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.
It varies by employer, to this day. ADP (biggest HR company in the world, likely) probably still pays its employees every two weeks, but I no longer work there. My current company is on the twice-a-month schedule. I've been paid monthly in past jobs. And my wife is currently getting paid once a quarter!
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…
Long back when I worked in my first job at a large private bank, I remember being in a meeting where they spoke about overdraft fees + late fees + interest on these + god knows what else and the lady, our systems counterpart, looked at all of us and said 'We better plan a trip to Ganges to atone for all this and we might need to go ever year' (it's a common saying in India, as Ganges is supposed to wash away one's sins)
It's been 16 years since I worked there but I still remember this vividly. Modern banking has to be one of the biggest scams legally running and once you go below the prime segments, it's basically just exploiting the poorest and weakest to make some of the easiest money you can.
> Typically, the apps offer their users a choice: payouts at the speed of banking, for free, or payouts at the speed of the Internet, for a small convenience fee. Cash App charges 1.5% with a minimum of a quarter. This is just another way the financial system (including fintech startups) preys on the poor. If you are well off, you wouldn't want to pay any convenience fee for the privilege of receiving money from a bu…
> This is just another way the financial system (including fintech startups) prey on the poor. This is the way a government preys on the poor by not making electronic transfer of money a utility. The businesses are just doing business, no one sets out and says I want to screw the poor. The prices simply reflect the risks to the business. If society wants to subsidize those risks for the poor, then it should by creati…
You are right, but "it's just profitable and not illegal yet" is how we get all kinds of negative externalities, like dumped waste into rivers and this borderline usuriousness. I think it's worth regulating (but carefully)
I guess everything in the US is controlled by fear. So for them this might be a legit argument. "What happens if someone breaks into your house?". "What happens when somebody robbed you?". "What happens when somebody uses your credit card to do fraudulent transactions?" Guess what, having a debit card in the Netherlands gives you protection against all of the above. Luckily not many people are ruled by scare tactics…
> Lost your debit card for some reason? Just a simple click in your online banking app on your phone is enough to block the current one and recieve a new card the day after.
This is how it works in the US as well. What you haven't addressed is how you get money back in your debit account if someone manages to steal it. For that period of time, you are out the money until the bank resolves it. By definition, this is not true of a credit card.
It's not just overdraft fees right? It's overdraft fees plus transaction reordering which makes the magic happen. I'm still kind of mesmerized on this one, it felt like regulatory action almost happened, the most lucrative of the overdraft practices got limited circa 2009/2010, and then banks voluntarily toned it down and the regulators mostly looked the other way on things like reordering?
The transaction re-ordering to maximize the amount of overdraft events should have put execs in prison. Out of all the obviously corrupt, mal-intent, direct consumer harming practices this was quite near the top.
It wasn’t illegal, and maybe isn’t (although I thought it was). I know that I was impacted by this as a college student, and ended up paying hundreds of dollars in fees for a single weekend. I had OD protection fees and “bounce fees” for the “protection fees”. It was insane. However I thought this was at least made unprofitable by capping fees and limiting when they could be applied.
All of this insane behavior is a big reason why the CFPB was created, and legislation was passed to limit “overdraft protection” auto-opt-in.
It's not irrational, there's a whole bunch of other things you're not considering. For example, a debt creates a financial obligation and as such it diminishes one's personal autonomy. People who value their personal autonomy will take that into consideration before going into debt.
Its incredibly irrational. You're shipping a ton of personal baggage under "personal autonomy". Why even take part in economic transactions at that point. If your definition of autonomy is that extreme, the concept that someone might have something you want but don't have must be a alien concept
My definition of personal autonomy is extreme? What definition? Why do you think it's irrational to assess how getting into debt affects my personal autonomy?
It's not just overdraft fees right? It's overdraft fees plus transaction reordering which makes the magic happen. I'm still kind of mesmerized on this one, it felt like regulatory action almost happened, the most lucrative of the overdraft practices got limited circa 2009/2010, and then banks voluntarily toned it down and the regulators mostly looked the other way on things like reordering?
Yea. For people who aren't familiar with this, the bank will reorder your transactions and batch them to do the biggest one first. Then you get charged an overdraft fee per transaction after that. If they did the small ones first, you may not go into overdraft until the last big one... So you'd pay one fee. Do the largest first, then each small one causes a fee. Highway robbery.
Again, I'm speaking from a purely US perspective, but there is no good reason to use a debit card instead of a credit card, for the same purchasing patterns. You have better fraud protections, you don't worry about overdrafts or transaction reordering, you get a month interest-free loan if you pay back your balance every month. You get cash back or reward points or etc. And if some emergency comes up, you have credit…
I think the argument you mentioned is actually worth it for some people. Credit card interest rates are really high and people are better off getting charged a one time overdraft fee rather than buying stuff they cant afford and get saddled with high interest credit card debt.
Ha, it's true, the limit enforced by a debit card is handy. I love my wife dearly, but her spending habit is 'if it is in the account, I can spend it.' So after trying various strategies, we just settled on keeping a debit account specifically for routine household purchases, groceries, etc. It is budgeted exactly what we plan for, not a dollar more, and she knows that when it's gone it's gone. That's not strictly true, of course, we replenish if we buy a lot of groceries in a month, but it serves as a useful signal for her that she's spending more than the generous amount we budgeted for this purpose.
I don't think most Americans understand stocks. I definitely don't. Even more so for crypto-currency.
At least in my country, inflation is higher than what I get in interest. I lose money every month. I prefer to, over the long term, earn more than inflation. The only way to do that it to add risk. Over the long term, the risk reduces and I’m net positive. Index funds reduce the need to know about stocks. I buy the economy, not a stock. (Well mostly. That’s the idea.) There are times I hold more cash but then I feel…
> Index funds reduce the need to know about stocks.
And for that vast majority of people, whether they are expert or not, the index fund will outperform their personal stock picks anyway.
99% of the population only needs to know 'put it all in a vanguard S&P 500 fund' as their long-term investment advice, at least until they're old enough to see retirement on the horizon.
What's transaction reordering? 1. have $10 in your checking 2. pay $9 for steak 3. fill account with $500 4. buy sausage for $2 bank reorders it as 1. have $10 in your checking 2. pay $9 for steak 3. buy sausage for $2 4. charge overdraft 5. count $500 deposit Is that what banks would do? I faintly remember that really old accounts I had in Germany had overdraft capability, but for all newer(last decade or so) accoun…
Yes, that's exactly what they would do. Even better (for the bank's profits) is if you had lots of other smaller transactions that day too. They would re-order everything from largest-to-smallest, so it's: 1. have $10 in your checking 2. pay $9 for steak 3. buy sausage for $5 4. charge overdraft 5. buy milk for $3 6. charge another overdraft 7. pay $2 for parking 8. charge another overdraft 9. buy a pack of gum for $…
I know Chase and USBank always credited deposits first (going back to about 2006).