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The author seems to be deliberately conflating "free banking" with "no overdraft fees", which is extremely misleading. I have had "free" banking for over 20 ye

The author seems to be deliberately conflating "free banking" with "no overdraft fees", which is extremely misleading. I have had "free" banking for over 20 years, by going through credit unions instead of banks. Credit unions are identical to banks, with the exception that they are (usually? always?) non-profits and generally do not charge fees for having an account. There are limits on withdrawals, transfers, and fees for things like wire transfers that do not affect the average family. They also have some condition of membership but these days, living, working, or going to school within their service area suffice. Almost every area in the US has a credit union. There is no reason to open an account at a commercial bank. Every time I have opened a checking account (for temporary business purposes) at a bank instead of a credit union account, I have regretted it. Now, overdraft protection fees. These are a completely separate topic that is applicable to both banks and credit unions. These are completely optional, by law. If you have a habit of regularly withdrawing more than you deposit, you can call up your bank/CU right now and tell them to take it off of your account. The tradeoff is that your checks will bounce. Either way, the solution is simple: Keep track of your balance and don't overdraw. The author also thumbs his nose at paper checks, but most traditional small businesses in the US don't have much of a choice: checks are how money moves because they leave a paper trail. Which is important because the security of the whole US banking system is based on after-the-fact audits. This is a double-edged sword because while it allows (some kinds of) fraud, it's also easier to clean up. If someone steals Gradma's check book, most banks will bend over backwards to help her because they want to keep her as a customer. If someone steals Grandma's bitcoin wallet, she is just simply fucked and that's the end of that. I agree that the ACH system is largely a dumpster fire, though.

Plasmoid 5y ago
That's the argument he's making. Checking is only free because it's being paid for by people who who run up fees, and these people tend to be poor. It would be more fair for everyone to pay the same for a service, but banks decided it was "better" to get 10% of the population to pay for it.
- clairity 5y ago
  no, fees are pure profit in most cases. loans made with deposits more than pays for operating costs of checking accounts. banks that say different are fibbing.
mindslight 5y ago
Local commercial banks can have a similar experience to credit unions (at least until they get bought out). FWIW "overdraft fees" and "overdraft protection fees" are two different things. If you do not sign up for "overdraft protection service", then when a check bounces, your account will generally get charged an "overdraft fee", and the person trying to deposit the check will generally get charged a similar fee for the checking having bounced. Hence businesses (that still take checks) having notices about passing their banks fee back to you if you write them a bad check. If you try to use your debit card, the card will be declined, since it is an online transaction. If you do sign up for "overdraft protection service", then the bank will extend you a small line of credit. When a check would bounce, the bank will honor the check but charge you an "overdraft protection fee". This fee is usually the same amount as an "overdraft fee" would have been, but depositing the check will have been successful, saving the fee on the other side. However, I think that such services tend to also apply to debit card transactions, so if you swipe your card and overdraw your account, the transaction will go through but you'll get dinged with that fee. Whether it benefits you to sign up for such a service will thus depend on your expected usage and the banks specific terms. Which back to the general point about banks attempting to create revenue by nickle and diming customers with an arbitrary fee structure - this is just another facet you need to know about to avoid them. I've never paid a monthly or punitive bank fee in my life, so I started off a bit skeptical of the article. But I've still had to deal with the existence of such fees, whether by double checking transactions, making sure to keep a minimum balance, or having to get management to remove erroneously assessed fees. The increased share of large online-only (or online-first) banks has created a good amount of competition that has driven the prevalence and dollar amount of such fees down. FWIW last time I did a comparison of the large online banks, I saw that Capital One has an (optional) feature whereby if you overdraft your account, it's treated as a regular line of credit with a reasonable interest rate and no fees. This is probably the best option for someone concerned about regular overdrafts. The trade off is that their customer service sucks.

Plasmoid 5y ago

That's the argument he's making. Checking is only free because it's being paid for by people who who run up fees, and these people tend to be poor. It would be more fair for everyone to pay the same for a service, but banks decided it was "better" to get 10% of the population to pay for it.

clairity 5y ago
no, fees are pure profit in most cases. loans made with deposits more than pays for operating costs of checking accounts. banks that say different are fibbing.

mindslight 5y ago

Local commercial banks can have a similar experience to credit unions (at least until they get bought out). FWIW "overdraft fees" and "overdraft protection fees" are two different things. If you do not sign up for "overdraft protection service", then when a check bounces, your account will generally get charged an "overdraft fee", and the person trying to deposit the check will generally get charged a similar fee for the checking having bounced. Hence businesses (that still take checks) having notices about passing their banks fee back to you if you write them a bad check. If you try to use your debit card, the card will be declined, since it is an online transaction. If you do sign up for "overdraft protection service", then the bank will extend you a small line of credit. When a check would bounce, the bank will honor the check but charge you an "overdraft protection fee". This fee is usually the same amount as an "overdraft fee" would have been, but depositing the check will have been successful, saving the fee on the other side. However, I think that such services tend to also apply to debit card transactions, so if you swipe your card and overdraw your account, the transaction will go through but you'll get dinged with that fee. Whether it benefits you to sign up for such a service will thus depend on your expected usage and the banks specific terms. Which back to the general point about banks attempting to create revenue by nickle and diming customers with an arbitrary fee structure - this is just another facet you need to know about to avoid them. I've never paid a monthly or punitive bank fee in my life, so I started off a bit skeptical of the article. But I've still had to deal with the existence of such fees, whether by double checking transactions, making sure to keep a minimum balance, or having to get management to remove erroneously assessed fees. The increased share of large online-only (or online-first) banks has created a good amount of competition that has driven the prevalence and dollar amount of such fees down. FWIW last time I did a comparison of the large online banks, I saw that Capital One has an (optional) feature whereby if you overdraft your account, it's treated as a regular line of credit with a reasonable interest rate and no fees. This is probably the best option for someone concerned about regular overdrafts. The trade off is that their customer service sucks.