Are Hidden Bank Fees Ripping You Off?

By Dedrick Muhammad, Senior Director of Economic Programs, NAACP

A lack of transparency and disclosure around bank fees has created prohibitive barriers that keep many people from fully taking advantage of banks.

As Wharton management professor Keith Weigelt points out, “Many people do not like banks because they are tired of being charged fees that were explained in small print that no one reads. They feel banks rip them off.”

For example, one study shows that more than half the people who overdraw did not know they had signed up for overdraft coverage that would result in a fee. Yes, you heard right — opting for debit card overdraft protection may actually mean that you’re hit with a fee if you don’t have enough funds in your account to cover the withdrawal. If you opt out of overdraft protection, your transaction might be declined, but you also won’t owe a fee. Bank revenue from overdraft fees rose to $31.5 billion from $30.8 billion the previous year.

Historically, lower-income diverse neighborhoods have always had disproportionately limited access to banks, which typically concentrate in wealthier suburbs. And many consumers are understandably wary of big banks after their widespread sales of predatory loans that triggered the financial crash of 2008.

New bank policies reacting to post-recession regulations have created even more fees for the average banking consumer. Because the Dodd-Frank Act limits the amount of money banks can collect from merchants, financial services firms are now attempting to recover lost revenue by imposing fees on products and services aimed at retail consumers. What’s worse — many big banks are now aggressively pushing lower-income customers to choose high-fee financial products and banking options.

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