Exorbitant Overdraft Fees - Bank of America: Bad for America

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With control of one in five credit cards and the maximum amount of bank deposits permitted by the Federal Reserve—there’s no question that the nation’s largest bank is also its most powerful one.

In fact, with 52 million customers, more than 5,700 bank branches, and more than 17,000 ATM machines across the country, Bank of America and its products reach nearly half of all U.S. households. Bank of America by the Numbers »

Although CEO Ken Lewis claims Bank of America is committed to “creating opportunities for people…to fulfill their dreams” a growing body of evidence shows the financial giant is using its size and its power to squeeze consumers, taxpayers, and working families.

In 2006, Bank of America raked in $21 billion in profits. Bank of America made more money from its U.S. operations than any other company—including ExxonMobil, the world's most profitable company.

Bank of America: Bank of the Free, or Bank of the Overdraft Fee?

High overdraft fees--charges imposed when you take too much money out of your checking account--enrage millions of Americans every year. In the past, most banks simply denied purchases or cash withdrawals if they would result in customers overdrawing their accounts. Now, many banks, including Bank of America, allow those transactions to go through, then stick customers with expensive fees --without warning customers making the withdrawals --that inflate the company's substantial profits.

Americans pay $17.5 billion per year to banks for overdrafts, according to the AARP. "Low- and moderate income customers pay a disproportionate share of the overdraft loan fees," according to a survey by the Center for Responsible Lending. "Once plunged into the overdraft debt trap, these customers have the greatest difficulty climbing out: 16 percent of overdrafters pay 71 percent of the fees." For low and moderate income customers of Bank of America, the nation's largest, most powerful bank has essentially become a payday lender!

"The purpose of [overdraft fees are] not, in my opinion, to help the consumer. These programs are only to increase fee income." -J. Philip Goddard, deputy director of the Indiana Department of Financial Institutions

Just As Bad As Payday Loans »

How Bank of America's overdraft fees can cost you BIG

Joe is used to getting his paycheck on August 31, but a snag in the accounting department delays his payment by a day, of which he is unaware. He only has $10 in his Bank of America Regular Checking account.

12:00 p.m.- Joe gets in his car to head over to his parents' house.
12:04- Fills car up with $20 of gas, incurring first $35 overdraft fee.
12:15- Picks up two foot long sandwiches at Subway for $10.00, incurring second fee.
12:23- Stops by Fannie Farmer for box of chocolates that costs $10.00, incurring third fee.
12:32- Uses his debit card at the dry cleaner's, costing him $20 and his fourth fee.
12:40- Pays for nails and screws worth $5.00 at hardware store.

Joe incurred five separate
overdraft charges, totaling $175 in fees (assuming he has had only one overdraft in the previous year-if not, he doesn't get a free pass but would still get hit with $100 in fees). His purchases for the day totaled $65, which means he owes Bank of America $240. That's an interest rate of 370 percent, simply because Joe didn't know that his direct deposit had gone through, and Bank of America never alerted him that he had overdrawn his account.