Skipping the Overdraft Fees Once and For All
Overdraft fees are the bane of anyone who has a checking account that goes up and down every month with a paycheck, bills, and regular living. If one doesn’t stay on top of things down to the penny, or keeps an intentional buffer, the risk of overspending once in a while is a real one. Banks know this, and they also know that most people who do overspend 95 percent of the time take care of things. That means that they are also good targets for fees and essentially free income for the bank when these customers do make an occasional mistake.
Traditional Banks Know People are Human
Instead of closing the bank account and shutting off the customer outright, banks take a far more “diplomatic” approach, charging overdraft fees every time a checking account goes under the balance, i.e. in the red. And those fees add up. Charging anywhere from $25 to $50 per instance, even happening once a month, can generate $300 to $600 in free income annually for a bank, per account. It’s real business. In addition, banks know customers aren’t going to leave. Most folks would feel a bit ashamed at bouncing a check or running in the red. To make the matter go away with a fee means many will keep their account, and the setup begins again until the next overdraft. It’s a very smart strategy from a bank management perspective.
Banking With Smart Institutions
However, smart, modern banks know that good customers matter a lot more than just a singular fee capture. Solid customers will typically expand beyond just a checking account, looking for additional services over time. That can include savings accounts, CDs, borrowing, and investment. So, it’s obviously a better business strategy to hold onto customers long-term than to focus on just a singular fee. Yet, traditional banks continue to gouge their customers at every chance. It’s a broken record that keeps repeating the same old song.
The best choices are options like Current, providing their customers a $200 buffer that protects them from overdraft fees. If there is an accidental over-spend, it automatically turns into a consumer loan up to $200 that the customer then pays back when possible within an expected short time frame, plus interest. It makes much more sense, and the customer is not stuck with a painful overdraft fee so common with traditional banks.