Bank of America's Parking Meter Play

Bank of America (BAC) must be really cash strapped to pull this stunt: B of A Charges $10 Fee For $2 Parking Meter Tab.

I recently used my bank of America credit card to pay for a multi-space parking meter in Washington DC. The type electronic meter common in urban areas for parking on the street and which accepts credit card payments. The charge for parking was $2. Bank of America treats this charge as a cash advance. They charged me a $10 cash advance fee on top. So now I will be thinking twice before using any bank of America cards. A transaction that should cost $2 can come out costing $12. Also, my card currently has a 0% promotional APR on purchases, but they put the $2 parking purchase in a separate category subject to a much higher interest rate.

Banks Begging For Regulation

Banks are just begging for more regulation. And they will get it. And they will complain. I am not in favor of more regulation, but I will not feel sorry for them one bit when it happens.

I can hear the complaints now. "Where's The Free Market?" Well I said banks were begging for regulation, but I also said I was not in favor of it. Finally, the conditions that fostered these credit excesses had their roots in cheap money from the Fed and lots of help from Congress, such as the Bankruptcy Reform Act of 2005.

In other words, the free market did not create this mess. Congress and the Fed created this mess. I am in favor of scrapping the entire bankruptcy reform act.

Bankruptcy Reform Act To Blame

The bankruptcy reform act of 2005 fostered the attitude from lenders that no credit lending was too risky to consider, that consumers couldn't default.

Armed with the idea that consumers could not default, banks engaged in all kinds of risky lending. Insane levels of risky lending was done in mortgages, credit cards, autos, home equity lines, and commercial real estate.

Yes, this was the very attitude that guaranteed a deflationary bust. And much of the attitude of banks can be traced back to that bill. I called it at the time. It just took a long time to play out.

For a more detailed discussion, please see Bankruptcy Reform Act Finally Blows Sky High.

Cash Advance Warning

Technically I see nothing wrong with charging interest on cash advances except that interest rates involved typically amount to what I consider usury. Besides, no money went directly into the consumer's hands, so this does not seem to be a cash advance in the first place. The big problem however, is charging $10 for a $2 transaction. Furthermore, I do not think there should be fees at all, regardless of the size of the advance. After all, interest starts ticking from day one, and the banks should set that rate to make a reasonable amount of profit.

This is begging for the next Congress to not only rewrite credit card legislation, but to completely rewrite the bankruptcy reform bill as well.

In the meantime, please remember that any cash or pseudo cash transactions might get you whacked for $10 or higher, plus interest.

Cash Transactions

• Cash back at grocery stores or service stations on credit card purchases.
• Buying chips at a casino.
• Parking meters.
• Cash Advances.

If you are doing any of those things... Stop now. Banks are so greedy, and/or so desperate that not only are they charging ridiculous interest rates, they are willing to ding you with a $10 fee on a $2 transaction.

And if you routinely get cash back at the grocery store, sooner or later you will get hit with a $10 charge. They will notify you of the change, but trust me on this: you will never read it or even understand what they are saying if you do read it. So get out of the habit now.

Overdraft Fees Rise

USA Today is reporting Banks raise penalty fees for customers' overdrafts.

For more than a year, Wachovia has been urging its employees not to refund too many overdraft fees because they "make up a big percentage of our revenue and is (sic) a HOT button among leadership," according to internal memos obtained by USA TODAY.

Bank of America and Washington Mutual, meanwhile, have jacked up their overdraft fees and made it easier for customers to be hit with multiple penalties. The changes come as banks grapple with growing losses from bad mortgage loans. Overdraft fees have increasingly become a source of profits. Banks and credit unions collect about $17.5 billion in overdraft fees per year, the Center for Responsible Lending says.

Fees Keep Going Up

Overdraft Fees, Overlimit Fees, and Credit Card Interest Rates are all going up. Credit limits are contracting. Inflation? Think again. In disinflation credit lines go to the moon. These conditions are what one would expect in deflation where banks and other lenders are worried about being paid back.

Here is another trick banks are playing. As a hypothetical example: you have $500 in your checking account and $550 worth of checks hit, as follows: $500, $25, $10, $15. The bank is apt to generate the highest amount of fees possible by clearing the $500 check and bouncing the other 3 checks. That's $75 of overdraft fees on $50 worth of checks. The payee sometimes charges a returned check fee as well. Double it and you have $150 worth of fees on $50 of bounced checks.

Bear in mind the article stated that Washington Mutual (WM) raised the number of times that fees could be generated from five to seven per day. Yikes!

The moral of the story is simple: Do not overdraft and do not take credit card cash advances. Instead, consider getting a credit line attached to your checking account for genuine emergencies, not for routine use. I have one but have never used it.

Comments

[jjason]

Do what I did....Find another, better, bank...and cut up your BofA credit card!

[barnburner]

I have an Alaska Airlines credit card but it's really a Bank of Americas "Alaska Airlines credit card". I like the air-miles that pile up in my Alaska account BUT - Three years ago I moved to Mexico. I started to put a lot of charges on my card which was nice as everyone in Mexico accepted the card and I got the international exchange rate on each transaction which was a better deal than changing money at the banks here in Mexico. Alas, the good deal went away and BAC now charges me 2.99% foreign exchange transaction fee for each use of the card outside the U.S. so even though I pay my card off every month I am still getting whacked the foreign exchange transaction fee Plus the yearly fee just for the privilege of having the damn card

[helplessobserver]

BofA is in desparate financial state and is doing everything to wring revenue out of its customers. All this plus the insane merger with COF will backfire and blow CEO Lewis out of a job.

[jackooo]

You blame congress? Blame yourself. Anyone that does business with B of A is a fool. Cut up the card.

[Telecom Dir Ret]

If you dont respect your customers, someone else will. The wheels of justice do turn slowly but they grind very finely. And it is OK to be a pig, but the big hogs finally get slaughtered. Customers will forgive you for an ocassional error in judgement, but ARROGANCE is never forgotten. It is often the small things(fees)that get you in trouble.

[diogenes]

So we should do away with the Bankruptcy Reform Act? No country in the world is as lenient towards scam artists and deadbeats as here in the US. Do you know why the act was put in place? Because of people like the ones I know from my coffee shop club who purposely scammed the cred card companies and then BRAGGED ABOUT IT TO ME. They both work in cash businesses and make more than enough to pay their bill but one has defaulted on close to a quarter of a million...yes that is right...a quarter of a million on 43 credit cards...four of which were registered to his deceased wife (nine years ago now). I am paying for these bums and I don't like it. And don't tell me that it was or is isolated...I know different. Try that stunt in Europe.

[hexvate]

It's simple: keep a register. Keep track of your money. Bank of America only allows money to leave your account if YOU AUTHORIZE IT. Are you having a problem overdrawing your account? Then stop! It's so easy to blame a big institution for your lack in math skills. When you write a check, record it. When you swipe your debit card, record it. I've been with Bank of America for 3 years, and I've not had any issues overdrawing my account.

Know why? I know that if I have $500 in my account and write a bunch of checks that amount to $550...that means I'll overdraw. Duh.

[NavywwII]

Been with BA over 10 years...a few minor problems but nothing serious; when a problem arises I talk to them about it and it is quickly and fairly resolved. If customers would closely monitor their activity most of their problems would go away.

[Anne M]

Transferred about 4,000 onto a BofA card with no interest or transfer fee for 12 months. I paid it off in a year. I kept the BofA card with no balance and didn't use it. Know what BofA did? Raised my credit limit. I use a cash card for all my purchases now (Wachovia - which is now doing the Way2Save thing and giving me 5% + 5% bonus at 1 year anniversary). Any credit card gets paid off in full each month. I buy less and sleep better.