Follow the Money: Why do we pay fines or fees?

Copyright, 2017 Finhive

A quick survey in my household revealed that last month we paid fines for stuff borrowed from the library that – you ready for this – we didn’t even read. I had borrowed 3 books from the library, all at once and only read one. The other two just sat there, but the 3-week time period ran out and I didn’t get to them. Worse, I returned the 2 borrowed but never read books days late and paid fines. This happened at the same time, I received an ‘Overdue and collecting fines’ notice for a book my daughter had borrowed. When asked, I got a response, “Oh yeah, that book. Yeah, I never finished it because it was too hard for me” She is 9, so she got a break.

According to a recent report published in CNN Money, in 2016, three major banks earned $5.4 billion in overdraft fees, $2.3 billion in maintenance fees, and $1.1 billion in ATM fees. That amounts to a whopping $8.8 billions in fees. What's even more astounding is that, according to Consumer Financial Protection Bureau (CFPB), most overdraft fees are paid by a small fraction of customers – 8% of customers pay 75% of all overdraft fees, and the younger customers have roughly one overdraft every month.

Airline industry also made $41 Billion in fees in 2015. Unbundling has certainly not been easy on our pockets. While most of us may be able to plan ahead so we don’t have to cough up $12 for a blanket on the airplane. As a society, we pay premium for convenience like next day delivery or ignorance like overdraft fees on a bank account.

So basically, we pay extra when we are in a hurry, uninformed or ignore the rules, some of which can be avoided by some planning and carefulness such as:

• Set up alerts with your bank to text you when balances fall below a threshold.
• Maintain minimum account balance to avoid monthly fees.
• Opt out of overdraft protection. Better to have a charge declined than pay $35 on a $4 cup of latte.
• Opt for credit cards with no annual fee.

As for my library fines, we use and appreciate the town library, so I justified it as my ‘contribution’ towards a good cause, but went ahead and changed my account setting to auto-renewal for future. 😊

This article was published previously on author's LinkedIn profile.