Archive for the ‘Debtbeat News’ Category

Up until now, Bank of America customers who charged more on their debit cards than they had in their checking accounts were hit with a nasty $39 fee.  That meant that a wayward swipe at 7-11 could end up costing a month’s worth of Big Gulps.

But Bank of America has just announced that it will no longer charge overdraft fees for debit card transaction.  Also, it will no longer allow customers to charge more on their debit cards than what’s available in their account. The change is slated to go into effect sometime in June.

This is good news for most BofA customers and it’s how debit cards were meant to be used. But it’s also a safety measure that responsible consumers shouldn’t need. Managing a checking account is personal finance 101, serious 18-year-old stuff. You put money in, you record how much goes out, you know how much you have left. Easy peasy.

But regardless, small errors in record-keeping shouldn’t result in a $39 windfall profit for your bank. And what a windfall it’s been. Last year banks racked up close to $40 billion in OD charges. That’s a lot of cheddar.

So not to miss out entirely on that gravy train, the bank will of course continue to charge for other overdrafts, like those resulting from bounced checks and ACH transactions.

As the country’s largest bank, Bank of America is taking a leadership role in this matter and as we’ve seen before, other banks will likely follow suit. That’s good news for all bank customers who aren’t as diligent as they could be with their charge cards.

In a very unexpected development, U.S. Consumers increased their non-real estate borrowing for the first time in a year.

According to new numbers released by the Federal Reserve Friday, the total seasonally adjusted consumer credit increased in January by $4.96 billion (for a 2.4% annual rate) to $2.46 trillion.

Economists had widely expected consumer borrowing to keep falling, given the still-weak job market and tightening credit in the run up to the CARD Act going into effect.

The good news is that this borrowing was not fueled by Americans running back out to the malls and throwing their credit cards around like ninja stars.  Balances on revolving debt (i.e. credit cards and lines of credit) fell in January by a 2.3% annual rate.

Fixed-payment loans (like car loans and student loans, which are much safer than credit cards in these troubling times) were driving the number.  These were up 5% during this time.

Some attribute the rise in new borrowing to a rosier outlook for the long-term economy and increased consumer confidence.  Other attribute it to a new “hot” phenomenon: “Frugal Fatigue.” That’s what the hipsters are calling the burning desire by Americans to get out and shop after being fiscally cooped up for too long.

Sort of like an alcoholic falling off the wagon or that chaste girl you knew from high school who turned into a super-slut when she got to college.  Some people just can’t bottle it up for long.

It will be interesting to see if this was a one-month hiccup or if our debt has bottomed out and is on the way back.

Which wouldn’t be an altogether bad thing, if we turn to smart borrowing in the future.  Our economy needs people buying things, preferably big, expensive things. And with limited job and wage growth in the short term, a lot of that will clearly have to be on credit.

Let’s just hope that we don’t forget the lessons of the last two years and forget frugality altogether.  Borrowing for college and cars is goods, vacations and iPads, not so much.  Plus we all need to keep our credit card purchases to a minimum, sticking a figurative and financial fork in the eye of those banks that took advantage of folks in their neediest hour.

Every year the American taxpayers provide close to $9 billion in subsidies to banks in the student loan business, and guaranteed losses when former students were unable to pay.  Sounds like a great deal for the banks, not so much for taxpayers and students.

That’s why the Obama administration is looking to cut out the middleman and as a result cut out the legs of the financial institutions who have both provided access to college funding for millions of students but also have been accused of serious abuses in search of the golden fleece.

So with the proposed government takeover of the student loan business looming, 800 pound gorilla Sallie Mae needed to find a new profit gravy train and fast. And it has chosen, not surprisingly, retail banking.

Leveraging its excellent name recognition, Sallie’s first foray into the online banking business is a savings account with a 1.35 percent annual interest rate to go along with online certificates of deposit paying higher rates. According to their website, their High-Yield Savings Account boasts an Annual Percentage Yield (APY) that is five times the national average and charges no monthly fees. It’s even FDIC-insured to boot.

To sweeten the deal, Sallie has teamed up with the college savings site UPromise to boost the returns with a 10% match bonus on Upromise earnings if a customer links these two accounts within 90 days of opening a Sallie Mae High-Yield Savings Account with either set up of an Automatic Savings Plan with a monthly deposit of $25 or more, or an initial funding of $5,000 or more.

Salle Mae has had a banking charter for about five years, and they’re finally putting it to good (at least for them) use.