Yeah, those annoying charges that happen when the timing of cash inflows and outflows isn’t quite right. We don’t keep much extra cash in our business account, preferring to buy corporate preferreds with it.
The good news, at least for our bank, Chase, is that at least they pay the items that cause the account to go upside down, but they charge $34 per item. We think this charge is pretty standard among the money center banks (Chase, Wells, BofA).
Now, it’s always fun visiting with our business banker to remove some of these charges, but after the last visit, we got thinking about this interest rate on the overage balance.
We got charged $34 for the lending of an average balance of $500, over about a week, which is a computed interest rate of 6.8%, which works out to an annual rate of 353.% which is just a tad over most state lending rates.
My proposal to Chase was that they, at the end of the overage, compute the average balance overage, say $500, and put their normal business lending rate of, say, 10% on it, which would result of an overage charge of $.96. A bit better, and under the state usury laws.
So, we would ask that all you business owners reading this blog go have a similar chat with your business banker, and let’s see if we can get a groundswell going.