Overdraft fees a huge revenue stream for banks. In fact, US banks will pull in an estimated $38,500,000,000 from this year last year alone (source: Moebs Economic Research). While the banks love these fees, many consumers complain because they say they never opted into them in the first place.

The New Changes & When They Start
On Nov 9th 2009, the U.S. Fed announced their own new overdraft fee reform, similar to how they did with credit cards. Customers will now have the ability to opt out of the ability to overdraw their account using their debit/ATM card. It won’t apply to overdraft fees resulting from auto-deductions you have set up on your account (i.e. auto-payments for power bills, car payment, etc) nor will it apply to checks. Banks will have until July 1st, 2010 to meet this reform.

My Take On It
As you guys can see from my previous blogposts, 95% of the time I side with consumers. However I’m not necessarily in agreement with how they structured the reform. Before you jump on me for saying this, let me explain why:

First of all, I do believe this fee should be waived entirely if it is a rare occurrence for your account. If you are a responsible person and this happens to you, say once per year or so, then you should not be charged a fee. Simple as that.

Rather, I have a problem with the “serial offenders” that are totally irresponsible and don’t pay attention to their balance. For example, I have a friend who I’ll call Chuck (not his real name) and I would estimate that on an annual basis, he overdraws his account at least a dozen times… and it’s not by accident. He will basically spend until transactions no longer go through. Chuck doesn’t bother to actually check his balance or simply (heavens forbid) actually not spend that extra $30 at the bar when he already know his balance his extremely low.

When it comes to people like this… I can’t say I feel bad for them. If anything, the fees are doing them a favor… hopefully they are ridiculous enough to give them a clue that they need to start spending responsibly.

A recent story on BBC recently reported that the payment method of the check turned 350 years old on Monday. Which brings us to the question… how much longer will checks be around? Most Americans born in the eighties and later have never even had their own check book because they use online bill pay, debit and credit cards, direct deposit, and other forms of payment.

Still think checks will always be around? Don’t be so sure. Checks are now rarely used in Germany, Sweden, Switzerland, and Belgium, and they’re not used at all anymore in the Netherlands. The only developed countries still using checks are the United States and the United Kingdom. And to see how rapidly it’s changing, ask yourself this question: Compared to the 90′s, how often do you see people at the grocery store paying with a check?

Others say “cash is king” and making a comeback because of the economy. But that actually is not correct. Well it is true that individuals and businesses alike have less credit available today, it doesn’t mean they’re paying with cash; instead debit cards are the popular alternative to credit.

Are you tired of lousy returns on your savings account? Excessive overdraft fees on your checking account? Overall poor customer service at your bank? Or just worried about the financial stability of your bank? Well the solution is not to bury cash in your backyard! Instead you should look into the best-kept secret in banking; the credit union.

Unlike banks, credit unions are not-for-profit. Credit unions are also owned by the members (account holders) themselves. The members, regardless of how much money they have, each have one vote to elect the credit union’s board of directors. Interest rates and other policies are decided by these directors.

How many credit unions are there in the world? There was 46,377 credit unions in 97 countries at the end of ’06, and today there are even more. With so many credit unions in existence, it’s almost guaranteed there is at least one in your area you qualify to be a member of. In today’s mortgage meltdown, credit unions are a particularly useful place to find a mortgage with favorable terms if you are currently stuck in a high rate or adjustable-rate mortgage.

To learn more about credit unions we recommend you check out our friends over at the Bruen/Bensley Credit Union Blog. They’ve been blogging daily for 6 years now about credit unions and their blog is loaded with great advice.

Although we have not had any credit card crisis *yet* during this global financial meltdown, it’s interesting to take a look at what companies are most exposed should this happen.

As expected, some of the biggest card card issuers are listed. The amount of total credit card debt is not the issue, but rather the percentage of revenue from credit cards. In other words, the more exposure a company has to credit cards, the more they will be hurt if credit cards turn out to be the next shoe to fall.

It looks like Discover generate almost all of their revenue from from credit cards.