Debit cards are hidden financial infrastructure • Hacker News Board

Re: Debit cards are hidden financial infrastructure

#271

Post by tzs » Sat, Nov 13, 2021, 3:01 PM UTC

numair wrote: post #43

The beginning of this article is a fairy tale that ignores what used to be one of the biggest drivers of revenue for banks: overdraft fees. Maybe the HN crowd has never been in a situation where they were auto-billed into a negative balance, which then caused an overdraft fee that then further drove their balance into negative territory, but this was a weekly/monthly fiasco for millions of Americans. I was once in a…

This happened to me once, at BofA, before web-based and app-based banking so you only got verification that things were what you thought they were when you got your monthly statement, went to an ATM or teller, or used a cumbersome telephone interface via a touch tone phone:

1. Initial balances: -L on BofA credit card, 0 on checking account, S in savings/investments. When I write a check I transfer money from savings or investments to checking to cover it.

2. I attempt to pay my credit card bill in full by check, but I don't get the money transferred to the checking account in time to beat the check.

3. Overdraft protection on my account kicks in, which was backed by the credit card and treated as a cash advance. That did the following:

  3a. Transfer L from credit to checking
  3b. Charge overdraft fee O to credit card
  3c. Charge cash advance fee F to credit card
    for cash advance of L+O+F
  3d. Transfer L from checking to credit card

Note that the credit card balance went from -L to -2L-O-F from 3a through 3c, then to -L-O-F after 3d.

Since the credit card always had a debt of L or more on it during all that, an interest charge I for not paying off the card completely during that month was changed.

I didn't find out about this until my next statement, where the balances were: -L-O-F-I on credit card, L on checking, S-L in savings/investments.

I found this absurd and irksome for two reasons.

1. If it had been my Discover card or my Capital One card I was trying to pay off, the card balance would have ended up at 0 after all this so I wouldn't have incurred interest charges. This would have been a lower net cost than what happened.

2. My BofA card included allowing skipping the minimum payment every so often with no late penalty (it would still accumulate interest on the unpaid balance of course). If I had NOT had overdraft protection, what would have happened is that when the check bounced due to my savings/investment transfer not making it in time, I'd have been charged a bounced check fee B on checking, my "skip a payment" would have been used on the credit card, and my next statement balances would be: -L-I credit card, L-B checking, S-L in savings/investments. This would have been a lower net cost than what happened.

Re: Debit cards are hidden financial infrastructure

#272

Post by GordonS » Sat, Nov 13, 2021, 3:03 PM UTC

em500 wrote: post #172

chrisseaton wrote: post #7

Earlier quoted context omitted.

> a check cashing place taking 3% of people's paychecks You have to pay to deposit your pay in the US?

The more shocking tidbit is that lots of Americans still get a literal paper paycheck.

Back in 2005 or so, I recall my American colleagues also saying they were paid every 2 weeks, instead of monthly. That seemed pretty strange to me, for salaried positions.

Re: Debit cards are hidden financial infrastructure

#273

Post by loeg » Sat, Nov 13, 2021, 3:05 PM UTC

toomuchtodo wrote: post #62

kcb wrote: post #44

Earlier quoted context omitted.

You still need a buffer to pay for expenses...$3000 to someone with Upper Income is not a lot. I don't think anyone is liquidating assets to pay for their electric bill.

Expenses can be paid from margin and credit, and that paid back when the income lands in the brokerage or cash management account. Credit cards are usually ~20 days float, margin is 1-2% for as long as you’re extended with it (ignore margin rack rate on brokerage sites, high net worth folks aren’t paying that). Higher level, being poor is expensive and it gets cheaper and easier to get ahead as you get ahead.

Credit cards are at least 20 days - you also have on average 1/2 a month before the monthly statement, and then another 20 days until the statement is due.

Re: Debit cards are hidden financial infrastructure

#274

Post by donarb » Sat, Nov 13, 2021, 3:09 PM UTC

smabie wrote: post #80

p2t2p wrote: post #48

Earlier quoted context omitted.

Australian here. Don’t use credit card, setup a separate account for bills, direct debit everything from there, don’t keep anything big on your debit card and use it with Apple Pay everywhere. No fraud, no fees, no complex things and rules to remember.

Why would you ever not want to put something on a cc? It's quite literally free money (rewards/points + you can delay payments for a month and pay no interest)

Rewards/points are not free. You're paying more upfront to get something "free" later on.

Re: Debit cards are hidden financial infrastructure

#275

Post by simonbarker87 » Sat, Nov 13, 2021, 3:13 PM UTC

throwaway98797 wrote: post #239

simonbarker87 wrote: post #203

Earlier quoted context omitted.

Lower transaction fees? I moved a few hundred £ into my wallet the other day for some Ethereum and paid like £50 in various fees and gas. The crypto world is full of layers of middle men taking their slice. Even swapping some ENS to ETH cost over $100 in gas

I mean your ENS was free money tho, so …

Very true, but same experience buying an NFT, 15% in fees etc

Re: Debit cards are hidden financial infrastructure

#276

Post by adpcm » Sat, Nov 13, 2021, 3:15 PM UTC

kwhitefoot wrote: post #209

doikor wrote: post #184

Earlier quoted context omitted.

Here in Finland banking fees are a thing only for the poor (and even then we are talking about a total of 20 or 30 euros per year) Basically every bank has some kind of "premium customer" program that you qualify for by having enough investments or loans from that bank and magically all your banking fees go away (obviously they just make their money from the services they provide for your investments/loans)

Banking fees? Never paid any as far as I can tell, not for the ordinary things. My bank here in Norway won't pay a bill if there isn't enough money in the account. It sends me a text and an email to say what happened and doesn't charge me anything. The only fees I pay are a small percentage for management of mutual funds.

I’m assuming parent meant fees like X per month for having a debit/credit card or for access to “online” banking.

Re: Debit cards are hidden financial infrastructure

#277

Post by silexia » Sat, Nov 13, 2021, 3:16 PM UTC

Please note that the article points out that it cost tens of millions of dollars to launch a new bank and takes years of work. Overregulation is the reason we can't have nice things.

Re: Debit cards are hidden financial infrastructure

#278

Post by simonbarker87 » Sat, Nov 13, 2021, 3:16 PM UTC

GordonS wrote: post #269

barsonme wrote: post #189

Earlier quoted context omitted.

> most people will do their day to day spending on debit because the rewards we get aren’t worth the faff of paying for things a month later, when you are less “flush” This sort of thinking misses the point that even with credit cards you don’t spend what you don’t have. You (ideally) treat it like a debit card. If I spend $100, then I’ve $100 less in my checking. If you do that, then “flush” never enters the equatio…

This is what I do as well. Monthly bills are all direct debit, but almost all other spending goes on my credit card, and, without exception, I paying it off completely at the end of the month. I've done this for decades, and never paid a penny in interest - the key is to not spend money you don't have. I get some small amount of Amazon vouchers every month for doing this (£10/m or something like that), but really I d…

Glad it works for you, we are very good at budgeting but i find u less you put 100% of the “cash” like spending on the credit card it falls apart as you can double spend without realising and when we tried it for a few months I hated paying for August’s groceries in mid October - it just felt weird to me, far easier just to have a set XX amount in a current account each month and spend it down to 0 through the month on the cash transactions etc.

Re: Debit cards are hidden financial infrastructure

#279

Post by katbyte » Sat, Nov 13, 2021, 3:18 PM UTC

refurb wrote: post #160

NikolaNovak wrote: post #118

Earlier quoted context omitted.

I'm going to re learn the lyrics to Oh Canada and sing them joyously and thankfully... Our banking system gets a lot of ire but dear Gawd.

Oh boy no. Canada has only a handful of banks, minimal competition (they make money hand over fist) and customers get bent over on a regular basis.

My Canadian bank (rbc) doesn’t charge me any fees outside of interest if I keep a negative balance for going into my overdraft.

Re: Debit cards are hidden financial infrastructure

#280

Post by doikor » Sat, Nov 13, 2021, 3:21 PM UTC

adpcm wrote: post #276

kwhitefoot wrote: post #209

Earlier quoted context omitted.

Banking fees? Never paid any as far as I can tell, not for the ordinary things. My bank here in Norway won't pay a bill if there isn't enough money in the account. It sends me a text and an email to say what happened and doesn't charge me anything. The only fees I pay are a small percentage for management of mutual funds.

I’m assuming parent meant fees like X per month for having a debit/credit card or for access to “online” banking.

Yeah that is what I meant. Basically having online banking + debit/credit card. Also for under 2X years old (depends on the bank) they are usually free.