4 ms·

I'm not saying banks are perfect, but it seems like 90% of your complaint is about overdrafts. If you don't want to worry about overdrafts, check your balance i

I'm not saying banks are perfect, but it seems like 90% of your complaint is about overdrafts. If you don't want to worry about overdrafts, check your balance in the morning, write down the amount, and don't spend more than that. Or pay for everything in cash from an ATM and use the ATM to double-check the balance first. As for the $26 overdraft charge, do you know how much it costs the bank? Do you know that it makes a difference if it's only a $1 overdraft? If you don't know the industry, how can you propose to change it? Sure, it might be nice for me to say I think all banks should give 10% interest on accounts, but they can't. Maybe there's nothing they can do about the overdraft fee.

prosa 17y ago
Actually, fees can drive as much as half a bank's revenue, and overdraft fees are typically the largest component of that income. These fees are almost entirely driven from checking behavior of Americans earning less than $50K a year. You would be shocked at how frequently overdrafts occur for a customer with a low balance. These fees can add up to hundreds of dollars a year on average for low balance customers. In fact, they are among the primary reasons why "Free Checking" is an attractive offer for big banks. (Hint: it ain't really free.) There is serious congressional concern about the inherently predatory nature of overdraft fees. However, with Dodd's impending departure from the Senate it appears that the banking lobby will prevail in avoiding legislative restrictions.
- ErrantX 17y ago
  In this sense I believe it is more beneficial to change the spending habits of people than fixing the banking system :)
  - prosa 17y ago
    That is a reasonable argument. (You'd make a great banker!) However, realize that in today's world the message coming from banks is spend-spend-spend. Furthermore, a huge amount of overdraft fees comes from the practice of auto-enrollment in overdraft protection. If consumers need education, having transactions go through at the point-of-sale despite having an empty bank account is a recipe for trouble. Last, is the issue of check ordering. (Considered a "courtesy" by most banks!) Today, most banks clear all debit card purchases (and checks) at the end of the day, after sorting them from largest to smallest. The idea is to run your account into the red as quickly as possible, saving the small $1-5 charges for the end. This simple greedy algorithm (no pun intended) maximizes the number of overdrafts. The typical rationale is "big checks tend to be rent and other important payments, which you would prefer to clear under any circumstance" -- laughable when the majority of overdrafts are on small, card-based debits. So while I agree with you that consumer behavior needs to change, the people that need to save and not spend are exactly the ones that banks are (intentionally) targeting, and they have gotten exceedingly good at doing so. Check order policies and automatic enrollment in OD protection only complicate the issue.
    - ErrantX 17y ago
      I look at this the other way; assaulting the bastions of banking is probably pretty difficult and could take years (though it might be a bit easier at the moment). But if we can brainstorm/think of other ways to modify individuals behavior - to help them manage money better, avoid over spending etc. then the banks are a bit screwed and would have to adapt. Actually better idea: we'll meet in the middle. :D
      - clavalle 17y ago
        Why 'assault the bastions'? Why not just chip away at the edifice? A smaller bank with clear customer service pledges that rigidly controls costs through as much automation as possible. Keep most transactions online. No large physical locations with drive thrus and corresponding staffing...smaller loan centers with loan officers paid by some sort of commission structure based on loans given out and repayment rate. Lean and mean...except when it comes to customers who will be treated with the dignity they were used to 25 years ago. Make money with the bank's core services instead of an abusive fee structure. Doesn't seem terribly outlandish to me.
      - prosa 17y ago
        Ah. I see where you are going. For a second I thought perhaps you were defending the practice as necessary :) The average consumer is shockingly disorganized with their personal finances. Sites like Mint are a tremendous step in the right direction. Online banks are also emerging as "consumer-friendly" competition. For example, Schwab has one of the best deals out there right now -- free, interest-bearing checking, no overdraft fees, unlimited ATM surcharge rebates. I think consumers want to understand but are overwhelmed. Perhaps an approach lies in expanding the 3rd party services market to continue to provide helpful tools to consumers.
olliesaunders 17y ago
Pretty negative. I prefer to believe there are many areas where things could be improved and there's nothing wrong with wanting to explore that.
lil_cain 17y ago
Surely you could just get an account that doesn't allow an unauthorised overdraft? So if you need one, you need to actually go into the bank and talk to someone (or is this kind of account only common outside the US?)
- pbhjpbhj 17y ago
  >an account that doesn't allow an unauthorised overdraft Is that even possible. No account with a cheque facility could prevent you making an unauthorised overdraft. Nor indeed could it have Maestro (et al.) as balance is not normally checked when making authentications or done as part of the purchase process. So it would have to a cash only account... and then the chance of the bank making money from you must be low; meaning they'd probably have a standing charge?
  - Travis 17y ago
    I actually signed up for a USAA free checking account minutes ago. Fully online. Not military -- they just opened it up. They gave me the option to select an overdraft account. I chose not to. So I'll get point of sale declines if I ever were to go in the red. Highly recommend them. Take pictures of your check with an iphone to deposit. They cover other banks' ATM fees up to $30/month, so that's pretty much eliminated as well (for me, at least).
    - pbhjpbhj 17y ago
      Cheques must work differently over there. Here you get a guarantee card (usually your Maestro/cash machine card) which states the amount the bank will cover you for - retailers can then take payment up to this amount without risk of losses. If you have £20 in your account and write a cheque for £50, provided the cheque is properly endorsed with your card number and details, then the amount is credited to the retailer by your bank. This results in an unauthorised overdraft and ensuing charges. Or are you using "checking account" as a loose term? I always assumed it meant an account one could write cheques from?
  - shamir 17y ago
i2pi 17y ago
Um. How much does it cost the bank? Zero. Or very close to it. Unlike banks outside of North America, US banks earn well over 50% of their revenue from fees and charges. The typical banking model of net interest margin (the amount earned by the difference in savings & loan rates) dominates revenue elsewhere. The American market, however, is so lacking in competition that they can get away with charging hidden fees and charges. Sure, it helps if you check your balance. But do you read your full terms and conditions each time your bank changes them. I spent most of my summer reading the T&C's of every major bank account in America. You'd be very surprised by what they contain. Here's a personal favourite of mine: most banks would retain the right to re-order your transactions in any 24 hour period before settlement so that withdrawals for large amount came before any smaller amounts, and then deposits were posted in reverse order. What this means is that if you were to start out the day with $100, then have a $2,000 check clear and post to your account, you could go out and make a purchase in the afternoon for $500 and _still_ get hit by an overdraft fee. And if in the morning you made a few $5 purchases, they would _also_ incur the $35 (median) overdraft fee, despite the fact that if the balance was updated in chronological order you would incur no such fee. I say 'would' as this practice is being phased out. That said, overdraft fees, while expected to earn $40bn for banks in '09, are only about 7% of overall revenue. There are plenty of other tricks that banks have up their sleeve. Falling back on the argument that banks are allowed to do whatever you agree to in your contract is intellectually and morally dishonest. No one reads their T&C's. Banks know this and use many invisible and often unavoidable fees to earn excessive revenue from unsuspecting consumers. And even if you were to level the playing field in terms of fees and charges, banks are sluggish and don't grok what it means to have a good online experience. We are working on fixing this. If you want to speak with us in more detail, track us down and we'd be happy to chat.

prosa 17y ago

Actually, fees can drive as much as half a bank's revenue, and overdraft fees are typically the largest component of that income. These fees are almost entirely driven from checking behavior of Americans earning less than $50K a year. You would be shocked at how frequently overdrafts occur for a customer with a low balance. These fees can add up to hundreds of dollars a year on average for low balance customers. In fact, they are among the primary reasons why "Free Checking" is an attractive offer for big banks. (Hint: it ain't really free.) There is serious congressional concern about the inherently predatory nature of overdraft fees. However, with Dodd's impending departure from the Senate it appears that the banking lobby will prevail in avoiding legislative restrictions.

ErrantX 17y ago
In this sense I believe it is more beneficial to change the spending habits of people than fixing the banking system :)
- prosa 17y ago
  That is a reasonable argument. (You'd make a great banker!) However, realize that in today's world the message coming from banks is spend-spend-spend. Furthermore, a huge amount of overdraft fees comes from the practice of auto-enrollment in overdraft protection. If consumers need education, having transactions go through at the point-of-sale despite having an empty bank account is a recipe for trouble. Last, is the issue of check ordering. (Considered a "courtesy" by most banks!) Today, most banks clear all debit card purchases (and checks) at the end of the day, after sorting them from largest to smallest. The idea is to run your account into the red as quickly as possible, saving the small $1-5 charges for the end. This simple greedy algorithm (no pun intended) maximizes the number of overdrafts. The typical rationale is "big checks tend to be rent and other important payments, which you would prefer to clear under any circumstance" -- laughable when the majority of overdrafts are on small, card-based debits. So while I agree with you that consumer behavior needs to change, the people that need to save and not spend are exactly the ones that banks are (intentionally) targeting, and they have gotten exceedingly good at doing so. Check order policies and automatic enrollment in OD protection only complicate the issue.
  - ErrantX 17y ago
    I look at this the other way; assaulting the bastions of banking is probably pretty difficult and could take years (though it might be a bit easier at the moment). But if we can brainstorm/think of other ways to modify individuals behavior - to help them manage money better, avoid over spending etc. then the banks are a bit screwed and would have to adapt. Actually better idea: we'll meet in the middle. :D
    - clavalle 17y ago
      Why 'assault the bastions'? Why not just chip away at the edifice? A smaller bank with clear customer service pledges that rigidly controls costs through as much automation as possible. Keep most transactions online. No large physical locations with drive thrus and corresponding staffing...smaller loan centers with loan officers paid by some sort of commission structure based on loans given out and repayment rate. Lean and mean...except when it comes to customers who will be treated with the dignity they were used to 25 years ago. Make money with the bank's core services instead of an abusive fee structure. Doesn't seem terribly outlandish to me.
    - prosa 17y ago
      Ah. I see where you are going. For a second I thought perhaps you were defending the practice as necessary :) The average consumer is shockingly disorganized with their personal finances. Sites like Mint are a tremendous step in the right direction. Online banks are also emerging as "consumer-friendly" competition. For example, Schwab has one of the best deals out there right now -- free, interest-bearing checking, no overdraft fees, unlimited ATM surcharge rebates. I think consumers want to understand but are overwhelmed. Perhaps an approach lies in expanding the 3rd party services market to continue to provide helpful tools to consumers.

olliesaunders 17y ago

Pretty negative. I prefer to believe there are many areas where things could be improved and there's nothing wrong with wanting to explore that.

lil_cain 17y ago

Surely you could just get an account that doesn't allow an unauthorised overdraft? So if you need one, you need to actually go into the bank and talk to someone (or is this kind of account only common outside the US?)

pbhjpbhj 17y ago
>an account that doesn't allow an unauthorised overdraft Is that even possible. No account with a cheque facility could prevent you making an unauthorised overdraft. Nor indeed could it have Maestro (et al.) as balance is not normally checked when making authentications or done as part of the purchase process. So it would have to a cash only account... and then the chance of the bank making money from you must be low; meaning they'd probably have a standing charge?
- Travis 17y ago
  I actually signed up for a USAA free checking account minutes ago. Fully online. Not military -- they just opened it up. They gave me the option to select an overdraft account. I chose not to. So I'll get point of sale declines if I ever were to go in the red. Highly recommend them. Take pictures of your check with an iphone to deposit. They cover other banks' ATM fees up to $30/month, so that's pretty much eliminated as well (for me, at least).
  - pbhjpbhj 17y ago
    Cheques must work differently over there. Here you get a guarantee card (usually your Maestro/cash machine card) which states the amount the bank will cover you for - retailers can then take payment up to this amount without risk of losses. If you have £20 in your account and write a cheque for £50, provided the cheque is properly endorsed with your card number and details, then the amount is credited to the retailer by your bank. This results in an unauthorised overdraft and ensuing charges. Or are you using "checking account" as a loose term? I always assumed it meant an account one could write cheques from?
- shamir 17y ago

i2pi 17y ago

Um. How much does it cost the bank? Zero. Or very close to it. Unlike banks outside of North America, US banks earn well over 50% of their revenue from fees and charges. The typical banking model of net interest margin (the amount earned by the difference in savings & loan rates) dominates revenue elsewhere. The American market, however, is so lacking in competition that they can get away with charging hidden fees and charges. Sure, it helps if you check your balance. But do you read your full terms and conditions each time your bank changes them. I spent most of my summer reading the T&C's of every major bank account in America. You'd be very surprised by what they contain. Here's a personal favourite of mine: most banks would retain the right to re-order your transactions in any 24 hour period before settlement so that withdrawals for large amount came before any smaller amounts, and then deposits were posted in reverse order. What this means is that if you were to start out the day with $100, then have a $2,000 check clear and post to your account, you could go out and make a purchase in the afternoon for $500 and _still_ get hit by an overdraft fee. And if in the morning you made a few $5 purchases, they would _also_ incur the $35 (median) overdraft fee, despite the fact that if the balance was updated in chronological order you would incur no such fee. I say 'would' as this practice is being phased out. That said, overdraft fees, while expected to earn $40bn for banks in '09, are only about 7% of overall revenue. There are plenty of other tricks that banks have up their sleeve. Falling back on the argument that banks are allowed to do whatever you agree to in your contract is intellectually and morally dishonest. No one reads their T&C's. Banks know this and use many invisible and often unavoidable fees to earn excessive revenue from unsuspecting consumers. And even if you were to level the playing field in terms of fees and charges, banks are sluggish and don't grok what it means to have a good online experience. We are working on fixing this. If you want to speak with us in more detail, track us down and we'd be happy to chat.