The most profitable source of income for banks? Overdraft fees • Hacker News Board

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

#161

Post by mrb » Tue, Aug 25, 2015, 3:25 AM UTC

mikekchar wrote: post #41

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…

I wonder if there would be an interest in a virtual credit card (NFC smartphone) showing you how much money you can spend for, say, the rest of the week. You would be able to configure your desired spending limit. The virtual credit card app would automatically be able to update the amount of money spent whenever recurrent charges are processed automatically. The idea is that whenever you pull your smartphone to pay, you always see exactly how much you have spent so far. As opposed to the situation today where nobody logs in multiple times daily on their bank/credit card website to check how much they have spent.

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

#162

Post by geofft » Tue, Aug 25, 2015, 3:31 AM UTC

Touche wrote: post #151

geofft wrote: post #146

Earlier quoted context omitted.

So a couple of things: 1. Why can't the bank refuse to process the charge? 2. This seems to be failing, in practice, at dissuading people and making them pay attention to keep a positive balance. At least according to a couple of comments here, there are people who are repeatedly hit by overdraft fees. Is there something better that can be done do solve the actual problem, which is banks having to come up with money…

Oh, you're under the illusion that a for-profit business' primary responsibility is to maximize the value they provide to their customers? Sorry but that's not the way the world works. Now that could possibly be the case if we lived in a country where banks were allowed to compete on things like "treating the customer right" but we don't live in such a country; we live in the one where ever more annoying fees is the…

No, I believe nothing of the sort and now I'm curious what part of my post conveyed that, so I can write in a less sloppy manner in the future. Sorry!

Judging solely from the point of view of the bank, and conditioned on the assumption that fees are to dissuade customers from behavior that hurts the bank, it's in the bank's interest:

1. To find a way for that behavior not to hurt it in the first place.

2. To actually, successfully dissuade behavior, so that the bank is hurt less.

3. To warn people right when they're about to hurt the bank, so they don't.

That matches the three questions I had.

If fees are themselves for the bank's profit, then yes, sure. But then we can just admit that the bank is charging fees to people who maintain low balances (= "poor people", to first order) for profit purposes, right? That seems clearly within the margin of rhetoric that "tax on poor people" is a fine description.

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

#163

Post by ars » Tue, Aug 25, 2015, 3:38 AM UTC

tsotha wrote: post #106

pyre wrote: post #67

Earlier quoted context omitted.

Large banks will do things like structure charges so as to extract the maximum amount of overdraft charges. For example: You have $40 in your account. You spend $20, then $12, then $5, then $120. One would logically conclude that at the end of the day, the bank will resolve these *in order* and you will have a single overdraft fee. Large banks *cough* Bank of America *cough* will explicitly structure those charges to…

Wasn't the law changed so they can't do this any more?

Yes, it was.

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

#164

Post by darkmighty » Tue, Aug 25, 2015, 3:46 AM UTC

Karunamon wrote: post #63

fredkbloggs wrote: post #23

We could read 100 sob stories, or we could recognize that every single overdraft (other than errors and fraud, which do happen but are rare and these days invariably corrected) is voluntary . Yes, banks will make money any way that they can. Yes, they will happily take your last dollar, or even dollars you don't have and never will. No, they do not give one flying fucking rat's ass about you, your sister, or the home…

And the best part is, you're being downvoted for this.. I dunno, apparently a lot of HN thinks that it's impossible to believe that banks are generally run by bastards while simultaneously believing that 99% of these instances are completely voluntary and completely avoidable? If you keep track of what you're spending your money on, it's not a problem you're gonna have to ever deal with - and I say this as someone th…

Not talking specifics here, but there's a point that people must be shielded from their own ignorance (or even plain stupidity). There are lots of things to know about, and many people simply won't ever know about them by pure chance. I believe the law should actually be maximally protective of individuals up to the point it starts severely compromising the flexibility of businesses or individuals. Doing any less is masochism in my opinion.

For example, roads have guard rails in high traffic areas that mostly protect people from their stupidity -- you shouldn't speed near ledges otherwise; doing so would be stupid, and from then you could be small distraction away from death. It frees mental bandwidth and cuts transit times of travelers with little added cost. Nobody should have to suffer needlessly for poor decisions (not even taking into account most times it's just bad luck -- let's assume worst case it's just stupidity) if we can prevent it, and sometimes education won't work (not as fast as it should).

I've been stupid quite a few times with regards to physical/career risks myself and have a few otherwise very bright friends make stupid decisions. If those were preventable they should be prevented. They are much more efficient ways of teaching than allowing very significant mistakes to be made.

In particular, any safety mechanism for which if the majority of affected users post facto would agree upon can likely be put in place beneficially (which I would argue is the case for limiting overdraft fees).

You can think about it as if instead of needing people to learn about the innumerable (and mounting) hazards of the systems around us, we can free mental bandwidth and create other systems that learn about the hazards and protects us so we don't have to worry about it.

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

#165

Post by fredkbloggs » Tue, Aug 25, 2015, 3:48 AM UTC

Retra wrote: post #156

fredkbloggs wrote: post #99

Earlier quoted context omitted.

Let's talk about the word "accidentally". Suppose I drive to a bar, have three beers, and drive home. I don't bother to check my BAC; I just assume I'm below the legal limit and can drive safely. On the way, I accidentally run over a budding young Progressivist on the street, who then dies. When the sheriff shows up, he finds that my BAC is 0.09 -- just over the limit! Surely, you will agree that any penalty I am ass…

Except, in your analogy, you are being force-fed alcohol by your landlord, car insurance laws, gas stations, any children you have, public dress laws, ISP, electric company, phone company, and the biological need for food. This puts your default BAC at somewhere between .06 and 0.085 at any given moment. Now if you go over 0.09, do you think maybe that might happen on accident?

Nonsense. Nothing obligates you to use your checking account for the vast majority of ordinary purchases. And for those that you generally cannot avoid (usually only the rent), nothing requires that you fail to record the amount you spent and track the amount remaining. If you aren't sure of your records or don't care to keep them, use cash for everything else.

People with far less education than today's Americans have been successfully balancing checkbooks for over a century. My great-grandfather was a dirt-poor coal miner with a fourth-grade education and he never had any trouble avoiding overdrafts. And yes, he had -- and used -- a checking account for most of his life. Ignorance and carelessness are just excuses; they do not absolve you of your responsibilities.

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

#166

Post by omonra » Tue, Aug 25, 2015, 3:48 AM UTC

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 mostly agree with you (99%) except the part about 'Rich bankers robbing poor people'. The bankers devising this are not rich - they are very much middle class MBAs who are struggling to meet ends meet, what with high cost of property in good school districts, etc.

It the same guys who develop devilishly complicated cell phone plans, cable tv plans, drug packets that are 8oz big but contain 4 pills that would fit in a 1oz packet, etc. There must be an MBA school course 'How to screw over people with IQ lower than 90'.

What i'm saying is that it's not a rich vs poor but rather intelligent vs less so (or just people who fail to pay sufficient attention).

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

#167

Post by yummyfajitas » Tue, Aug 25, 2015, 3:53 AM UTC

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.…

Have you ever been a poor person?

This is a fallacy. If you were to claim AGW occurs or that outer space is a vacuum, it would be a fallacy for me to say "have you ever been planet-sized body warming due to excess CO2?" Of course not, but one can still reason about such things.

If you are claiming that the poor are incapable of taking responsibility for their choices, recognize that there is a term for this: incompetent. Are you claiming the poor are incompetent and unable to make choices like the rest of us?

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

#168

Post by MichaelGG » Tue, Aug 25, 2015, 3:59 AM UTC

a3n wrote: post #128

ssimpson wrote: post #38

Earlier quoted context omitted.

USAA also batches their debts and payments differently than other banks, to help their members minimizes any fees incurred. Their customer service saying is "assume positive intent" and they have amazing service. I will probably be a customer for life.

The other day I took a picture of a check that I received, with their phone app. They credited the check to my account immediately . Not "pending," it was in there with no unusual note. I assume it would have been on me in some way if the check bounced, but still. If you're eligible, you should join USAA.

Hah and with Wells Fargo, a check from one account to another will take a day or two. Online transfers take up to three.

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

#169

Post by Retra » Tue, Aug 25, 2015, 4:01 AM UTC

fredkbloggs wrote: post #165

Retra wrote: post #156

Earlier quoted context omitted.

Except, in your analogy, you are being force-fed alcohol by your landlord, car insurance laws, gas stations, any children you have, public dress laws, ISP, electric company, phone company, and the biological need for food. This puts your default BAC at somewhere between .06 and 0.085 at any given moment. Now if you go over 0.09, do you think maybe that might happen on accident?

Nonsense. Nothing obligates you to use your checking account for the vast majority of ordinary purchases. And for those that you generally cannot avoid (usually only the rent), nothing requires that you fail to record the amount you spent and track the amount remaining. If you aren't sure of your records or don't care to keep them, use cash for everything else. People with far less education than today's Americans ha…

My money is in my checking account. That's where it is. I can't use money from somewhere else. I could put it on a card, but then I still have to pay the card at the end of the month, don't I?

In fact, I just recently over-drafted my rent. Do you know why? Because my phone company auto-charges to my account. All I had to do was forget what day this happened, and not coordinate the exact day that my landlord cashed the check. (PS: it was my landlord who charged the overdraft fee. I have a decent bank.)

You're taking too narrow of a view here -- this isn't about responsibilities. Of course I'm responsible for my over-drafts. But I should not be at risk for them in the first place. And that's what this is about: RISK. The severity of a problem multiplied by the probability it will occur. Overdraft fees do not minimize risk, and thus they are not rationally justifiable. They disproportionately transfer risk from the bank to the customers. (That is, for every unit of risk the bank saves for themselves using over-draft fees, they deliver more than one unit of risk to their customers.)

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

#170

Post by codezero » Tue, Aug 25, 2015, 4:05 AM UTC

Overdraft fees are maddening. I can't even imagine how bad they would be if I were strapped for cash.

I admittedly am not great at managing my accounts, but, it blew my mind that the following situation could (and did happen):

I got paid monthly, let's say it was $5k USD. At the end of the month, I may or may not have enough money in my account, for, say, a day or two.

So, I go to buy a coke at the university shop. No problem, costs me $1.25, but I used my debit card.

Now I get a $35 fee because my account was at $.75

That makes sense right? Given that the bank has significant historical information that I will get paid in less than 48 hours, how am I a risk?

OK, so I bought another soda, later in the day, another $35.

Whoa! $70 for two sodas.

Kill me now.

What's worse... I couldn't set my account to reject these transactions. Either I had to always monitor my account, AND make sure that none of the services I subscribe to ever charge me in this specific time period.

It wasn't until specific laws were passed that I could make my account follow these rules, and this was about 2009, or 2010.

I paid at least $1000 to the bank in overdraft fees over the course of a few years.

In fairness, these are the only fees I paid to the bank, and probably, if this were the cost of banking (less than Spotify!) I probably would have paid them happily.

The problem with these charges is that they were volatile, a surprise, and scraped the bottom of the barrel when I was least capable of handling the charges.

It's maddening, and I feel strongly for those who weren't as well off as me who got fucked over by banks under the scheme, and likely continue to get fucked over because the banks still don't make it easy to set your account up in such a way that you reject overdraft charges.