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Wednesday, February 25, 2009

Bank fees: a toll to pay for accessing unemployment benefit

As if the unemployed weren't already enough problems, another problem that's hitting them now are the bank fees. Reason? - many states providing unemployment benefits require people to use debit cards to access their money. Not surprisingly, many banks have been smart to find ways to make money in these situations.

Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 -- even though they could decline charges for more than what's on the card.

I don't mind banks charging legitamate fees. However, in situations like these where people have no choice but to retrieve money using debit cards, I think the states should have been smart to have set up better agreements with the banks to ensure customers didn't end up getting charged fees. Of course, some questions I have are - why were these bankers not so smart when they were issuing mortgages to all the subprime borrowers? How come they display all their smartness only when it comes to finding new ways of charging fees to customers, or ensuring they get million dollar bonuses and golden parachutes even when they fail on their jobs, or convincing their board of directors in investing in $35,000 commodes?

Of course, consumers also need to be smart. For eg, many banks allow consumer to avoid debit card-related fees by withdrawing all their money in a single transaction. Why not do that?

The banks say their programs offer convenience. They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. But the banks benefit from human nature, as people end up treating the cards like all the other plastic in their wallets.

For complete article, see:

Associated Press/Yahoo Finance: Jobless hit with bank fees on benefits

posted by Ruby @ 9:53 AM

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