The fuss lately over bank fees has left me mostly disinterested. After all, fees are what other people pay — those folks who don’t know how to manage their money. Wrong. When it happens to you then it isn’t carelessness any more. It’s just the law of averages — sooner or later the fee devil will get you.

Too Little Money

When I was raising a family occasionally the bank would call and tell my wife that our account was overdrawn but if she would make a deposit that day there would be no fee. Those were the days when you each had a checkbook and tried to keep the register balanced. When the bank statement arrived each month you would reconcile it and discover your true balance. It is much easier these days because you can check balances online. So no more overdrafts. It was never a case of too little money but just poor timing.

A few years ago I became debt free and began putting surplus funds into rewards checking accounts. This earned me an interest rate of between 4% and 6%. Once in a while I would change banks to earn a better rate but leave the old accounts open to move funds back again if rates improved at the old bank or worsened at the new bank.

Just Poor Timing

On the 5th. I moved a sum from an Arkansas bank, leaving just $1.00 in the account to keep it open. I have a company that automatically charges one of my credit cards $3.31 a month, billed on the 4th. Naturally I set up my Arkansas rewards checking account to pay this bill so that it would count as a transaction. On the 6th. the $3.31 was posted, leaving me $2.21 negative and triggering a $25 overdraft fee. On the 8th. I remember the automatic payment and transfer $30 back to the bank account which will probably not arrive until the 10th. or 11th. Not a case of too little money but just poor timing.

So far in summary:

4th Nov: $3.31 billed by company.
6th Nov: $3.31 posted in bank account.
6th Nov: -$27.21 new balance ($1.00 – $3.31 – $25.00).
8th Nov: $30 transferred to cover.
10th Nov: Overdraft cleared.

Back-of-the-envelope calculation:

6th to 10th = 5 days.
$25 / $2.31 = 11.31.
365 days / 5 days = 73.
11.31 x 73 = 825.63 = 82,563% APR.

There you have it. Even people who think they are reasonably competent money managers (me) can make a slip. It isn’t the bank’s fault, it was me who miscalculated. It wasn’t a case of too little money but just poor timing.

I think I want to own a bank.