most popular accounting programs of quickbooks or peachtree? If you answered yes, and need cheap business checks, then its easy to do. You could go to your bank, and pay for 250 checks, on average of $75, or find a company that will be able to offer it to you for less.

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When your bank that you’ve been using for a while, and it has failed, what do you do with the debt and existing checks? FDIC allows a failed bank, when its purchased by another bank, that the existing customers are allowed to use their existing business checks, debit/credit card, and personal checks. When the personal or business checks runs out, the new bank will require you to update the checks.

Alot of people worry that the checks they have already bought wont be able to be used. That is incorrect. When you order new checks, you’ll be assigned a new routing number and your account number will remain the same. Its bad enough to have a bank fail, but to have your info changed is another hassle. They will do what they can to make it easy on you. Dont forget to keep copies of your bank statements with the old bank for at least 2 years. That way, if anything happens, you’ll be able to use those statements as as backup.