While I think overdraft fees are gross and exorbitant (and I fell at their mercy a few times before I finally wizened up and got overdraft protection), I don't really think this is that big of an issue (at least, compared to other issues in the banking system.) It's a pretty solvable problem from the consumer end -- don't spend money on a card if you're not sure you have at least X in your account.
Overdraft fees are absurd, but so is complaining about them. Just go to your bank and ask them to disable overdraft. If you don't have the money and overdraft is disabled, the transaction will simply be declined. If you want to spend money you don't have yet, you can do it the normal way, by borrowing.<p>(Also, flagging the article.)
The graph in the article suggests the bank's cost for a checking account per year is $250. Wow. That seems like a huge opportunity to provide better banking service. Driving that cost down to $100 or so would be a very big deal.
<i>Fact 1: If you don’t keep several thousands of dollars in your checking account, overdrafting is near the only way your bank makes money on your account.</i><p>I thought the bank could make money by lending out a multiple of all the money deposited, such that if I deposit 1000 dollars, they can now lend out on the order of 30000 (i.e. thirty times) that. If they lend that out at, say, 10% interest, they can make 3000 a year because I have 1000 in my account.<p>The magic of fractional reserve banking. If I've misunderstood this, I'd very much like to be corrected, please.
Yes, and to add to that, credit card companies <i>do not</i> want you to pay your balance off in full every month, because even though they get a 2-3% cut of every credit transaction from the merchant, interest is still how they make most of their money. I have heard that within the credit card industry, they even colloquially refer to such responsible cardholders as "deadbeats!"