The $36 soda: Overdrafting in America

In the book "The Big Short", Michael Lewis mentions how one CEO admitted to an audience that free checking accounts were simply a way of screwing over poor people for all these additional fees, like overdraft, etc. It's really because people with less money need to spend more time managing their money because they are closer to drawing down the account, and the banks are betting on this. It's basically predatory banking, and I guess based on the numbers, extremely profitable.<p>It's the exact type of behavior I would expect from a bank. But let's not swallow everything that the article said. It's not like banks of yesteryear were so magnanimous. Back in the Great Depression, it was the banks that screwed over so many farmers and home-owners that many states, including California, made mortgages non-recourse meaning that banks could only take back the house in the case of foreclosure, something that many people took advantage of during the latest housing boom.

I had an annoying run in with them. It happened because I didn't know Suntrust didn't take out charges in the order they occurred. They take out the largest charge first, and each charge as they decrease in value.<p>One day I had had a few small charges, and realizing it was a week intl payday, I figured I'd run to the grocery store and make a large precise of groceries, to ensure I had food taken care of, expecting to make s single overdraft.<p>Suntrust had other plans. They took out the large grocery bill first, meaning a quick lunch at Taco Bell cost over $40, shipping a small box cost over $50, and a Slim Jim and cream soda cost almost $40. In addition to the overdraft on the groceries.<p>It's a very easy trap to fall into if you're living check to check and make even the slightest mistake.

I work for a US bank, "ING Direct". On our "checking" account (electronic payments preferred), our policy for overdrafts works like this: if you overdraw your account, we do NOT charge you an overdraft fee. Instead, we automatically turn it into a loan at typical unsecured lending rates (11.25% today: prime plus 8%). As soon as you deposit enough money to go back to a positive balance, we go back to paying interest on your balance.<p>I hate feeling like an advertisement for my employer, but I just don't understand why ALL banks can't work this way!

STOP USING COMMERCIAL BANKS.<p>Sorry for the caps but it cannot be stressed enough.<p>There is no good reason not to use a credit union - almost everyone in the USA can find one and qualify and since they are member owned they won't do nonsense like this and don't need regulation to force them to do what is morally right.

For months after the new regulation my bank was giving me a screen when I logged on to online banking. It went something like this:<p><i>Recent Federal regulations require us to re-confirm your enrollment in this valuable service you'd previously been getting with your checking account.</i><p>[ YES! Please! ]<p><i>[ Remind me later ]</i>

I remember when BB&#38;T called me to beg me to authorize them to enable overdraft "protection" on my account. They acted like it would be doing me a favor, and when I asked them why they would even bother me about something so horrible, the lady on the phone insisted that "the government" was trying to interfere in our freedoms or some other such bull crap.

Made 2hrs after of walking out of a Wells Fargo. <a href="http://fuckwellsfargo.com" rel="nofollow">http://fuckwellsfargo.com</a>

<i>Once upon a time, banks made money by charging interest on loans.</i><p>Banks don't have to offer checking accounts to make money charging interest on loans. I suspect what will happen if the government starts to get into the business of deciding what fees ought to be charged for this or that the banks will start charging a flat fee to have an account.<p>Once again "advocates" for the poor will end up screwing poor people.

Personally, I never use my debit/check card. I only use credit. There are much stronger consumer protections. I can contest/deny a charge, and not pay until it's resolved. No fees. Cash back. A free, no interest loan on which to float my purchases until the end of the billing cycle.<p>It is amazing to me that people use, or even sometimes prefer, their debit card over a regular credit card.

I use Chase, and they tried to get me with this once. I had to call and yell at them and basically asked them how it's possible that they know I don't have funds and still let the transaction go through.<p>I told them that their systems were faulty, and they told me this was a 'feature' of the account type.<p>I told them I never asked for such a feature, and expect it to work like every other bank account where it denies transactions based on funds.<p>They reversed one of the overdraft fees and removed the 'feature' from my account at no cost to me. Now if I don't have funds in my account and try to make a transaction, it gets denied. The way it should be, I haven't paid overdraft fees since then.

My brother, a university student, got trapped in the overdraft scheme. This bank, TCF Bank, encourages students to sign up during orientation. My brother decided to sign up and deposited a small sum of money. Not realizing there exists an overdraft fee, he continues to buy things thinking the bank will prevent a transaction if his balance hits 0. He didn't realize his until letters from debt collectors came in the mail asking for $300! He tried with multiple TCF branches to try and reduce this amount, but no one budged. He got screwed!<p>What did he purchase to have to owe $300? He frequently buys $0.50 candy and $1 chips... at $30 per overdraft... yeah

I was discussing this with my friend the other day and she's convinced that if she didn't have overdraft 'protection' there are still certain merchants who run debit cards as credit cards which then incur an overdraft fee anyway. Has anyone heard of this? I'm looking for some evidence I can use to get her to cancel the overdraft nonsense before she gets further in debt.

I think credit card companies are starting to charge for "overdraft" fees.<p>I got mails asking me to sign up for over-the-limit protection program. I was like, huh? What over-limit? Just decline the charge when the limit has been exceeded. Apparently the CC companies would gladly authorize over the limit charge with a fee. Sneaky.

I hate this. I hate the way banks try to think up underhanded ways of screwing their customers (like cashing checks in largest to lowest so they can bounce as many as possible).<p>Having said that, the old "Store your money here so we can lend it to others" business model is not as profitable as it used to be.<p>Edit: Removed reference to interest rates.

Almost every bank's overdraft fee in Canada has been pegged at $42.50 for the past 5 odd years, perhaps longer.<p>I just paid $42.50 for mistakenly giving a $3 refund in Canadian dollars via paypal, when both my paypal and my bank were flush with US funds, the simple fact that I mixed up a currency symbol means that refund now cost me $45.50.<p>This is one of the reasons I stand behind the bitcoin idea. Fee free banking would be too incredible.

When are these guys going to launch?

Banking in UK is so ridiculous, beside of all insane overdraft charges when you enter your PIN incorrectly (Pin &#38; Chip is mandatory in many EU countries) your bank charges you for £1

Or you could just not buy shit that you can't afford.

Honestly, is this post valuable information previously unknown to anyway, or a cheap PR/SEO gambit by the company that posted it?

I agree that banks are predatory, but the fact that people can't keep ~$500 in their bank account indicates they are spending more than they are earning. When someone can't keep an extremely small amount of cash on hand at all times. it doesn't mean they are living paycheck to paycheck and just netting zero - it means they are accruing debt every cycle, and then struggling to stay cash flow positive in any way necessary.<p>So, if you ask me, the solution to America's woes in this regard is not to eliminate overdraft fees. That's just addressing a symptom. The real solution is a living wage for all Americans, or some other way to prevent poor people from sinking into debt little by little. Then banks wouldn't construct their systems like this, because it just wouldn't work.<p>Instead of patching bandaids onto the financial system, we need to lift people up from poverty directly. Want to solve overdrafts? Tax the rich and give the money to the poor.<p>As for BankSimple, that's nice marketing and all, but let's see if BankSimple becomes the bank of the poor. Can anyone get a free bank account with BankSimple and keep $0-$500 in it?