Financially strapped consumers certainly aren’t catching a break from their banks when it comes to the ever-escalating fees and minimum balance requirements for checking accounts and fees and surcharges for ATMs.

There are far safer havens for savvy customers, and if you can live with a free checking account, which generally means no interest, you’ll do your finances a favor.

Here’s what Bankrate found in its 2008 checking study:

-Bounced Check Fees hit New High Again

-ATM Surcharge and fees continue climbing

-Interest Accounts Require High Minimums

-Online Banking Can Be Pricey

Methodology: Bankrate.com surveyed one interest checking account and one non-interest checking account at each of the largest banks and thrifts in each of 25 large markets to find the latest trends on checking account and ATM fees. There were 247 interest accounts and 226 non-interest accounts surveyed at 249 banks and thrifts in the top 25 metropolitan areas.

Cash Advance and Payday Loans pricing remains flat amongst the non traditional segment.  However, as banks and credit unions begin to offer these products, they are increasing their pricing as they find the right pricing point for their customers.

Bankrate.com also looked at 22 checking accounts at 18 institutions offering online accounts and compared them to their brick-and-mortar counterparts.

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Just over a week ago on December 3, 2008, the Federal Deposit Insurance Corporation (FDIC) released a study on the impact of bank and credit union overdraft protection programs.   Simply stated, the results were not pretty for the average consumer.  The study revealed that over 70% of depository institutions automatically enroll their customers in some form of overdraft protection programs,  programs that can charge depositors upwards of $35.00 per bounced transaction.  In some instances, availability of these programs can serve as a life preserver to cash-strapped consumers.  Overdrafts are often used by consumers when they face the prospect of bouncing a check.   The bank helps the consumer by paying the check, but putting the depositor in the red at $35.00 a pop.   Sometimes this proves helpful to consumers and other times not so helpful.   The FDIC in their December report gave consumers additional help by revealing the true cost associated with these loan products.

The FDIC study showed that the APR on these products (this is the first time the FDIC formally acknowledged that an APR might be a useful measurement of cost when discussing overdraft and non sufficient fund fees)  can exceed 3,520%!!!! The FDIC reveals that banks alone generated almost $4 billion (BILLION) in additional fees thanks to overdraft and NSF charges in 2006 alone.   These products have proven to be a source of easy money for banks and credit unions, especially in light of the shrinking real estate and commercial lending sources.

When faced with paying these fees, consumers should be aware that cheaper alternatives exist.   Clint Says does not call for the limitation of choice when it comes to personal financial needs, even when it comes at the expense of a 3,500% APR.  However, the FDIC made a smart choice when it used the universal measuring stick of APR to reveal how expensive this form of financing is.   For years, other forms of short-term lending such as payday loans, cash advances, and credit card debt has been under the close scrutiny of state and federal regulators, in large part to the triple digit APR associated with their use.   However,  these alternative credit products deserve a second look by consumers needing short-term cash, especially when the cost associated with them is much cheaper than alternatives like overdraft protection fees and bounced check charges.

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The Motley Fool published an interesting article about the largest payday lender in the United States. No, not Advance America, CashNetUSA, or Check-N-Go. It’s Well Fargo. Thats right, the bank you probably use for checking or a mortgage is in the business of payday lending. If you are disappointed by the fact that you can’t get a cash advance loan through Well Fargo take heart. US Bank, a major competitor of Wells also offer their own payday advance product. Chances are if you need a short-term loan a bank or even your local credit union (yes, they are in the business too, just Google the term “CU on Payday.”)

The Fool points out that the fees charged by these two large bank and a dozens of fee-funded credit unions are often as high as your local payday lender. Cash advance lenders suggest, and a number of studies by universities and accounting firms have shown, that the high fees charged by payday lenders is justified. However, to say the risks to depository institutions and private lenders are the same is untrue. Credit unions and banks have a leg up on the short-term lenders and on their borrowers. When a borrower utilizes their credit union or bank for a short-term or payday advance the credit union ensures the borrower has direct deposit. With direct deposit, the risk to the bank or credit union is minimal. The fees charged by the credit union or bank don’t appear to be justified. The profit margin for depository institutions on these loans is large, and in light of the ongoing credit crunch, they are a bright spot in an otherwise dismal lending landscape.

It is little wonder that some of the loudest critics of payday lenders are banks and credit unions. Could it be that payday advance lenders offering personal loans are an unwelcome competitor to banks and credit unions? As criticism of cash advance lenders has increased in the last few years interested parties should be suspicious of credit unions and banks who claim that short-term lenders are hurting consumers. If that is the case, then what are these depository institutions doing by offering the same loan products?

There have been some recent stories listed on Bankrate regarding Credit Card issuers (and the banks that fund them) reducing credit limits and increasing APRs on consumers due to the lack of liquidity and the increased risk involved in today’s consumer credit market. Some borrowers are even finding their accounts canceled by the credit card providers as well. Below are a couple of testimonials as found on several websites:

-TS

90 % REDUCTION
I received a Macy’s Visa back in 2005 that I didn’t even recall applying for. The credit limit was $5,000. Nevertheless, I didn’t use it until this year. I had planned a trip to Disney in Florida and wanted to use it then. I called to activate it and found out that my limit was reduced to $500. How drastic was that?!
– Patricia S.

THIS IS THE THANKS I GET?
My wife and I have faithfully paid our credit card payment every month for the last five years. Last week we received a notice from our bank that they were reducing our limit by half and that we would need to reduce our balance in 90 days or face over the limit charges. We’ve never been late on a payment and am ticked off that we may face losing our credit cards because others have been stupid with the way the utilized their credit cards. Because it will be difficult to make ends meet through the end of the year, we may need to utilize another credit card’s cash advance line or even use a title loan. This is the great service we should expect from our bank after five years of banking with them.

-Jason W.

BRUISED CREDIT SCORE
I am 49 years old and have been employed since 1993, when I graduated from law school. My wife and I have lived in the same home since 2000. Neither my wife nor I have any late payments on any obligation we have had over the last 10 years or more. We do, however, have a good deal of credit card debt, very nearly all of it at 4.99 percent interest or less. Our annual household income is over $90,000 and our total monthly debt payments, including my student loans, our credit cards and our mortgage, is about $2,400. My wife’s credit score was about 720 and mine about 690.

A few months ago, Bank of America advised rather abruptly that it was cutting our cards’ credit lines by a total of about $30,000. This increased our credit utilization ratio rather dramatically, and it has begun affecting our credit scores. My wife’s score has dropped by more than 50 points and mine by an even greater amount. In turn, I believe other credit issuers will begin cutting our credit limits. We just received notice from American Express, for example, that my wife’s card limit through them will be cut by over $5,000. No doubt actions such as this will further depress our credit scores.

As a consequence of their actions, my wife and I are seriously considering severing our relationships with Bank of America and American Express. Although this sounds like the proverbial cutting off of one’s nose to spite one’s face, I don’t know what else to do to express my displeasure with these companies other than discontinuing their opportunities to profit from my patronage.
– Doug H.