As important as it is for banks to protect their customers from hackers and data breaches, sometimes the biggest threat out there is the bank itself.

In a new study of checking account practices at 50 of the nation’s largest banks and credit unions, the Pew Charitable Trusts found that banks are still employing shady practices that can take a bite out of customers’ balances.

Half of big banks are still reordering consumer transactions from highest amount to lowest, making it easier to inadvertently overdraw an account, up from 47% last year. This chart shows just how costly transaction reordering can be in a hypothetical scenario:

For banks, reordering transactions is an easy way to collect overdraft fees, which cost consumers $32 billion a year, according to the Consumer Financial Protection Bureau. More than 70% of banks charge $35 or more when a customer’s withdrawal exceeds their account balance, and in many cases, fees can be charged as many as four times in a single day.

An even larger study of U.S. banks published in January found that overdraft fees are creeping higher each year. At more than 2,800 banks surveyed by Moebs Financial Services, the median fee for overdrawing a checking account was $30 in 2013, up from $29 in 2012. Even credit unions, long considered to be more fee-friendly than big banks, increased their median overdraft fee from $28 to $29 last year.

Consumers can even incur overdraft fees at the ATM. Three-quarters of banks in Pew’s study let customers overdraw their accounts at ATMs. A bank teller wouldn’t let customers withdraw more funds than they have available, so it makes little sense that they could do so at an ATM and get hit with a $35 fee for the privilege
Other than watching your bank account like a hawk to be sure you’re not spending more than you have, the only way to avoid these fees is to opt out of overdraft protection services if you are currently enrolled. That’s the “service” banks offer that triggers overdraft fees in lieu of declining your transaction.

“There’s lots of room for improvement for banks in providing safe and transparent checking accounts,” said Susan Weinstock, director of Pew’s safe checking practices arm. “[Consumers need] new rules to require that all consumers have basic protections no matter where they have a checking account.”

In addition to harmful overdraft practices, even more banks make it difficult for consumers to take them to court to resolve complaints. Seventy percent of banks require customers to settle any legal complaints through a third-party mediator and more than 60% ban customers from joining class action lawsuits. On top of that, one in three banks require consumers to pay for the bank’s legal expenses in the event that the consumer loses their case.

Where banks have improved

It’s not all bad news for bank practices. Ally Bank, First Republic Bank and Bank of America  came out on top in Pew’s report, meeting at least 5 out of 7 best practice requirements for disclosure forms, overdraft protections and dispute resolutions. Ally Bank scored a perfect 7/7.

Since its study last year, Pew found that a lot of banks have been proactively making their checking account practices more transparent.

Twice as many banks this year use summary disclosure boxes that highlight their key terms and fees — up to 43% from 22% in 2013.  Twenty-six banks and credit unions went so far as to adopt the model disclosure forms Pew proposed in last year’s report.

Overdraft fees may be universally hated, but consumers can’t say they aren’t warned about them. Fully 100% of banks studied by Pew disclose their overdraft fees, up from 93% last year. The number of times that customers can be charged overdraft fees in a single day has also improved, falling from five to four times this year.

http://finance.yahoo.com/news/big-banks-haven-t-improved-much-in-the-last-year-200512376.html

What about usury?

That too.

Would you prefer that they managed your account and insured the money in it for "free"?

When a bank lends money out it has credit risk when it borrows your money you don't up to the FDIC limit.

The worst thing about banking is the high barriers to entry and the lack of wider competition.  I am sure that if Google and Facebook were allowed to hold your savings the rates of savings interest would go up and the banking fees be driven down.  It would probably be easier to make payments to people too, although it is a lot easier today than it ever was before.

You can always bank with a credit union.  They are much less usurious but they also have less branches.  You can maintain a $1000 balance in your account and be disciplined about it and always pay your credit card off in full on the due date and you will never pay charges or interest, or at least they will be minimal and justified by the convenience.

If you use banking services prudently and  judiciously your bank are not even making a profit from you.  All the mugs who borrow and pay high fees and late payment and bouncing check fees are subsidizing your financial services.

When you buy items on-line does it not strike you as highly convenient and useful that a third party like Mastercard or Visa or PayPal is prepared to guarantee the payment and the delivery of items?  Without that how could on-line merchants operate?

I buy stuff on line pretty much every day and I remember the old "going to the shops" way and frankly I prefer the new.  If that costs me 1 or 2% in fees I consider that fair for the time and gas it has saved me as well as the lower prices and general convenience of getting what I want when I want it.

Last week for example my 18 month old broke the glass on our coffee maker.  A new one would have cost $35.  Within a few minutes I measured the holder and order a new glass from Amazon of the right size for $12 including the postage.  It arrived two days later.  How would I fix that before the internet or plastic?

The thing is that you get less than 1% on the $1000 when you put it in the bank and most people pay over 10%, more like @ 30% on credit card balances. That is a unfair. That is usurious.

Except people have choices.

Normally, I purchase things on my credit card for the insurance.

Did you know that if you rent a car and get into an accident and used a debit card, even if it had a credit card logo on it, you are not insured ? You have to pay to replace or fix the car out of your own pocket.

But if you purchased on your VISA you will be 100% reimbursed for all damages. Ditto if you buy a bike on your credit card and it is stolen you are insured.

If you pay your card off quickly you basically get that benefit for free.