2 banks change rules on overdraft fees

by Teresa Mears

Here's a small victory for consumers:

Bank of America and JPMorgan Chase are planning to overhaul their debit card programs, changing the way they credit transactions and allowing customers to opt out of overdraft protection.

We'd like to think they're doing it because that's what the customers want, but they might have been just a teeny bit influenced by moves in Congress to crack down on overdraft fees.

Members of Congress have used words like "criminal" and "rip-off" to describe the practice of letting people overspend and then charging them fees without warning, The Washington Post reported. Customers are outraged that banks have raised fees, even as the government is investing vast sums to rescue the industry.

• Bing: Avoiding bank overdraft fees

"People out there are getting whacked," said Sen. Christopher Dodd, who is drafting legislation that would require banks to get permission from customers rather than doing automatic overdrafts. "They should have the right to say, 'Deny me the transaction.' "

Overdraft fees are big business for banks and are expected to yield more than $38 million this year.

Overdrawing your account by a small amount of money, spread over several transactions, can cost hundreds of dollars in overdraft fees.

Rather than refuse to process a debit transaction when the account is out of money, banks approve it and then charge a hefty fee, $16 to $35 per transaction. That means an outing with six transactions could cost $210 in overdraft fees, even if you spent only a few dollars more than the amount in your account.

You might figure you could save yourself from these fees by telling the bank you don't want it to approve any transactions if you're overdrawn. But many banks don't allow you to do that.

And T at Savvy Frugality even had a problem with the bank processing the debit transactions first, charging fees and only afterward processing a paycheck deposit, even if the paycheck deposit happened first. When T protested, the charges were reversed, but T is still looking for a new bank.

Beginning Oct. 19, Bank of America customers will be able to opt out of overdraft protection, and new customers will be asked whether they want overdraft protection when they open their accounts.

Chase also plans to allow customers opt out of overdraft coverage. Plus, the bank says it will now credit bank transactions chronologically rather than debiting the highest amount in a day first. So if you make six transactions and only the last one overdraws your account, you'll be hit with only one overdraft fee. Currently, banks often debit the largest transaction first, which causes more of the day's transactions to incur overdraft fees.

Bank of America says it won't charge fees for overdrawing an account by less than $10 in one day and will charge a maximum of four overdraft fees per day, at $35 per overdraft. Chase will no longer charge fees when accounts are overdrawn by less than $5 and will cap the number of overdraft fees a day to three.

No word yet on whether other banks plan to follow suit.

While you're waiting for the new rules to take effect, or if you're at a bank that won't allow you to opt out of overdraft protection, be vigilant to save yourself from those hefty fees. If you think you've been charged unfairly, ask for a refund. You may get it. And, Flexo at Consumerism Commentary has 10 tips for avoiding overdraft fees.

The Five Oldest Banks in the World

by Jason Lankow

With so much focus on the demise of banks of all sizes, its easy to imagine the worst doomsday scenarios and wonder if your own bank is next. However, some banks have continued operations throughout civil wars, world wars and economic depressions without going under. These are not the first banks in the world, which trace back to early lending from priests to merchants in 18th century B.C. Babylon and up through the Roman empire, but rather these are five of the oldest surviving banks in the world, and they each tell a story.

Bank of New York (now Bank of New York Mellon)

New York, New York (Founded 1784)

(Source)

It began with a press release in the New York Packet, announcing the plan to form New York’s first bank in 1784. Alexander Hamilton, a respected attorney at the time, drafted the bank’s constitution and led The Bank of New York through its formation and early years. Eight years later, it was the first company to be traded publicly when the New York Stock Exchange opened in 1792. There is also an abundance of history behind Mellon Financial Corporation dating back to the Industrial Revolution, who merged with Bank of New York in 2007 to become Bank of New York Mellon. Today, it is the oldest bank in the United States, and they get to have One Wall Street as their address to prove it.

The Bank of Scotland (now Halifax Bank of Scotland)

Edinburgh, Scotland (Founded 1695)

(Photo Courtesy of HBOS plc Group Archives)

Although the concept of currency and bank notes wasn’t necessarily new to Scotland in the 17th century, the Bank of Scotland was the first to print its own paper currency. Further, it was unique in the sense that it was set up to help businesses, whereas the Bank of England, established one year earlier, existed primarily to finance government defense spending. Early on, it faced fierce rivalry from the Royal Bank of Scotland, and in one instance, RBS (the “new” bank) began hoarding the bank notes issued by Bank of Scotland (Old Bank) in order to present them at once, forcing old Bank of Scotland to call their loans and cease payments for six months. This didn’t sink them though, and this old resilient bank has remained as the only existing commercial institution created by the Parliament of Scotland. The Bank of Scotland merged with Halifax Bank to become HBOS in 2001.

C. Hoare & Co.

London, England (Founded 1672)

(Source)

Before modern street numbering, people used signs to locate a shop, and Sir Richard Hoare couldn’t have chosen a much better symbol than the Sign of the Golden Bottle, as gilded bottles were a sign of luxury and wealth commonly used by the goldsmiths who shaped the precursors to more modern banking systems and paper currency. This private banking institution has proven to be remarkably resilient. Of note is the fact that their building was evacuated during World War II and saved from a fire by a few brave employees. Furthermore, the bank is still completely family-owned and managed by direct descendants of Sir Richard Hoare.

Berenberg Bank

Hamburg, Germany (Founded 1590)

(Source)

Formed in 1590 by Hans and Paul Berenberg, two brothers who ran a cloth trading and import/export business, the company was very lucky to be growing during a time of prosperity in Hamburg, Germany. The city quickly grew as a hub of financial and trading activity, and they were able to thrive along with other members of a small, tight-knit group of Dutch people that didn’t even have full citizenship rights in Hamburg. Berenberg Bank today has offices throughout Europe, and remains Germany’s oldest private bank today.

The Oldest Bank in the World: Banca Monte dei Paschi di Siena

Siena, Italy (Founded 1472)

(Source)

Originally formed as The Monte di Pietà, or Monte Pio, to make loans to the poor out of charity, this is the longest running bank in the world. “Monte,” meaning “heap” or “pile,” referred to the collection of money used for charitable distribution, and the bank truly served to benefit the city’s economy. One interesting historical note is that the citizens of Siena put up income from the land as guarantees against loans for farming and city infrastructure, which led to it being referred to as Monte dei Paschi in reference to the land. Today it stands out as the oldest existing bank in the world by far, and remains an esteemed bank that has branches throughout Italy.