Banks have so much power over consumers that the industry can develop wildly abusive credit card policies. AND, consumers can’t do anything about it. The banking credit card industry is collecting millions in fees with the abusive credit card policies. Here are the details of a shocking bank policy and an excellent reason why Senator Menendez and others in the Senate and Congress should pass credit card reform.

A friend told me that he signed up for bank overdraft protection with a major bank. The overdraft protection was explained to him in simple terms. If his account was overdrawn, the bank would transfer money to his bank account and charge it to his credit card and he would be charged $30.00 each time. So, he signed up for overdraft protection. It seemed like a good idea.

The friend’s bank account was never overdrawn for several years, but then within a couple of weeks it happened twice. Including transfer amounts and fees, about $500 was charged on his credit card. His credit card already had a balance of approximately $2,500 for items that he had purchased and the new balance was $3,000.

He continued to make payments on the credit card and several months went before he noticed that the interest every month seemed higher than usual. He called the bank to check into it and was told that the overdraft protection was considered a cash advance and the interest rate is 31%. OMG! he thought. I’ve got to pay that off!

He asked the customer service representative what should he do to make sure that his monthly payments were applied to cash balance portion of his statement first. THE BANKS ANSWER: You can’t do that. You have to pay off your entire balance to pay off the cash portion.

This is the perfect example of why the Congress and Senate must step in to approve legislation to curb the abusive power of banks. What person wouldn’t expect to be able to pay of the 31% interest rate portion of the statement first. After all, the bank knows exactly how much the cash balance is, because they charge 31% interest on this amount each and every month. Wouldn’t any prudent person expect to be able to pay off the highest interest rate debt first? Wouldn’t any decent bank allow its customers to pay off the highest interest rate debt first? Of course! But banks aren’t decent.

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