Opening a new account? Read the fine print.
Here's seven common clauses consumers might watch out for when they sign up for a credit card or checking account.
Got a fee-related complaint for your bank? Your bank's got a message for you: You agreed to it – live with it.Skip to next paragraph
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Over the past year, the consumer banking industry has come under increased scrutiny in Washington for interest-rate hikes, questionable legal practices, and debt-collection procedures. And when bank representatives appear before Congress, they often repeat the same message: Whatever their practices, their consumers agreed to them.
Of course we did. Unless we want to hide our money under our beds, we have little choice but to play by their rules. But if you're like most, you've thrown out your checking-account or credit-card contracts long before you read all of its legalese.
And it's not as if financial institutions are scrambling to draw your attention to the contracts. In some cases, consumers have to blindly agree to a credit-card holder's agreement when applying for a card; and only get a chance to look at it when they receive it, their new card, and a bevy of inserts in the mail sometime later.
Figuring out what it all means can be difficult. Interest rates can be calculated in a variety of ways, and the ultimate effects of certain clauses aren't always clear. "It's getting to the point where it's like opening up the guts of a Dell and a Mac and asking to choose based on that," says Kathleen Keest, senior policy counsel for the Center for Responsible Lending.
But what you don't know can hurt you: You may assume you have rights that you've actually signed away, and knowing what the rules are now can save you major financial problems later on.
To help, we're magnifying the small print. Here is a by-no-means-comprehensive list of common clauses to be aware of before signing up for that next credit card or checking account:
1. Your bank gives you access to money, and your bank can take it away.
Got a fishy check? Just because your bank gives you access to the funds, doesn't mean the check is good. Banks follow federal laws, which require them to give you access to your money after a certain number of days, often before they verify that a check is valid. If the check turns out to be bad, then you – not the bank – will foot the bill.
Banks let you know that it's your responsibility to ensure the check is good on the account holder's agreement, or even sometimes on the deposit slip itself. But those who don't realize that money in their pocket isn't necessarily money in the bank are easy targets for check scammers, who entice their victims to wire away money with promises of winning a lottery or asking for a favor after "overpaying" for a product they found online.
2. Your bank may be holding your money, but it doesn't mean they're guarding it.
What's left out of savings account agreements can be as important as what's put in. Under federal law, Social Security funds and some other benefits can't be garnished by creditors. But many banks in most states respond to legal restraining orders on money in an account without checking to see if it can be legally garnished. Eventually the funds may be released, but in the meantime, banks charge you for it: Restraints on accounts can cost as much as $100, and then account holders are subject to bounced-check and over-the-limit fees.
3. Your debit card probably doesn't know when to say "when."
If you overdraw on your bank account – even by a few dollars – you've opened yourself up to a whopping fee. Instead, Ms. Keest suggests asking your bank if they'll give you a written agreement for an overdraft loan, which typically has a much lower interest rate than the lump fee banks would otherwise charge you.
4. Your credit-card interest rate can skyrocket, regardless of payment history.
Paying bills faithfully isn't enough to keep interest rates low. Depending on your credit-card agreement, rates can rise if your credit score drops for an unrelated reason, such as taking out additional credit lines. Why? You guessed it: They want to be able to raise your rates and you agreed to it in the contract.