I love that they are trying to revolutionize the banking industry, and I wish them well. But I'm afraid that they'll succumb to adverse selection to the greatest degree. The reality is that most of a bank's customers are not profitable (without the fees), which is why they institute these ridiculous fees to either drive them off or make them profitable. If BankSimple can make these previously-unprofitable people profitable again without surprise fees, they'll be a great success.
Let's hope that happens.
However, while traditional banks make a lot of revenue from fees and such, traditional banks also have a lot of costs. Traditional banks have very large staffs that BankSimple won't have, traditional banks have lots of real-estate that BankSimple won't have, etc.
So, there is the potential that BankSimple is cutting out the fee revenue, but they're also cutting out a lot of the costs and that they'll offset (or it'll be enough that they can succeed, even if succeed with lower than average profit margins for the banking industry).
I'm also guessing that online banks get a higher percentage of their clients from the no-fee club. There are already e-banking divisions of many banks that offer higher rates, ATM reimbursements, etc. So, there's some wiggle room there.
It will be difficult, but they're going for it. Again, I'm skeptical. There are a number of e-banks that offer better terms than physical banks, but haven't quite gone all the way on no-fee. It isn't a sector where there aren't competitors already. So, BankSimple is going to have its work cut out for it.
Interchange fees have been in the news a lot lately, but they're notoriously difficult to put an exact figure on because PIN-based debit incurs a flat per-transaction fee, while signature debit is generally percentage based, and varies with the merchant in question. (eg, Gas stations will pay less interchange than Best Buy or online merchants.)
When you see figures in news stories, there are a lot of assumptions going on behind the scenes; eg, they'll typically assume a $40 transaction, aggregate PIN and signature based debit, are based on broad-industry studies, &c.
There is also variation depending on what debit networks are being used. If you look at the back of your debit card (especially if it's from a smaller regional bank or CU), you'll see many more logos than just Mastercard or Visa.
I thought many places here (Canada) accepted debit but not credit because it was a fixed fee per transaction not a %
Debit cards issued by Visa or Mastercard and operating over those networks incur a lower fee than credit cards but follow the same interchange fee structure. Australian Visa interchange fees are here: http://bit.ly/visainterchangefees. Just incase anyone was interested. Whether or not these cards require a PIN or signature depends on whether they use the Chip-and-PIN system, which all new cards issued in Australia should.
That's how it used to work, so sure, it's an option. A second option would be automatically taking the money out of your savings account, if available. A third option is, if you have a credit card with them, putting the overage on you your credit card. A fourth option would be to generate an automatic overage loan at a reasonable interest rate, without assessing a ridiculous fee.
However, you definitely don't want to keep using that credit line. Interest rates are on the order of 120%/year.
I have a 2500 or 3K credit line attached to each account; if I overdraw my balance -- with a bill payment, ATM withdrawal, whatever -- the extra comes from the overdraft line of credit, and there aren't any fees. I even used to be able to transfer money from the overdraft credit line into my checking account using their online interface, but they've turned that off now.
I've never overdrawn for more than a few days (due to poor planning, generally), so it's a perfect safety net... I always hated those fees!
It's not quite the same as a normal credit card line, I suppose -- where if I pay off the balance at the next statement, I pay no interest -- but the interest has never been more than pocket change, so I haven't even bothered looking it up.
[edit: sorry; I intended to post this in response to a post replying to you, not your post]