Wednesday, March 08, 2006

The banks don't miss a trick, do they?

I remember years ago hearing talk about how there was so much money squirreled away in old accounts and that it was difficult for banks to close those accounts. So they (the banks) wanted to find a way to do it without having to wait years, or having to track down the owners, etc. I think I may have written a story about it at one time.

Well, it appears that those clever banks have found a way around that. It's called a service charge. You know what I'm talking about. We pay them all the time, to banks, waiters, rental firms -- all kinds of places. Usually, they're tied to some kind of service that you've received, hence the name.

You don't notice them that much when you're using your bank account. For example, you pay one when you withdraw money, or write a cheque, or use your debit card, etc. If you don't want to pay each time, you can sometimes pay a lump sum each month and then get "unlimited" access to your accounts.

But what you might not notice is that most accounts now include a charge called a "monthly fee" or something like that. It's just a fee you pay, no matter what you do that month. Sometimes those fees are waived if you maintain a minimum balance, but in most cases, they just get added to your account each month.

"It's in the mail"

This morning, I got a bank statement in the mail. I opened it, because it had my address on it. But after I'd ripped open the envelope, I noticed that while it was my address, it wasn't my name. Ooops! But wait a minute. That is my address, so what the heck is going on? So I looked a little closer.

According to the statement, a couple (presumably, since both of their names are on there) had opened an account, with my home address, on Feb 13, 1999. That was about 18 months after we'd bought the house. First big problem.

Also, according to the statement, after opening the account, they made one deposit, for $242.47. And that's it. No further activity on the account. Presumably, it might even have been a mistake or whatever, because nothing more was ever done with the account.

Enter the service charge

Except the account was a "Powerchequing" account. So every month from then on, $2 was deducted at the end of each month as a service charge, just for the privilege of having the account. The bank didn't do anything, except process the service charge. There was no interest calculated. Nothing. Except that $2 each month.

So over the years, the $2 has been grinding away, until finally, the bank had taken every dime out of the account.

The service charges weren't always the same. On October 31, 2000, the monthly charge went up to $2.50 per month. And then on April 15, 2002, there was an extra service charge of $20. With no explanation.

On Mar 31, 2005, the service charge jumped to $3.50 per month. And on April 15, 2005, there is another unexplained service charge of $30.

OK, now here's the funny part. On Sept 30, 2005, the monthly service charge of $3.50 put the account into the red. The balance is now $-2.53. So the bank added an overdraft interest charge of $.04 to the total. The next month -- same thing.

It takes until Feb. 23, 2006, when the account is overdrawn to the tune of $20.78 before the bank takes action. Since they're not actually getting any money out of this thing anymore, they simply deposit $20.78 into the account to bring the balance back to $0.00 and close it. Simple.

Then, a few weeks later, I get this notice. As far as I know, this is the first bank statement I've received this whole time, although the name sounds familiar, so there may have been other mail over the last 7 years. But I don't think any of it was a bank statement.

Who's your Daddy?

The bottom line is that although this money was abandoned, and left dormant in a bank account that the owner had probably forgotten about, the bank has made sure that they won't have any trouble tracking down the rightful owner. Thanks to the power of the service charge, they now have all the money. So they can just close it down.

I'm still left wondering about those two big service charges, one for $20 and one for $30. What could possibly justify those kinds of charges on an account that had never had any action except the automatic debits of service charges?

Chalk up another win for the bank and the power of service charges. They're sort of the evil cousin of compound interest, aren't they?

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