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Consumers Need to Guard Their Bank Accounts This Holiday Season

[Dec 9, 2007.]

 

With the holidays just around the corner, experts say consumers would be wise to re-examine their spending habits. Because of the sales that are ever-present in the days leading up to Christmas, many individuals may be tempted to push their credit spending to the limit.

As a result, for Christmas 2007, consumers would do well to stick with a shopping budget. That way, they will not receive any unpleasant surprises when the January credit card statements arrive in their mailboxes.

Another smart financial strategy this holiday season is to attempt to limit the extra fees and charges you might otherwise be forced to pay. Primary among these are overdraft fees. While overdraft protection can be a convenience, overdraft fees can quickly turn into a hefty penalty. Such overdraft charges can amount to as much as $35. If your checking account balance falls below zero and you're not aware of it, you could incur multiple overdraft fees, resulting in a financial nightmare. You may even face more charges for everyday that your balance is in the negative column.

According to the American Bankers Association, overdraft fees are designed to deter you from trying to make debit payments or writing checks for more money than you have in your account. But are consumers really paying attention? Last year, bank customers paid a whopping $17.5 billion in overdraft charges, according to a group called the Center for Responsible Lending.

This has outraged consumer groups, who believe that banks should be more responsible when dealing with customer accounts. These groups consider overdraft charges to be tantamount to usury. As a result, they're calling on Congress to force banks to obtain written consent from consumers before they're enrolled in accounts with overdraft fees. Consumer groups add that overdraft fees should be disclosed to consumers in the form of an annual percentage rate.

Until that happens, the wisest course for consumers this year is to keep a close eye on their checking accounts in order to avoid overdraft fees. While overdraft protection can seem handy, the fees incurred can quickly turn into a financial nightmare.

Julie Ann Amos
December 9th 2007

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