Metro Cheapo

Automatic Overdraft Coverage: Banks Are Getting Even More Desperate

Earlier this month, new federal legislation regarding automatic overdraft coverage went into effect. Banks are still allowed to offer overdraft protection on checking and debit card accounts, but it can only be provided as an opt-in service. It’s no longer automatic or set up by default. As a result, banks are getting more and more aggressive get you to sign up. Why? Because automatic overdraft coverage nets the banking industry (literally) BILLIONS of dollars annually.

For the past few months, my bank has sent me countless paper notices to get me to sign up for automatic overdraft coverage. (So much for the “green” business practices, right? Perhaps the bank’s environmental concerns are not so important, after all. Or maybe they’ve just forgotten about the planet in their blind pursuit of more and more fees.) I shake my head and laugh when receiving each of these stupid notices and, of course, I recycle them.

No sooner did I become oblivious to banks (and the tidal wave of pleading ads about automatic overdraft coverage), when I noticed at least one bank now offering a $50 bonus for signing up. Yep, 50 bucks. M & T Bank — a regional bank serving the mid-Atlantic states — is actually paying people to opt into automatic overdraft coverage. The desperation has reached a new level of, well, desperation.

I must confess, this $50 bonus tactic is very smart and will probably fool many clueless account holders. M & T Bank may not be the first bank to gamble $50 on automatic overdraft coverage. Nevertheless, I expect that other banks will follow suit. Of course, my strong advice to you is a familiar refrain: JUST SAY NO! Don’t be fooled by the crisp bill with Ulysses S. Grant’s picture on the front. It’s a trick! Banks like M & T are simply betting that you’re more desperate than they are. Prove them wrong.

If you’re thinking you can take this bonus and outsmart the bank, think again. So-called bank account “bonuses” often never materialize. When customers are ignorant enough to take the bait, the bank will employ one of two scenarios: 1) they’ll refuse to add the bonus to the account or neglect to do so; or 2) they’ll flag the bonus accounts and figure out how to recoup it. Either way, you can count on the fact that automatic overdraft coverage always works in the bank’s favor. You can also count on overdraft fees in the future, if you’re exposed to automatic overdraft protection.

Just in case you need a reminder to say no, here’s a recent video from Consumer Reports about why you should decline automatic overdraft coverage.

Lessons from iPhone 4: Avoid the Dreaded Consumer Product Recall

Apple stopped short of issuing a consumer product recall for the iPhone 4.

After iPhone 4 users raised concerns that dropped calls and bad reception might warrant a consumer product recall on Apple’s newest gadget, Apple CEO Steve Jobs spoke at a rare press conference on July 16 to reassure iPhone 4 users. While stopping short of issuing a consumer product recall for the wildly popular phones, Jobs announced that everyone who bought a suspicious iPhone 4 will receive a free “bumper,” a silicone ring that slips around the phone and seems to solve the bad antenna/dropped calls problem.

Despite iPhone 4′s sleek look and top-of-the-line functionality, its usefulness was compromised by something as simple as users holding the iPhone 4 in a position that cut off the antenna’s reception.

There’s a lesson here. While it’s tempting to jump on the iPhone 4 bandwagon, or that of any super-new, ultra-modern tech gadget, buyers can avoid dealing with the potential consumer product recall — and save money in the long run — by waiting until other users have road-tested the product.

By waiting a few weeks, or months, before buying the current model and adopting a wait-and-see attitude, you let other consumers do the quality assurance testing for you. If they run into bad reception and a consumer product recall, they’ll have to deal with sending the defective product back to the manufacturer while you remain in possession of your hard-earned cash.

If you’re one of the few people who can get along with a cellphone that just makes calls (like me), you’ll save even more money and avoid the dreaded consumer product recall even when you upgrade over the long term. The life span of personal electronics has decreased proportionately with the speed at which newer, shinier products are released on the market. As a result, older models are often vastly cheaper than the newest model and won’t be in danger of a consumer product recall anytime soon.

Sometimes companies drop the price of its latest gadget to compete with similar gadgets from other manufacturers: see Barnes and Noble lowering the price of its e-book reader Nook to get a leg up on Amazon’s Kindle, the market leader. That’s good for all consumers — except the ones that paid top dollar for a Nook.

So the next time you’re pressing your nose to the glass at the Apple store, waiting for a glimpse of the latest tech toy, consider the potential for a consumer product recall. Wait a week or two: you’ll avoid the headache and save your dough.

Airline Fees Become Deal-Seeking Hurdles

Airline fees will play havoc with your travel budget.

The Associated Press published a report today about airline fees — hidden charges that make it more difficult for consumers to find the cheapest deal on a flight. Congressional investigators have observed that sizable airline fees on baggage and basic amenities are not part of the ticket price. As a result, consumers often don’t know about these airline fees until they show up at the airport.

Airline fees can easily go undetected until it’s too late for the traveler to shop around. Why does Congress care about these fees? Because billions of dollars’ worth of airline fees are tax-exempt and lawmakers would like to get their hands on that money.

Regardless of the government probe, sneaky airline fees hurt consumers — if you travel, you should know about them. Airlines, travel agents, online travel sites and other ticketing venues should be required to disclose airline fees for checked luggage, reservation changes and other services in a clear-cut, fair and consistent manner, according to the Government Accountability Office.

During the past three years, airlines have initiated new fees for services that used to be part of the ticket price. These unprecedented airline fees have restored airline profits in a tough economy but provoked the anger of travelers who see themselves nickeled and dimed to considerably higher costs. In addition to checked bags, some airlines charge customers for seat assignments, extra leg room, preferred status in boarding lines, blankets, pillows, beverages and meals.

It’s the position of the airlines that these fees are really for the passengers’ benefit, since they let airlines reduce ticket prices while consumers pay only for services they use. If this is the logic of their argument, how about charging airline fees for screaming babies? Or guys who lunge all the way backward in their seats, shoving a tray table into their rear neighbor’s stomach? Or gum-snapping teenagers who want to trade seats with you so they can sit next to their boyfriend/girlfriend?

All joking aside, airline fees amount to serious coin. American, Continental, Delta, United and US Airways all charge $25 for the first checked bag and $35 for the second, as reported by the online reservation site Kayak. JetBlue charges $10 plus for extra leg room. AirTran charges $6 for advance seat selection and assigns exit row seats for $20. Snacks aboard most airlines range from $2 to $5 — meals cost you a little bit more.

The Department of Transportation could call for airlines to publish two ticket prices to passengers: a “full fare” with only the mandatory charges (such as taxes) and “full fare-plus” with the extra airline fees. As of now, the airlines won’t supply the travel industry with their fee schedules. This is why consumers can’t get this information when comparing airline ticket prices online. Of course, no one wants to be the first to disclose airline fees that would put themselves at a competitive disadvantage. Therefore, until the government mandates full disclosure of airline fees, we consumers are still on our own.

Next time you book a flight, go to the airline’s official site and read the fine print. Airline fees will play havoc with your travel budget, so don’t neglect due diligence. Remember the famous Latin proverb, caveat emptor = “buyer beware”.

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Automatic Overdraft Coverage: Banks Are Getting Even More Desperate

Lessons from iPhone 4: Avoid the Dreaded Consumer Product Recall

Airline Fees Become Deal-Seeking Hurdles

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