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The most profitable source of income for banks? Overdraft fees

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Re: The most profitable source of income for banks? Overdraft fees

#41

Post by mikekchar »

staunch wrote: post #6

The pain overdraft fees cause poor people is truly hard to comprehend unless you've been there. It's incredibly evil. You've got $16 left for food and then then the Flickr account you forgot to cancel gets charged to your account, putting your balance at -$9. Now you have to pay $35/day until you get enough money to cover the overdraft fees. You end up paying $100+ for a $9 forced loan. The bank could have just decli…

There are a couple of times in my life when I was quite poor (for someone living in a G8 country...) The biggest thing I learned was to use cash. Cash is awesome because you can see how much you have and you can't spend more than you have. Even now that I am relatively well off, I have my habitual routine of getting cash at the beginning of the week and spending only that for the week. In fact, I make sure that there is always a bit left over at the end of the week (because there are always surprises).

The thing that is frustrating for me in western countries is that using cash is becoming more and more difficult. The last time I tried to rent a room at a hotel in Canada, they would not accept cash -- credit card only.

In the UK, I used to use my Oyster card (a pre-paid travel card for public transit in London). I could basically use it like cash. You put in whatever money you want at the beginning of the week and then you can use it without worrying about over spending. If you ever travel in London, be aware that the payment system is buggy as hell and they will over charge you badly. With the Oyster card it's great because I can notice that my balance is lower than it should be, go online and get a refund (seriously ... it happened at least 3 times a week for me!!!) But now they are pushing using your bank card as a payment mechanism. They have access to all of your money and you have many less ways of detecting when they have overdrawn (or penalized you for the failure of their equipment to register your badging in).

Again... these companies know exactly what they are doing.

As an aside... I often wonder what happened to the laws about accepting legal tender. There are a number of times that I've been refused service because I wanted to pay cash (hotels and car rentals being the biggest culprits). Is this actually legal?

Re: The most profitable source of income for banks? Overdraft fees

#43

Post by Touche »

Bud wrote: post #34
Touche wrote: post #20

Earlier quoted context omitted.

> They know exactly what they're doing. They're rich bankers robbing poor people. I can understand thinking that the "correct" thing to do here is to simply not allow a transaction when there aren't sufficient funds, but this language goes overboard. It's not robbing a person because they were unable to keep track of how much money they own and adjust accordingly.

No. Emphatically, no. It IS robbery. Have you ever been a poor person? Have you ever been overwhelmed with depression and the panic of a lost job, a few dozen bills you probably can't pay, the shame of asking friends and relatives for help, and in so doing, risking your relationships with those people and your own self-esteem? What you're missing here is that poor people KNOW that they are poor and right on the edge.…

> No. Emphatically, no. It IS robbery. Have you ever been a poor person?

Yes, I overdrew my account when I was in college and had $50 to my name. It was my mistake, I made a purchase unsure of how much money I had.

I also used to work for a bank that gave out RALs so I'm perfectly aware of the unethical behavior that happens in banking. So call it unethical, call it what it is. Using inaccurate alarmist language does not help the matter.

Re: The most profitable source of income for banks? Overdraft fees

#44

Post by fredkbloggs »

noonespecial wrote: post #3
stephengillie wrote: post #2

This is one of the financial barriers that severely impacts the ability of poor people to amass monetary wealth, but is invisible to the rich. Before they were overdraft fees, they were Non-Sufficient Funds fees for overdrafting, and these NSF fees still exist for those who can't even get the "overdraft loan". > Banks originally offered clients this service as a courtesy. Banks originally opted in at-risk customers.…

The most egregious example that has happened to me: I had a checking account with a hidden $5 fee if the balance went below $5000 in a given month. I made a big purchase, left the account with about $3 in it and scheduled a transfer from savings for the next day... you know how it played out: $5 fee on the low balance, $50 charge to "borrow" the $2 all taken from the transfer the next day. They call that a "service".…

Couldn't wait until the next day to make the purchase? Couldn't use cash or a credit card instead?

You're an adult. You're obviously literate or you couldn't be posting here. Unless these fees were not disclosed to you (a MAJOR breach of the law if true), you had every opportunity to know that this would occur and to prevent it. Try taking responsibility for your own actions.

Re: The most profitable source of income for banks? Overdraft fees

#45

Post by karamazov »

Touche wrote: post #20
staunch wrote: post #6

The pain overdraft fees cause poor people is truly hard to comprehend unless you've been there. It's incredibly evil. You've got $16 left for food and then then the Flickr account you forgot to cancel gets charged to your account, putting your balance at -$9. Now you have to pay $35/day until you get enough money to cover the overdraft fees. You end up paying $100+ for a $9 forced loan. The bank could have just decli…

> They know exactly what they're doing. They're rich bankers robbing poor people. I can understand thinking that the "correct" thing to do here is to simply not allow a transaction when there aren't sufficient funds, but this language goes overboard. It's not robbing a person because they were unable to keep track of how much money they own and adjust accordingly.

Banks make keeping track of the money in your account intentionally difficult. You can't just check your balance and assume that you can spend what's there.

Instead, your balance includes only processed transactions, whereas your account also has a list of pending transactions that can hit your balance at any time. Pending transactions can also disappear from your account, only to come back as a confirmed transaction. In effect, you can't be sure of exactly what's in your account unless you manually keep track of every charge you've made.

Banks do more than this to make overdrafts difficult to deal with. For example, Bank of America intentionally processes your transactions from largest to smallest, ensuring you'll git hit with the maximum number of overdraft fees.

e.g: if you have $10 in your account, and you make a $3 purchase, a $4 purchase, and a $12 purchase, they'll run the charges in the order of $12, $4, and $3, hitting you with three fees instead of one.

tl;dr: banks love overdraft fees and do whatever they can get away with to hit you with them.

Re: The most profitable source of income for banks? Overdraft fees

#46

Post by worldadventurer »

Bank of America had some pretty bad practices where they would reorder the sequence of debit transactions, largest amounts first, to maximize the number of overdraft transactions: "the bank mixed up the order and delayed the timing of debits and transactions to maximize the possibility customers will overdraft accounts".

They got sued and settled for $410 Million in 2011: http://www.bloomberg.com/news/articles/2011-02-05/bank-of-am...

[edit: spelling mistake]

Re: The most profitable source of income for banks? Overdraft fees

#47

Post by mbrameld »

djloche wrote: post #25
staunch wrote: post #6

The pain overdraft fees cause poor people is truly hard to comprehend unless you've been there. It's incredibly evil. You've got $16 left for food and then then the Flickr account you forgot to cancel gets charged to your account, putting your balance at -$9. Now you have to pay $35/day until you get enough money to cover the overdraft fees. You end up paying $100+ for a $9 forced loan. The bank could have just decli…

I wish USAA would open their net a little bit to extended families. My brother is a doctor in the US Navy, but that supposedly wasn't 'close' enough of a family relation for me to qualify to do business with them.

Why do you think it should be?

Re: The most profitable source of income for banks? Overdraft fees

#48

Post by rfrank »

Touche wrote: post #43
Bud wrote: post #34

Earlier quoted context omitted.

No. Emphatically, no. It IS robbery. Have you ever been a poor person? Have you ever been overwhelmed with depression and the panic of a lost job, a few dozen bills you probably can't pay, the shame of asking friends and relatives for help, and in so doing, risking your relationships with those people and your own self-esteem? What you're missing here is that poor people KNOW that they are poor and right on the edge.…

> No. Emphatically, no. It IS robbery. Have you ever been a poor person? Yes, I overdrew my account when I was in college and had $50 to my name. It was my mistake, I made a purchase unsure of how much money I had. I also used to work for a bank that gave out RALs so I'm perfectly aware of the unethical behavior that happens in banking. So call it unethical, call it what it is. Using inaccurate alarmist language does…

The unethical behavior in question is robbery. End of story.

Re: The most profitable source of income for banks? Overdraft fees

#49

Post by scintill76 »

Touche wrote: post #15
stevewepay wrote: post #9

This is a quote from Michael Lewis' The Big Short, I'll never forget it: Obsessing over Household [Finance Corporation], he attended a lunch organized by a big Wall Street firm. The guest speaker was Herb Sandler, the CEO of a giant savings and loan called Golden West Financial Corporation. “Someone asked him if he believed in the free checking model,” recalls Eisman. “And he said, ‘Turn off your tape recorders.’ Eve…

> form of fines for overdrawing their checking accounts. Why in the world shouldn't you be fined for overdrawing your checking account? A checking account is not a loan, am I wrong in thinking this quote is B.S.?

I'm not really in the know, but I'd guess "back in the day" it legitimately cost somebody something to deal with a cheque with a value greater than the balance of the account. Nowadays, it should be the same $0.0001 worth of computing/networking power which is already spent if it's a good cheque. I'd welcome corrections from someone who knows more, but I figure modern fees are just a way for the bank to extract money from people too harried to fight back. Perhaps some of it is legitimately used to subsidize general account maintenance, and maybe the banks are passing on a real cost specifically charged by a clearinghouse for bad debits -- but somewhere down the line, the bulk of it has to be lining someone's pocket.

If someone were attempting thousands of bad charges in a month, maybe they "deserve punishment" for abusing the system. What the fees do now is just taking money from people who already have little, and/or just lost track of their balance and made a small mistake that would have no bearing on anyone else if the bank didn't fine for it.

Re: The most profitable source of income for banks? Overdraft fees

#50

Post by zacwest »

worldadventurer wrote: post #46

Bank of America had some pretty bad practices where they would reorder the sequence of debit transactions, largest amounts first, to maximize the number of overdraft transactions: "the bank mixed up the order and delayed the timing of debits and transactions to maximize the possibility customers will overdraft accounts". They got sued and settled for $410 Million in 2011: http://www.bloomberg.com/news/articles/2011-0…

Their argument for doing is compelling. They figure larger purchases like rent or car payments should go through above smaller ones. It feels like the person doing the reordering was a different person from the one setting charges.
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