November 3, 2022

Banks Could be More Retiree Friendly

Anyone who has lived paycheck to paycheck is familiar with the headache of overdraft charges.

Due to a slight miscalculation at the end of a tough month, there isn’t enough money in the account to cover a check. The bank pays the check but charges an overdraft fee that drains money out of the account. A negative balance would trigger an overdraft fee on a different check or cause it to bounce.

Of course people should manage their finances responsibly. But the federal Consumer Financial Protection Bureau (CFPB) argues that older people in particular are at a disadvantage, and perhaps banks should put practices in place that protect them from overdrafts, which the CFPB said produce billions in revenue every year. The agency has also clarified existing regulations to prevent what it calls surprise overdraft fees, including fees charged to customers who write a check that bounces because they deposited someone else’s check that then bounced.

Banks “should promote financial health for older adults rather than erode it,” the agency said. Some institutions have made changes but more could be done. One suggestion: alerting an account holder’s trusted relative or caregiver when a bank balance is dangerously low.

Overdraft fees range from $15 at smaller banks to $35-$37 at major institutions. Some banks limit the fees they charge in a single day to one, but some will charge as many as six a day. “Social Security and a small pension,” a retired steelworker complained to the CFPB, “do not provide extra funds sufficient to pay for any of the cited ‘junk’ fees.”

Retirees’ checking accounts could be handled more carefully for a few different reasons. If they rely heavily on Social Security, they don’t have a big cushion in their checking accounts and must navigate an irregular deposit date for their Social Security checks. …Learn More