Troubled banks penalize customers

11.13.08
By Nicholas Storie

At first, a small hike in bank fees for a routine transaction may not seem like a big deal. But, over time, little changes can add up in a big way.

And that seems to be just what financial institutions are counting on. The Wall Street Journal reports that Citigroup is the latest bank to impose a new charge on customers in order to boost its profits.

Now, customers have to pay $10 in order to transfer money from a savings account or line of credit to their checking account, if they are overdrawn. People also have to pay more for "special" services, such as foreign exchange transactions or using a bank ATM if they are a non-customer.

Citibank is not the only company making changes during this difficult economy. Several other financial institutions have begun raising the fees they charge for customers who bounce checks and overdraw their accounts, according to Mike Moebs of economic research firm Moebs Services.

He told the publication that 90 percent of banks' profits from consumer fees are derived from penalties for those two behaviors.

Extra fees can wreak havoc with your finances, particularly if you have credit card debt and need every extra penny to help pay down your balance.

However, there is some good news out there for credit card customers who are tired of fee increases and other account adjustments imposed by providers.

Earlier this year, the House of Representatives passed the Credit Cardholders Bill of Rights. This legislation states that providers would no longer be able to change a customer's account terms without providing a reason.

It also addresses how payments are allocated and prohibits companies from increasing someone's interest rate on existing balances.

So, if the legislation also passes the Senate, consumers may be able to catch a break after all. Many hope the government turns its gaze to unfair bank charges as its next priority.

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Small charges add up for bank customers