I know plenty of people who racked up hundreds of $$ in these fees without even realizing it. If you don't check your balance on the interwebz, it can snowball into a massive heap of charges VERY quickly. If you somehow goof and go over your balance by even one penny, within 10 days your fees would be over $350. Add charges for transfer, for being (X) number of days in overdraft, and you could hit $500 within 2 weeks as friends of mine unfortunately discovered.
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Let's say you went to Starbucks and bought a $5 Latte. You swiped your debit card and didn't have the $5 in your account.
Bank of America would charge you a roughly $30 overdraft fee, amounting to 600% of your purchase for a loan of that $5 for as little as one day. That's bad enough.
Let's assume you paid that overdraft fee (and the $5) in one week. There are 52 weeks in a year and the bad news is that when computing the annual percentage rate you must divide the interest charged by the percentage of a year you held the money to get the APR. Thus, 31,200% interest on an "annualized" basis, assuming you pay it in one week (it's 218,400% if you pay it off the next morning!)
The bank will soon stop doing this, and in fact is mandated to do so without getting permission first for each transaction, as of June 1st.
The question that should be asked is why we should have to wait until June 19th for new accounts, or August 1st for existing accounts, never mind why this sort of outrageous behavior has been permitted in the first place.
Guido on the corner typically will charge you something obscene like 500% interest over the course of a year.
The banksters put Guido to shame.
How much do the banksters make off this? Some $1.77 billion annually, at last count. None of which, I might add, will be refunded to their customers.
The banking industry has claimed that changes like this will "restrict credit" to lower-income customers, who allegedly "need" that credit.
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