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Exactly. Most banks lose money on servicing a standard checking account with debit card for people with no cash flow issues. They make it back in fees(mostly ov

Exactly. Most banks lose money on servicing a standard checking account with debit card for people with no cash flow issues. They make it back in fees(mostly overdraft) off those who struggle - it’s a direct subsidy of the better off by preying on the poor. Disclaimer: I work for a neobank (chime) which inverts this model and has none of these fees and does free overdraft

ntoskrnl 4y ago
It seems like customers who get rejected by ChexSystems would be more likely to overdraft frequently and be profitable to the bank. Why are banks using the system to deny them accounts?
- FireBeyond 4y ago
  I ran into this many years ago with the transaction reordering scandal, when KeyBank turned a series of transactions on a given day (that were all cleared funds, to be clear) that should never have overdrawn me, and left with me with roughly $100 in the bank, instead ended up with me being $400 overdrawn, thanks to an absolute slew of overdraft fees, that the bank (and I) refused to budge on. My ChexSystems entry wasn't removed until there was a lawsuit against the bank.
clairity 4y ago
> "Most banks lose money on servicing a standard checking account with debit card for people with no cash flow issues." that's simply not true. the marginal cost of a checking account is on the order of a dollar. the breakeven on that is on the order of holding (and otherwise using) a deposit of a $100 for a month or two. banks are not losing money on the balance of their checking deposits in any conceivable way. that's a just-so story told and retold uncritically to convince the gullible that fees are "necessary". they're not. they're pure profit, and borne of pure greed. no bank requires fees to function profitably.
- Retric 4y ago
  Marginal costs can be deceptive, yes sending a debt card in the mail is cheap and you don’t need extra staff or locations for a single customer. However, the infrastructure need to support a million additional customers is expensive even if a single customer doesn’t seem to add any significant cost.
  - clairity 4y ago
    it's tricky but not deceptive. raising that point in this context indicates you've fallen for form of the sunk cost fallacy via conflating two separate business decisions (the investment decision with the pricing decision). we need to say no to these unsubstantiated, regressive fees, full stop.
    - Retric 4y ago
      I don’t see how acknowledging the truth is somehow supposed to support a bank argument. I would happily ban these fees until the industry adapted to a new normal. That said, don’t let your views blind you to the truth. Unscrupulous actors will often drive an industry into predatory practices, it’s correctable but only when people understand the dynamics involved.
      - clairity 4y ago
        > "don’t let your views blind you to the truth....correctable but only when people understand the dynamics involved." indeed. those sunk costs don't matter in this context, which is why they were originally, and should continue to be, excluded. it's extraneous, obfuscating, and most damningly, apologetic.
nullfield 4y ago
Then you’re just making all your money on interchange, right?

ntoskrnl 4y ago

It seems like customers who get rejected by ChexSystems would be more likely to overdraft frequently and be profitable to the bank. Why are banks using the system to deny them accounts?

FireBeyond 4y ago
I ran into this many years ago with the transaction reordering scandal, when KeyBank turned a series of transactions on a given day (that were all cleared funds, to be clear) that should never have overdrawn me, and left with me with roughly $100 in the bank, instead ended up with me being $400 overdrawn, thanks to an absolute slew of overdraft fees, that the bank (and I) refused to budge on. My ChexSystems entry wasn't removed until there was a lawsuit against the bank.

clairity 4y ago

> "Most banks lose money on servicing a standard checking account with debit card for people with no cash flow issues." that's simply not true. the marginal cost of a checking account is on the order of a dollar. the breakeven on that is on the order of holding (and otherwise using) a deposit of a $100 for a month or two. banks are not losing money on the balance of their checking deposits in any conceivable way. that's a just-so story told and retold uncritically to convince the gullible that fees are "necessary". they're not. they're pure profit, and borne of pure greed. no bank requires fees to function profitably.

Retric 4y ago
Marginal costs can be deceptive, yes sending a debt card in the mail is cheap and you don’t need extra staff or locations for a single customer. However, the infrastructure need to support a million additional customers is expensive even if a single customer doesn’t seem to add any significant cost.
- clairity 4y ago
  it's tricky but not deceptive. raising that point in this context indicates you've fallen for form of the sunk cost fallacy via conflating two separate business decisions (the investment decision with the pricing decision). we need to say no to these unsubstantiated, regressive fees, full stop.
  - Retric 4y ago
    I don’t see how acknowledging the truth is somehow supposed to support a bank argument. I would happily ban these fees until the industry adapted to a new normal. That said, don’t let your views blind you to the truth. Unscrupulous actors will often drive an industry into predatory practices, it’s correctable but only when people understand the dynamics involved.
    - clairity 4y ago
      > "don’t let your views blind you to the truth....correctable but only when people understand the dynamics involved." indeed. those sunk costs don't matter in this context, which is why they were originally, and should continue to be, excluded. it's extraneous, obfuscating, and most damningly, apologetic.

nullfield 4y ago

Then you’re just making all your money on interchange, right?