
The $36 soda: Overdrafting in America - loganlinn
http://banksimple.com/blog/Banking/the-36-dollar-soda-overdrafting-in-america/
======
steve8918
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.

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.

~~~
Confusion

      It's the exact type of behavior I would expect 
      from a bank.
    

From _an American_ bank. There is no German, Dutch or French bank that does
that and I doubt Spanish, Italian or Swiss banks do it. Sure, if I overdraft,
I pay (serious) interest over the amount overdrawn for as long as I am
overdrawn, but you aren't hit with any fine at all.

In fact, I have arranged that I actually can't overdraft. Automatic bills just
bounce when I'm underfunded. That's between me and the companies whose bills
bounced.

~~~
furyg3
As an American who moved to the Netherlands, I can vouch for this. My fellow
countrymen don't know what they're missing:

* There are no ATM fees levied by another bank's ATMs.

* There are no ATM fees levied by _your bank_ for using another bank's ATMs.

* There are no fees or minimum transactions for using your debit card at a business.

* You are allowed to overdraft, you just pay an interest rate to the bank for the money you owe (mine is 10%, up to €2,500).

* There are no bounced check fees, because:

* There are no checks. Non-debit card transactions are done via online banking, are free, and usually instantaneous.

* All banks use 2-step authentication (phishing is nearly impossible).

I was confronted by the joke of US banking again recently when I had to mail
someone in the US a check, which they lost, found 6 months later and cashed...
generating an overdraft fee in my US account.

Totally unnecessary.

~~~
joelhaasnoot
"There are no fees or minimum transactions for using your debit card at a
business." isn't always true. For (small) business with not enough
transactions, accepting debit cards is an expense, and below 10 euros they
often charge 0.25. Nothing major though.

And the big downside to all of the above? Credit card acceptance is very very
low. Tourists can only purchase train tickets by credit card at Schiphol
Airport. Everywhere else the option is disabled due to fraud issues.

~~~
rmc
_For (small) business with not enough transactions, accepting debit cards is
an expense_

Here in Ireland it's not uncommon for shops to insist on cash only for amounts
less than €10 (except in some extrenuation circumstances (like the ATM in
their shop being broken)).

 _Credit card acceptance is very very low._

That has definitly not been my experience. Perhaps you are thinking of chip-
and-pin credit cards. Here in Ireland (& IME UK), credit cards are accepted in
many, many point of sales/retailers. But they might only accept chip and pin
credit cards, which I believe are uncommon the USA.

~~~
joelhaasnoot
In the Netherlands very few stores accept credit cards, most accept just the
dutch "PIN" and "Maestro" (=EMV). Not many people in the Netherlands have a
credit card.

Vice-versa however, I was able to pay at WalMarts in the US with my Dutch
debit card with no issues (once I hit the right button, it's confusing).

------
jeffool
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.

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.

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.

It's a very easy trap to fall into if you're living check to check and make
even the slightest mistake.

~~~
kstenerud
Which is why you shouldn't be using such a dangerous service when living check
to check.

Go to a bank machine, inquire about your current balance, and then extract
cash to make your purchases with.

Banks may be predatory with fees, but really it's your own responsibility to
avoid this trap, and it's not even that hard to do. You can also join a credit
union.

~~~
jeffool
I'm not sure why people are downvoting you... I get what you're saying and
don't completely disagree.

But I think it's worth noting, because I'm not sure if I got the point across:
I was intending to overdraft on the final, large fee. The insane overdraft
fees only affected me in an unexpected way because they go out of their was to
also screw people on the order of withdrawals.

~~~
gujk
Isn't "intending to overdraft on the big charge" analogous to "intentionally
reading from freed memory because you think it hasn't been reallocated yet"?

relying on undefined system behavior is dangerous.

~~~
eru
Your bank should have public documentation about those procedures. So it's not
exactly undefined.

~~~
tedunangst
The bank does have public documentation about those procedures. Edit: I
realize now that may have been your point.

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mcherm
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.

I hate feeling like an advertisement for my employer, but I just don't
understand why ALL banks can't work this way!

~~~
r0s
I prefer the "deny all" option, where any transaction that overdrafts is
simply denied at POS.

This is absolutely no problem for small transactions. For larger, potentially
inconvenient ones like bills or rent, I really don't see the possibility.
Maybe I'm too careful with my money, but I don't usually try to make large
payments without checking my funds first.

~~~
thomaslangston
I concur with a strong preference for a "deny all" option. I have credit cards
for when I require a temporary line of credit.

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ck2
STOP USING COMMERCIAL BANKS.

Sorry for the caps but it cannot be stressed enough.

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.

~~~
bermanoid
I'm curious here: what are the benefits of using a credit union over a bank?
What are the drawbacks?

Right now I keep 95% of my money in investment accounts (I use Interactive
Brokers these days, they have reasonable fees for trades and zero bullshit,
which puts them two steps ahead of any normal bank that I know of), and push
the remaining stuff to a throwaway checking account @BoA as needed to cover
recurring payments, bills, etc. I don't have any sort of credit whatsoever,
I've always preferred to pay up-front (and yes, this _has_ been a problem, as
I've gotten older I've realized that some things, like car rentals, are
exceptionally difficult to deal with without a credit card, and getting a
credit card is actually somewhat difficult if you skipped it for the first
part of your life, and they really don't care how much money you have if you
have no credit history...).

Trust me, I'd love nothing more than to know that I was contributing
absolutely zero to the consumer banks. But I've never really looked into
alternatives; the main reason I use consumer banks is for convenience, like
being able to set up bill payments, have a debit card, deposit checks at an
ATM, etc. Can credit unions cover those use cases? And can someone like me,
who's over 30 but has never borrowed money before, get into one?

~~~
Natsu
The main advantage is that credit unions are member-owned and therefore run to
benefit the members, not some investors. This keeps them from having an
interest in screwing you via weird fees and whatnot. The main disadvantage
I've seen is that smaller ones have less leverage and so you pay more ATM fees
to other banks.

I've been in the no credit card boat, so I know exactly what you mean. I got
mine by having a car loan I don't really need that my brother cosigned to
create a credit history. You may also be able to get a loan from your broker.
Mine keeps telling me how big a loan I'm approved for, though I've never tried
it.

~~~
_delirium
> The main disadvantage I've seen is that smaller ones have less leverage and
> so you pay more ATM fees to other banks.

Many credit unions are now part of ATM networks where you can use any of the
members' ATMs fee-free, and in some cases can use other members' branch
offices for free as well (at least for routine stuff). Depends somewhat on
your location and your ATM-using habits; if you need to use a random mall ATM
that doesn't help, but there are usually several member ATMs nearby.

~~~
Natsu
I notice this because the only free ATMs I know of are too far out of my way
to be practical. I would probably do better to move to a larger credit union,
but I don't know of any others I could join.

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marshray
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:

 _Recent Federal regulations require us to re-confirm your enrollment in this
valuable service you'd previously been getting with your checking account._

[ YES! Please! ]

 _[ Remind me later ]_

~~~
eogas
My bank had something similar. I really don't understand why they're allowed
to do it at all, even as an opt-in "service". If I wanted to spend money I
didn't have, I'd use my credit card. At my bank, an overdraft counts as a cash
advance from your credit card anyway. It's just a way for them to force you to
borrow money at an inflated interest rate, and it's absolute bullshit.

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jcromartie
I remember when BB&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.

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hop
Made 2hrs after of walking out of a Wells Fargo. <http://fuckwellsfargo.com>

~~~
alanh
Guess: The reason you censored the logo but not the domain is because you
don’t really have the appropriate typeface & just pasted the “F” from “Fargo”?

Idea: You _could_ attempt to construct U, C, and K: U = top of L + bottom of
O; C = mirror the top half of G; K = maybe the legs of A + the left of R? If
you want me to give it a shot, ping me. _Update_ My attempt, just for fun.
Result: <http://cl.ly/273o3w1z2d2B3y2A0e1y> _(I first did this sort of font-
less logo-hacking in MS Paint, maybe 14 years ago; then 5 yrs ago in
Photoshop:<http://cl.ly/0p0k2H3x2V0y3s0r2v25>; now, in Acorn.)_

~~~
hop
Thanks. I just googled for the font and came up with Clarendon, but it doesn't
look exact. Anything you want to do I'll post. Really not interested in the
domain anymore, so if anyone wants it...

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tsotha
_Once upon a time, banks made money by charging interest on loans._

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.

Once again "advocates" for the poor will end up screwing poor people.

~~~
gujk
How is it screwing poor people to have a flat fee that eliminates the
negative-sum game of debit/credit shuffling?

Even if flat fee was considered bad, by taking away the chance for some folks
to skate the line and win, that is trivial to fix with a Federal income tax
credit. You can argue against that on liberation grounds, but not bleeding
heart grounds.

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dodedo
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.

It is amazing to me that people use, or even sometimes prefer, their debit
card over a regular credit card.

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TheRevoltingX
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.

I told them that their systems were faulty, and they told me this was a
'feature' of the account type.

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.

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.

~~~
caw
I also turned off overdraft on my account, but I did this when I got my
Wachovia debit card in the mail. It has as a $5000 per _DAY_ limit of
transactions. I called to get it lowered, to say $500 but they couldn't do it
on my blue debit card. Since $5k was more than my checking account at the time
I turned off overdraft so someone couldn't drain my savings account along with
it.

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Rinum
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!

What did he purchase to have to owe $300? He frequently buys $0.50 candy and
$1 chips... at $30 per overdraft... yeah

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Qz
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.

~~~
majorlazer
Yep. Example would be having your account tied to your PayPal. It will remove
regardless if you have the overdraft protection or not.

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ww520
I think credit card companies are starting to charge for "overdraft" fees.

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.

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MichaelApproved
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).

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.

Edit: Removed reference to interest rates.

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GigabyteCoin
Almost every bank's overdraft fee in Canada has been pegged at $42.50 for the
past 5 odd years, perhaps longer.

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.

This is one of the reasons I stand behind the bitcoin idea. Fee free banking
would be too incredible.

~~~
jarek
Omitting the part where you asked Paypal to debit a linked account that had
less than $3 in it...

<http://www.ingdirect.ca/en/chequing/index.html>

cheaper overdraft if you qualify,
[http://www.banking.pcfinancial.ca/a/products/chequingAccount...](http://www.banking.pcfinancial.ca/a/products/chequingAccount.page?region=ON&language=en&signinop=OB)

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jstatus
When are these guys going to launch?

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

~~~
Two9A
Would you happen to know which bank is doing that at the moment? In the last
year, I've had a debit or credit card from NatWest, Halifax, Lloyds,
Santander, MBNA and Barclays; never had an "incorrect PIN" charge though.

If it's a new policy at one of those, I guess I'm closing my account...

~~~
fmavituna
This is Lloyds TSB and they've being doing this for the last 5 years, not sure
why you haven't noticed (maybe you get it right every time :) ).

Overseas withdrawal can cost up to £4 and overdraft charges is can go up to
£60 Lloyds not to mention they'll decrease your CC limit to £500 when you
forgot paying £7.

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

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

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andrewljohnson
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.

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.

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.

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?

~~~
ajaimk
I would like to disagree regarding the fact that over-draft fees are the realm
of the poor. I've had the misfortune of being charged overdraft fees twice and
both times were because I accidentally swiped my debit card and then realized
I'd overspent. Both times, I wasn't spending more than I had. I had a
substantial amount of cash in a separate saving account as well as my
investment account. It was just my checking account that was low of cash.

As for BankSimple becoming the bank of the poor, I feel that it wouldn't be
that big an issue. They site focuses on integrating technology for pretty much
everything you need to do. Check depositing is by smartphone. There are no
branches - everything is online/phone based. This will probably deter the
_poor_ to sign-up since people who have < $500 balance on their bank account
probably aren't going about with a smartphone and a data plan.

~~~
gujk
What the heck bank is this? I bank with the reviled BofA, and once a year or
so I misjuggle my accounts and bounce something, and every time they courtesy
credit the fee, which is their official policy.

Usually when this overdraft sob story is posted to a forum with a call for
revolution, it is by someone who is a habitual line skater who is miffed they
keep geting caught out.

