It is ultimately the consumer’s responsibility to know their rights and obligations when using any banking product or service. Everyone knows to “read the fine print,” yet that’s exactly what people fail to do, blindly walking the path of financial ruin. Foreclosures, credit card negotiations and short sales are often the result of years of financial habits.
Exploiting ‘overdraft protection’ by charging down your big debts first
You may have noticed, banks tend to charge your big-ticket items first. Their claim is these items must have priority because they are more expensive. This is so they can utilize that wonderful overdraft protection option for you. For example, you only have $100 dollars in your account. The day the bank is scheduled to deduct you have $145 balance owed. That balance owed looks like this: $85 for gas, $30 for a haircut, $20 for a carwash and $10 for lunch. As the bank deducts, you get hit with your first overdraft fee on the second item, then another on the third item and then another on the fourth. This is a total of three overdraft fees.
If the bank had done it from lunch to gas, small to large, you would only have incurred one overdraft fee as only the big-ticket item put you into the negative.
Financing and refinancing from your bank’s perspective
In the wake of the Gulf of Mexico oil spill last year, many commentators lamented BP’s mismanagement of ‘social capital’—this is the stuff that makes people support and trust big companies.
Banks are financiers of social capital as much as the next business. They need you to like them, stay with them and will drone on about costumer loyalty. Don’t count on them for much in return if you are suddenly in need of a loan modification or want to refinance your mortgage for more cash. They are willing to offload a sterling public image if it threatens their profitability.