The Case of the $64 Chai Latte

pro·tec·tion [pruh-tek-shuhn] (noun) - 1. the act of protecting or the state of being protected; preservation from injury or harm. 2. a thing, person, or group that protects. 3. a document that assures safety from harm, delay, or the like, for the person, persons, or property specified in it. 4. Informal: money paid to racketeers for a guarantee against threatened violence.

"The best protection for the people is not necessarily to believe everything people tell them." (Demosthenes)

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A good friend of mine named John (not his name) went to Starbucks one afternoon and purchased his usual pick-me-up, a Chai Tea Latte, after a long day of paperwork (not his job), then went home. John is a typical nice guy who enjoys nice things and gets a decent salary that allows him to get those things. He's usually pretty responsible about his finances, so this particular evening, he decided not to check on his checking account. Instead, he chose to go to the movies with Jane (not his wife... um, crap... I better stop this).

The next day, I gave him a call and found him in a very bad mood. Turns out that his pick-me-up cost him $64. How did this happen, you ask? The bank happened.

Turns out that a check he wrote about and forgot to write down in his check register cashed. His account was short by $2.05. So his bank (which rhymes with vase), cashed the check. Of course, since he didn't have all of the funds for it, they charged him $29 for overdrafting. And since he didn't know about this check, he spent close to $4 on his latte. Of course, the bank let the charge go through. And as a token of appreciation, they charged him $29 for it. No need to thank them.

Overdraft protection is what the banks provide to all of their victims... er, customers. The deal is that they know John Q. Customer is a hard-working, busy person who is usually (1) living paycheck-to-paycheck, (2) has decent to bad credit and (3) usually does not balance his checkbook or pay attention to his account balances. So, they tell John that if a check comes in and his account is short, they will pay up to a certain amount and for doing this, they will charge John $29 (the price varies based on the amount and location, though this seemed to be the amount I saw more often) instead of him getting charged for non-sufficient funds (aka NSF) from his bank and the bank that submitted the check.

Guess how much the banks get just from this alone? According to a Wall Street Journal article, the estimate is $37.1 billion in 2009. Yep, billion. With a 'b'. It's legal robbery, but we let them do this. Many of us have gone through what John has. I know once when the bank got $348 out of me because I was double-charged for something I purchased at the same time that my bills were being sent out by my automated bill payer, causing a very ugly domino effect. So imagine how many people are going through this for them to receive $37 billion. With a 'b'.

I don't have anything with businesses making money. It's just that they usually do it by stepping on the little guy, aka us. $37 billion (with a 'b') is a lot of little guys getting bent over. And don't forget how many of them opened their hands when TARP funds were being handed out.

But if you stop for a moment, close your eyes and listen for a few moments, you will eventually hear the sound of the other shoe dropping. Now, before you panic, here's the good news: it's not for us this time.

On August 15th, Federal Reserve restrictions kick in that require the banks to charge for overdraft fees only if the customer signs up for the bank's overdraft protection program. If you sign up, it's business as usual. If you don't opt-in, then your purchase is rejected is you don't have sufficient funds.

So, if you have seen an increase in junk mail over the last two weeks from your bank, it's not because they decided to tell you that they love you. Some banks are calling and e-mailing their customers, desperate to ensure that the cash cow isn't heading out to pasture. Some of them are even sending their tellers and clerks to "sell" the service to anyone with a pulse while on line or going to the ATM. I wouldn't even be surprised if they're handing out bonuses based on how many people they are signing up.

Due to this, my shredder and answering machine are working like never before and are starting to request wage and benefit increases. And that's not counting the ads that show up whenever I go to my online account.

My advice to you is this: do not sign up. First of all, it will make you a more fiscally responsible customer. Second, you'll save a lot of money in fees, which you can actually (gasp) keep to yourself, since it costs nothing.

Zip, zilch, nada.

Consumers: 1. Banks: 0.

A good place to start is this article I found on how to never pay overdraft fees again. The choice is yours. Me, I'd rather be told by the student behind the counter that my card was rejected because of lack of funds. I didn't really need to eat those french fries anyway.