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For hundreds of thousands of workers losing their jobs during the recession, there's a new twist to their financial pain: Even as they're collecting unemployment benefits, they're paying bank fees just to get access to their money.
Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what's on the card.
"It's a racket. It's a scam," said Rachel Davis, a 38-year-old dental technician from St. Louis who was laid off in October. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.
The banks say their programs offer convenience. They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. But the banks benefit from human nature, as people end up treating the cards like all the other plastic in their wallets.
The fees are raising questions from lawmakers who just recently voted to infuse banks with taxpayer money to keep them afloat.
In Missouri, for instance, 94,883 people claimed unemployment benefits through debit cards from Central Bank.
Analysts say a recipient uses a card an average of six to 10 times a month.
If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000.
If half of the cardholders also dial customer service three times in any given week (the first time is free; after that, it's 25 cents a call), the bank's revenue would jump to more than $521,000.
That would yield $6.3 million a year ...
This is true, people should know better. But at the same time, they are banking(pun intended) on people's habits and making a profit without lifting a finger. Are we really going to perpetuate and bailout this kind of greedy philosophy? Give people a break! They sure as hell gave the banks one!!
Originally posted by BorgHoffen
Banks always do this though it doesn't matter if you are unemployed or rich.
They charge for convenience.
If people are stupid enough to use the convenience than that's there problem.
Banks say they are lending. But many consumers and small business owners disagree. So where's the disconnect?
Bankers say they are lending but try telling that to consumers having difficulty getting approved for mortgages, credit cards or auto loans.
In recent weeks, politicians have accused financial institutions of failing to extend credit, despite taking in billions of dollars in taxpayers' funds during the past few months.
But financial executives, including the CEOs of eight banks that testified before Congress last week, have maintained that they are making new loans and that the nation would face an even more severe credit crunch had the government not thrown the industry a lifeline.
Still, it's hard to deny that credit is tighter. One reason, experts said, is that many non-banking entities that provide credit, often referred to as the so-called "shadow-banking system", have withdrawn massive amounts of financing from the broader economy.
Money-market funds and insurance companies, for example, have typically been big buyers of debt from companies looking to raise quick cash, notes Rick Spitler, managing director at the New York City-based consultancy Novantas, which focuses on financial institutions. That's no longer the case, forcing corporations to look to banks for credit.