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0 overdraft fees. Yay. More like it. It will force major banks to rethink their overdraft fees as a revenue center. As someone who was not so well financially j

by dm8 5y ago

0 overdraft fees. Yay. More like it. It will force major banks to rethink their overdraft fees as a revenue center. As someone who was not so well financially just a decade ago, overdraft fees seemed like penalty for being poor. When you are living paycheck to paycheck, you never know when your account will get overdrawn. And most evil thing was - bank will deny the charge because you didn’t have enough funds but will still charge you for $34 fee. Some banks offer overdraft protection but it’s not obvious in lot of banking websites/apps in my experience and has been recent development. Plus - lot of people don’t understand the concept of overdrafts. They assume bank will deny if your account doesn’t have enough funds. I’m surprised congress didn’t take action on overdraft fees as it mostly affects middle class and poor people.

MisterBastahrd 5y ago
Yeah, this is huge in an age where a lot of people are dinged through recurring subscriptions. You could rack up 5 or 6 charges and not even realize it, at which point you're out hundreds of dollars in overdraft fees.
- mittermayr 5y ago
  I always struggled with this concept, why not stop at 0 when the account is overstretched? Here in Europe, for most people I would say, it's quite rare that the account goes to 0, and if it does, the transactions simply don't go through (unless it's a credit card). Isn't that asking for borrowing money at no fee? Don't get me wrong, I absolutely despise predatory bank charges, but wonder if that's a bit much to ask a a consumer (i.e. no charge for borrowing money I don't have?). Or is this just about the penalty fee for going into overdraft, and not the actual fee for loaning of money?
  - namdnay 5y ago
    Being able to go below 0 is not tied to having a credit card. Nearly all debit cards issued in Europe can do this to. The only ones that don’t are things like Electron (systematic authorization), but they don’t play well with “fast” systems like motorway tollgates
    - gambiting 5y ago
      So what happens here in the UK with my visa debit card, is that if I somehow go below 0 using it(very difficult, but it has happened before) then my bank sends me a text saying "hey, you have gone into unarranged overdraft, please pay in some money before tomorrow 3pm or we'll charge you a fee". But of course, that implies that the bank isn't greedy.
  - dimmke 5y ago
    You used to be automatically opted into overdraft. Also, you could still get hit with an overdraft fee even if they rejected the charge. Banks also used to structure transactions to force overdrafts if they could. It was really bad.
  - sofixa 5y ago
    In France many banks propose an overdraft service which is limited ( as an example, for a student with no banking history to 200 euros), and is basically a mini free loan. There are rules like you can't stay on overdraft more than X days ( iirc the only one I've seen is 30 days), in which case you pay a fee.
mcherm 5y ago
> It will force major banks to rethink their overdraft fees as a revenue center. I wish that were true. For significantly more than 10 years I have worked for a major bank that does not charge fees for overdrafts that pull from a loan or savings account. I still have seen few signs of the major banks deciding to follow our lead.
the_snooze 5y ago
https://www.fdic.gov/consumers/overdraft/ https://www.fdic.gov/consumers/overdraft/ Overdrafts have been opt-in by regulation since 2010. What banks have done is try to trick people into opting into "overdraft protection," which is really just the old system that allows a customer's checking balance to drop below 0: https://www.wellsfargo.com/credit-cards/features/overdraft-protection https://www.wellsfargo.com/credit-cards/features/overdraft-p... As long as a customer takes no action or just says "no," they won't be allowed overdraw their checking balance.
- yellow_lead 5y ago
  So how do you opt-out? Or is this an action you have to take when creating the account.
  - yardie 5y ago
    You opt-out or opt-in when you set up the account or anytime afterwards. I know only because I just setup checking for my teenage son and it was something the agent asked during the process. I pushed back and declined even though they gave me the end of the world spiel.
- angott 5y ago
  Yes, but if you do not opt into overdraft, you will still be charged a “non-sufficient funds” (NSF) fee when the bank declines your transaction. And the NSF fee is usually higher than the overdraft fee. This doesn't make any sense and is just a money grab on the poor and desperate, because there is absolutely no technical reason why declining a checking or debit card transaction should cost $35+ to process.
  - jjulius 5y ago
    Depends on the bank, I would imagine. Anecdotally, I've never been charged a fee for having a transaction declined because of insufficient funds, nor has my wife, and collectively that's ~5 different banks.
donmcronald 5y ago
> you never know when your account will get overdrawn How? It’s not that hard to keep track of money in vs money out. I bet most of it is people that don’t understand it takes time for a cheque to clear or people that know an auto payment will overdraw their account but can’t do anything about it (ie: no money). Overdraft fees should be illegal, especially for electronic transactions that get rejected.
- mellavora 5y ago
  maybe you have never lived through a period of sustained financial stress. Yes, people in that situation understand that it takes a few days for a check to clear. One of those checks is your paycheck, which you need to clear to cover your other costs. The other is the check you wrote to the grocery store so you could eat, or your rent check. Which clears first? Did you time it right? What if your paycheck was delayed by a day? Money in vs money out is very hard to keep track of when you don't have a buffer and you are always balancing empty. I want to make an analogy to a seemingly simple buy known hard computer science problem, like resolving bugs caused by race conditions. Stuff which is simple if you can assume a single processing thread can become a nightmare when this assumption does not hold.
  - roland35 5y ago
    This is true. Having an extra few hundred dollars made a huge difference to me since I was always juggling the payday vs rent money as well. Credit cards are not easy to get with no credit history either. I eventually was able to get a card but it had a $250 limit.
- dimmke 5y ago
  Banks used to structure these charges to create overdrafts whenever possible. They made it very difficult for you to see what your actual usable balance is. They also used to be allowed to simply reject the transaction if you didn't have the money and still charge a $36 fee. It was insanity. If your checking balance never reaches close to zero, you wouldn't notice this. I was a teenager in 2010 and definitely got hit with a bunch of overdraft fees. Banks know these fees are bullshit (even now, with increased regulation), that's why they're so quick to waive them at first.
dclusin 5y ago
Instead the extortionary practices will be moved to the foreign exchange rate or some other more opaque mechanism.
Kluny 5y ago
> Some banks offer overdraft protection I've always thought overdraft protection was disturbingly like "fire protection". As in, three dudes come to your door, and the skinny one says "Nice place ya got here, be a shame if it burned down" while one of the beefy ones fiddles with a Zippo lighter.
GloriousKoji 5y ago
I remember over a decade ago or so my bank offered this new overdraft "protection" where you could setup an amount of money to use from your saving account to make up the difference in the event of overdraft. One day I cut a check that was $5 over what was in my checking account and found out there was a $75 fee for overdraft. It was not at all obvious in their advertising that fees would still apply. Never made that mistake again.
duped 5y ago
The tyranny of scale creates terrible incentives in banking. Someone whose average balance hovers around $100/month might well cost the bank more money than they can earn off the balance, while someone with $10,000 is basically free. Normally in services you charge more from the people who are more able to pay, because they'll be willing to spend more money for the same service. Yet in financial services and banking, the more money you have to spend on the services results in the lower fees and costs across the board. I think if there's something that needs to be systematically altered to close wealth gaps, that's a fine place to start.

by dm8 5y ago

MisterBastahrd 5y ago

Yeah, this is huge in an age where a lot of people are dinged through recurring subscriptions. You could rack up 5 or 6 charges and not even realize it, at which point you're out hundreds of dollars in overdraft fees.

mittermayr 5y ago
I always struggled with this concept, why not stop at 0 when the account is overstretched? Here in Europe, for most people I would say, it's quite rare that the account goes to 0, and if it does, the transactions simply don't go through (unless it's a credit card). Isn't that asking for borrowing money at no fee? Don't get me wrong, I absolutely despise predatory bank charges, but wonder if that's a bit much to ask a a consumer (i.e. no charge for borrowing money I don't have?). Or is this just about the penalty fee for going into overdraft, and not the actual fee for loaning of money?
- namdnay 5y ago
  Being able to go below 0 is not tied to having a credit card. Nearly all debit cards issued in Europe can do this to. The only ones that don’t are things like Electron (systematic authorization), but they don’t play well with “fast” systems like motorway tollgates
  - gambiting 5y ago
    So what happens here in the UK with my visa debit card, is that if I somehow go below 0 using it(very difficult, but it has happened before) then my bank sends me a text saying "hey, you have gone into unarranged overdraft, please pay in some money before tomorrow 3pm or we'll charge you a fee". But of course, that implies that the bank isn't greedy.
- dimmke 5y ago
  You used to be automatically opted into overdraft. Also, you could still get hit with an overdraft fee even if they rejected the charge. Banks also used to structure transactions to force overdrafts if they could. It was really bad.
- sofixa 5y ago
  In France many banks propose an overdraft service which is limited ( as an example, for a student with no banking history to 200 euros), and is basically a mini free loan. There are rules like you can't stay on overdraft more than X days ( iirc the only one I've seen is 30 days), in which case you pay a fee.

mcherm 5y ago

> It will force major banks to rethink their overdraft fees as a revenue center. I wish that were true. For significantly more than 10 years I have worked for a major bank that does not charge fees for overdrafts that pull from a loan or savings account. I still have seen few signs of the major banks deciding to follow our lead.

the_snooze 5y ago

https://www.fdic.gov/consumers/overdraft/ https://www.fdic.gov/consumers/overdraft/ Overdrafts have been opt-in by regulation since 2010. What banks have done is try to trick people into opting into "overdraft protection," which is really just the old system that allows a customer's checking balance to drop below 0: https://www.wellsfargo.com/credit-cards/features/overdraft-protection https://www.wellsfargo.com/credit-cards/features/overdraft-p... As long as a customer takes no action or just says "no," they won't be allowed overdraw their checking balance.

yellow_lead 5y ago
So how do you opt-out? Or is this an action you have to take when creating the account.
- yardie 5y ago
  You opt-out or opt-in when you set up the account or anytime afterwards. I know only because I just setup checking for my teenage son and it was something the agent asked during the process. I pushed back and declined even though they gave me the end of the world spiel.
angott 5y ago
Yes, but if you do not opt into overdraft, you will still be charged a “non-sufficient funds” (NSF) fee when the bank declines your transaction. And the NSF fee is usually higher than the overdraft fee. This doesn't make any sense and is just a money grab on the poor and desperate, because there is absolutely no technical reason why declining a checking or debit card transaction should cost $35+ to process.
- jjulius 5y ago
  Depends on the bank, I would imagine. Anecdotally, I've never been charged a fee for having a transaction declined because of insufficient funds, nor has my wife, and collectively that's ~5 different banks.

donmcronald 5y ago

> you never know when your account will get overdrawn How? It’s not that hard to keep track of money in vs money out. I bet most of it is people that don’t understand it takes time for a cheque to clear or people that know an auto payment will overdraw their account but can’t do anything about it (ie: no money). Overdraft fees should be illegal, especially for electronic transactions that get rejected.

mellavora 5y ago
maybe you have never lived through a period of sustained financial stress. Yes, people in that situation understand that it takes a few days for a check to clear. One of those checks is your paycheck, which you need to clear to cover your other costs. The other is the check you wrote to the grocery store so you could eat, or your rent check. Which clears first? Did you time it right? What if your paycheck was delayed by a day? Money in vs money out is very hard to keep track of when you don't have a buffer and you are always balancing empty. I want to make an analogy to a seemingly simple buy known hard computer science problem, like resolving bugs caused by race conditions. Stuff which is simple if you can assume a single processing thread can become a nightmare when this assumption does not hold.
- roland35 5y ago
  This is true. Having an extra few hundred dollars made a huge difference to me since I was always juggling the payday vs rent money as well. Credit cards are not easy to get with no credit history either. I eventually was able to get a card but it had a $250 limit.
dimmke 5y ago
Banks used to structure these charges to create overdrafts whenever possible. They made it very difficult for you to see what your actual usable balance is. They also used to be allowed to simply reject the transaction if you didn't have the money and still charge a $36 fee. It was insanity. If your checking balance never reaches close to zero, you wouldn't notice this. I was a teenager in 2010 and definitely got hit with a bunch of overdraft fees. Banks know these fees are bullshit (even now, with increased regulation), that's why they're so quick to waive them at first.

dclusin 5y ago

Instead the extortionary practices will be moved to the foreign exchange rate or some other more opaque mechanism.

Kluny 5y ago

> Some banks offer overdraft protection I've always thought overdraft protection was disturbingly like "fire protection". As in, three dudes come to your door, and the skinny one says "Nice place ya got here, be a shame if it burned down" while one of the beefy ones fiddles with a Zippo lighter.

GloriousKoji 5y ago

I remember over a decade ago or so my bank offered this new overdraft "protection" where you could setup an amount of money to use from your saving account to make up the difference in the event of overdraft. One day I cut a check that was $5 over what was in my checking account and found out there was a $75 fee for overdraft. It was not at all obvious in their advertising that fees would still apply. Never made that mistake again.

duped 5y ago

The tyranny of scale creates terrible incentives in banking. Someone whose average balance hovers around $100/month might well cost the bank more money than they can earn off the balance, while someone with $10,000 is basically free. Normally in services you charge more from the people who are more able to pay, because they'll be willing to spend more money for the same service. Yet in financial services and banking, the more money you have to spend on the services results in the lower fees and costs across the board. I think if there's something that needs to be systematically altered to close wealth gaps, that's a fine place to start.