Double Dipping Banks
Some of the banks that have received TARP funds are sending interest rates through the roof and creating bogus fees:
- Last week, Bank of America sent letters to customers notifying them that the in
terest rate on their credit card would nearly double to 14%. They are also going to begin charging a $10 fee for many common transactions. Bank of America has received $45 billion from taxpayers. - CitiGroup is advertising $5,000 in immediate cash through a loan. What they are not advertising is that many of the loans carry a 30% interest rate. CitiGroup has received $50 billion in taxpayer money.
- Since the government began giving out TARP funds, the average overdraft fee has risen 10% to $27.50 in six months.
- In the same time, the average credit card rate has jumped from 11.38% to 12.35%.
- One California bank, that provides income tax refund anticipation loans, typically at 100% interest, has received $180.6 million in TARP funds.
- Wells Fargo and US Bank allow customers with direct deposit to access funds before pay day at an annual interest rate of 120%.
Here is what I find to be troubling:
Banks can essentially borrow money, in bulk, at 0% right now. Free money for them. This means that any interest they charge is pure profit. I am all for reasonable interest rates, or charging at-risk borrowers higher rates, except that these actions are often across the board changes.
Additionally, for many years, banks fought against payday loan companies by trying to make them illegal. They have succeeded in many states. Their argument is/was that the interest rates are too high. Meanwhile, some banks are essentially in the payday loan business. The real reason they were against the business is that it ate into their fees and thus profits. If someone were able to get a payday loan, they could avoid overdraft fees. Instead, the bank would rather have someone have six small overdraft charges of a few dollars (setting off a chain) and make up to $240 for essentially lending the customer $15 or $20. Meanwhile, the consumer could have gotten a payday loan of $100 that would carry them through to the next pay day for about $15 in total fees from the payday lender.
I am so fed up with banks. If electronic transactions were not almost a requirement today, I would have my money locked in a safe at home.
What do you think?
Source: Bailed-out banks face probe over fee hikes [The Australian Business with The Wall Street Journal]
Tags: Bailout, Bank Fees, Bank of America, Citigroup, Credit Cards, Interest Rates, TARP
- About Jesse Barron
- I am an Annapolitan and founder of the Annapolis Anchor. I love Annapolis and am proud to call it home. This great city has a lot to offer, which is why I founded this blog. I appreciate each of our readers and always strive to deliver relevant information in an easily digestible format.
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