fees bouncing higher
are two lessons in this story: A) You should balance your checkbook;
B) Spending more money than you have is a bad, bad thing.
The latest Bankrate.com survey of the ever-unpopular
non-sufficient funds (NSF) fees shows that bouncing a check is expensive
and getting more costly.
Nationwide, the average fee for a bounced check has
increased 2.4 percent in the last six months, from $23.87 to $24.45.
As you might expect, credit unions charge less for bounced checks
than thrifts or banks.
The dubious distinction of having the highest NSF
fee in the country goes to Mellon Bank. Spend more than you have
in your checking account, and they'll hit you with a $35 fee.
At the other end of the spectrum is Star One Credit
Union in Sunnyvale, Calif., where being overdrawn will cost you
a quite reasonable $9.
Joe Fagenstrom, vice president of marketing at Star
One, says the Silicon Valley credit union can keep its NSF fee low
because they don't see many bouncing checks.
"We have a fairly narrow customer base -- higher income,
more affluent -- specifically, engineers. They tend to have higher
average balances. Plus, we offer free overdraft protection."
The NSF lowdown
The lowest NSF fees, whether at credit unions,
banks or thrifts, are in California. Alana Golden, of the California
Department of Financial Institutions, says state civil code caps
NSF fees on state-chartered institutions. Competition within California
may keep nonchartered banks, thrifts and credit unions in tandem
with state institutions.
Todd Louden Slager, vice president of retail deposit
products at U.S. Bancorp, which has branches in California, says
consumer groups in that state may also play a role in the low NSF
fees. Slager says those groups have been very active in getting
banks to establish a more-tolerant policy toward those who may bounce
a check for the first time. According to Slager, many banks have
a tiered system that charges an escalating NSF fee depending on
how many checks a person has bounced.
The initial NSF fee is just part of the picture when
it comes to bouncing checks.
Besides paying the bank's fee, you may also have to
pay a fee to the retailer or business you paid with a bad check,
since they probably have to pay a fee to their bank. Remember that
little sign near the cash register -- "$20 NSF fee"?
There's more. Banks like to make easy money just as
much as you do. Suppose you had $300 in your checking account and
wrote six checks totaling $375. The six checks are for $200, $12,
$50, $60, $23 and $30.
If they all come back to the bank at the same time,
the bank could clear the last five checks and just bounce the one
for $200. You'd pay one NSF fee. But, more than likely, the bank
will clear the biggest ones first; so, the $200 check clears and
so does the $60 check. But with the $50 check you're overdrawn.
So, you pay four NSF fees.
You can save yourself this hassle by getting overdraft protection.
If you have a checking and a savings account or a checking account
and a credit card with a particular bank, the bank will link your
accounts and draw from one if you're overdrawn in another.
Most banks charge a fee for this service, but some
offer it for free if a customer has several accounts or carries
a specific balance.
If you bounce checks on a regular basis because you
have trouble balancing a checkbook, there is something you can do
besides paying for overdraft protection. It may make it even more
difficult to balance your checkbook, but at least you shouldn't
bounce a check.
Put $50 or $100 in your checking account and don't
add it to the balance. It'll be a cushion, at least for a while.
If socking away that much cushion is too painful, try rounding up
to the next dollar amount when you're deducting a check from your
balance. In other words, if the check is for $10.25, deduct $11
from the balance. It'll take a while to build the cushion, but it
will happen. Just be careful about bouncing checks in the meantime.
It may not be the brightest way to manage your checkbook,
but neither is paying NSF fees.
-- Posted: May 8, 2001