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Debit cards are hidden financial infrastructure

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Re: Debit cards are hidden financial infrastructure

#131

Post by steveklabnik »

rjzzleep wrote: post #81
mherdeg wrote: post #56

Earlier quoted context omitted.

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?

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…

I left a comment about how this happened to me... 8 years ago, wow https://news.ycombinator.com/item?id=6424493

Re: Debit cards are hidden financial infrastructure

#132

Post by richardw »

recursive wrote: post #12
vmception wrote: post #3

> An interesting wrinkle about net interest is that most customers don’t contribute much. In much of the U.S., median checking account balances at account creation are only around $3,000 Thats a lot of money not in crypto or stocks. Surprising.

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 the drain on my return every month.

In any case, $3k cash seems like a small amount for the safety it brings. Emergency funds are crucial.

Re: Debit cards are hidden financial infrastructure

#133

Post by eyelidlessness »

rp1 wrote: post #122
eyelidlessness wrote: post #101

Earlier quoted context omitted.

What I mean is that for customers, secured credit cards and debit cards have roughly the same risk, but banks have obligations to offer checking accounts fairly but offering the equivalent credit-building account is up to their own discretion. It’s considered lending even though they’re lending the customer their own money.

Do you feel that the "discretion" violates the equal credit opportunity act? Technically, credit discrimination is illegal, but I could see a bank taking liberties with people who don't have the means to protect themselves.

Given that the risks to “creditors” (banks lending money back to people who own that money) are equal for debit and secured credit cards, and that the risks to “debtors” (people who would be using their checking account to build a neutral-at-worst credit history)…

Having the means to protect yourself is the baseline definition of a secured credit card. That’s why it’s secured. You’re starting with some positive balance and spending your own money. That’s what debit cards are too. The liberty banks take is choosing who gets to benefit from their normal spending of their own money being considered as credit at all.

Re: Debit cards are hidden financial infrastructure

#134

Post by FunHearing3443 »

kccqzy wrote: post #59

> 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…

I get where you're coming from, but is the solution to simply not allow instant receiving of money? No one's being forced to use these apps.

Re: Debit cards are hidden financial infrastructure

#135

Post by eyelidlessness »

eyelidlessness wrote: post #97
mherdeg wrote: post #56

Earlier quoted context omitted.

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?

My last bank (US Bank, don’t bank with them) did this in a way where in one day where I had only one transaction which could overdraft they charged 6 overdrafts even though my net would have been positive. If I wasn’t (at the time) skilled at ~~kicking and screaming~~ advocating for myself I would have been out $180 plus whatever 30 cents they had calculated I went negative. Which (again at the time) was the differen…

Oh since I’m naming names. The bank before that, Wells Fargo, honored a check I wrote > 2 years earlier. Sure, I wrote it and I was good for it at the time. I forgot about it. Maybe I could’ve left that money in limbo but at a certain point I assumed my moderately wealthy aunt wasn’t gonna cash it.

Well it doesn’t matter what I assumed, the law said the check was no longer valid. When Wells Fargo honored it and overdrafted me they disregarded the law and said I was committing check fraud if I didn’t pay up. That’s how I ended up at US Bank, because fuck if I’m going to pay you for illegally processing my check.

Edit: and yeah I had “check fraud” on my record for years after because Wells Fargo said they didn’t care about the law and just lectured me about being responsible for checks I wrote.

Re: Debit cards are hidden financial infrastructure

#136

Post by oneplane »

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)

There is no free money, and delaying is essentially spending money you don't actually have. If you want to buy something that comes out of your short-term savings account here. Or you can choose to not do that and have all your money in one single account and everything you do goes in and out of that. And you can configure it in a way that disables going negative so you don't get this weird overdraft fee system unless you choose to.

Re: Debit cards are hidden financial infrastructure

#137

Post by likpok »

wmf wrote: post #109
whimsicalism wrote: post #67

> the industry generally estimates approximately $350 a year in costs to maintain a checking account, of which approximately $120 is direct marginal cost Does this not seem ridiculously high to anyone else?

Mainframes and lawyers aren't cheap.

The bigger cost is the branch and the teller, both of which scale less well.

Re: Debit cards are hidden financial infrastructure

#138

Post by oneplane »

hahajk wrote: post #96
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.

Amex pays me over a thousand dollars a year to use my credit card (which it takes from the merchants as fees.) I kinda feel bad about that, but I know those fees are built into the price and if I used cash or debit I’d still be paying the same price, just not get the reward. But if they accepted lightning payments, I would pay them in BTC.

They advertise it as 'paid by merchant fees' but somewhere in a ledge or spreadsheet everyone makes a profit except the individual consumer. Maybe the prices are higher in general, maybe there are some consumers where more value is extracted than from others, but money doesn't appear out of thin air (except when you get into the whole derivatives gamble). Someone, somewhere, gets screwed over when a bank or credit company "gives" you money.

Re: Debit cards are hidden financial infrastructure

#139

Post by oneplane »

p2t2p wrote: post #48
aynyc wrote: post #4

Use credit card, it’s the card issuers that are on the hook for fraud. It’ll help you build credit. Use debit when you don’t have the means or credit history.

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.

Same here in Western EU. And if you can't or won't use Apple Pay, any NFC EMV or Pin + Chip EMV will do. Don't combine automation with manual transactions (the direct debit thing), don't put a bunch of value on a thing if you don't have to (both the direct debit thing and the cards) and don't use a credit card or 'overdraft' (or whatever the local equivalent is) features.

Re: Debit cards are hidden financial infrastructure

#140

Post by zaphirplane »

rjzzleep wrote: post #81
mherdeg wrote: post #56

Earlier quoted context omitted.

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?

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…

This thread assumes intentional reordering not that the transaction arrive at the bank out of order

I have transactions that show up out of order to the event time. Thou I wouldn’t put it past some smaller banks in low regulation geographies

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