Lower Fees May Help Reduce Debt

[Oct 2, 2009.]

 

Senator Dodd Proposes New Legislation

Senator Dodd, Chairman of the Senate Banking Committee is proposing new legislation to start reigning in excessive bank fees.  More info here. Currently, the legislation focuses on checking account overdraft fees.  This may help customers trying to reduce and consolidate their debts in at least two ways. First, by leaving more money in the hands of the person trying to reduce their debt. Second, because the government may next go after the credit card companies.

The legislation Dodd is proposing focuses on a current bank practice of automatically paying overdraft debit card charges and then charging upwards of $35 per overdraft transaction. Dodd is proposing that clients be allowed to "opt" in or out of this service.  Clients who are allowed to "opt" out would be declined at the point of sale rather than overdraw their account and automatically be charged a fee.

More Money In The Checking Account For Debt Reduction

This year, consumers will pay over $38 billion dollars in overdraft fees.  If Senator Dodd's legislation becomes law and banks are required to reduce their fees, it will mean more money left in the checking accounts. In some cases, Bank of America charges $35 if a client overdraws their checking account even $5.  More info here. Anyone affected by these overdraft fees who is trying to pay as much as possible each month to reduce their credit card debts will find relief through this new legislation.

Legislation To Reduce Credit Card Fees

Because of the severity of the current economic crisis, the government is working hard to regulate and legislate the banking industry.  Some banks are responding to the government pressure by changing their practices ahead of the new laws.  Although the majority of the focus thus far is on checking account fees, it seems like a matter of time before the excesses of the credit card lenders also come under fire.  Hopefully as the government works to dig the US out of the worst economic crisis since the great depression, consumer protection laws favoring those struggling will fall into place.

Credit Card Best Practices

Even after the government reigns in excessing banking fees, it will ultimately be up to the consumer to manage their money carefully.  Making sure your monthly credit card payment is received before the due date will continue to help you avoid fees over and above any required interest due. $35 or more in late fees each month adds up.  That is money much better spent reducing debt balances.  For information about consolidating your debt and reducing your monthly payments, click here.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.