3 Ways Your Bank Is Scamming You

Banks Love Making Money From You

Banks can be like minefields of hidden fees, seductive offers, and invasive data practices.

And if you’re not the brightest when it comes to banking, you could be suffering from more fees than you know.

In fact, U.S. banks collected over $11 billion from overdraft fees last year alone.

Not to mention, if your bank doesn’t really give a crap about your privacy you could be exposed to data theft, resulting in endless spam calls and invasions of privacy.

We gathered the top 3 worst things to never let your bank get away with and how you can protect yourself.

#1 Overdraft Protection

Overdraft protection is a banking service designed to cover transactions when account balances are insufficient.

While this might prevent the embarrassment of a declined card at the register or the inconvenience of a bounced check, the service is far from free.

Banks charge hefty fees, often around $30 to $35 per transaction, which can rapidly accumulate, transforming a minor shortfall into a substantial financial burden.

Despite regulatory efforts aimed at protecting consumers, such as the Federal Reserve's rules requiring banks to obtain customer consent before enrolling them in overdraft coverage, many consumers are still automatically signed up without fully understanding the terms or the fees involved.

The use of overdraft protection skyrocketed in the early 2000s, with banks aggressively marketing the service as a customer convenience.

However, scrutiny increased after the 2008 financial crisis, with critics arguing that banks were using overdraft fees as a significant revenue stream at the expense of financially struggling consumers.

In response, regulatory changes were introduced to make overdraft practices more transparent, yet the fees remain a core income source for many banks.

Strategies to Avoid Overdraft Fees

Opt-Out Proactively: Customers can choose to decline overdraft protection services, thus avoiding the associated fees. Transactions that exceed account balances will simply be declined.

Set Up Alerts: Many banks offer free alerts that notify customers of low balances, which can help in managing funds more effectively and avoiding overdrafts.

Link Accounts: Linking a checking account to a savings account as a backup can be a cost-effective alternative. Some banks transfer funds in small increments to cover the shortfall with either no fee or a minimal fee, significantly lower than traditional overdraft charges.

Always remember to ask your bank detailed questions about the specific terms of overdraft protection, including fee structures and alternatives.

2# Sneaky Low Intro Rates

Low introductory rates are commonly used by banks to attract new customers.

These teaser rates, often very appealing, are applied to various financial products like credit cards, mortgages, and personal loans.

For instance, a credit card might offer a 1% interest rate for the first 12 months, or a mortgage might feature a below market rate for the first few years.

However, once the introductory period expires, the rates revert to higher, often much higher, standard rates.

The spike in rates after the introductory period can catch you off guard, significantly increasing your financial obligations down the line.

For example, a credit card that reverts from a 1% introductory rate to a 14% standard rate can drastically raise your repayment amount, especially if there is a remaining balance from purchases made during the promotional period.

This is why you should always compare the full terms of any introductory rate offer with other available financial products.

Sometimes products with a slightly higher but stable interest rate can be more economical in the long run.

And luckily, the attractiveness and potential pitfalls of introductory rate offers have not gone unnoticed by financial regulators. 

Laws such as the CARD Act in the United States require lenders to disclose the terms of rate increases prominently.

#3 Selling Your Personal Information

Many banks and financial institutions gather extensive data about you, from your spending habits and financial history to personal identifiers such as your social security number and address.

This information can be highly valuable, and some banks may choose to sell it to third-party marketers or data brokers.

When your personal data is sold, you might find yourself targeted by relentless advertising campaigns.

More concerning, however, is the potential for privacy breaches and identity theft, which can have long lasting effects on your financial health and personal safety.

Often, you might not even be aware that your data is being sold, as this detail is frequently buried in the fine print of user agreements.

Recent regulations have been put in place to protect your privacy in the digital age. Laws like the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the U.S. grant you the right to know what data is collected about you, who it is shared with, and allow you to request the deletion of your data or opt-out of its sale.

Here are a few steps you can take to help protect your data:

Exercise Your Opt-Out Rights: Most banks offer a way for you to opt-out of having your data sold. This is typically available in the privacy settings of your online banking account, or you might need to submit a formal request to the bank.

Understand Privacy Policies: Always take the time to read and understand the privacy policies of any financial institution you use. Knowing how your data is handled can help you make informed decisions about the services you use.

Choose Banks That Protect Your Privacy: Consider banking with institutions that prioritize customer privacy and do not sell personal information.

According to Wall Street Zen, some of the worst banks when it comes to hidden fees and privacy concerns are Bank Of America, Wells Fargo, and Credit One.

The BMM Takeaway

Pretty much every bank tries to scam you one way or another.

It’s just like that South Park episode where the banker tells Stan, “Annnnnnnnd it’s gone. All of your money is gone.”

But you can’t keep all your money under your mattress. It’s gotta go somewhere.

Luckily, some banks are better than others when it comes to fees, privacy, and customer service. Try finding a local credit union or smaller bank, as they tend to treat their customers better.