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The $36 soda: Overdrafting in America
- jeffool 15y agoI 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.
- eridius 15y agoAll the banks do this. They treat overdrafting as a way to make money rather than as a "service" for consumers (which is how they present it), and the way to do that is to ensure they charge as many overdraft fees as possible.
- bherms 15y agoYes, most banks do this now as a way to take advantage of their customers and generate more revenue. I had it happen once on a road trip -- you know, the type where you stop frequently and purchase $2-$3 of junk food or drinks all the time -- and ended up with hundreds of dollars in overdrafts on what would have actually only been about $20 of overdraft. Several banks are being sued at the moment in class action suits for this behavior if I recall correctly. It's an unfair tactic that takes advantage of customers.
- esrauch 15y agoBanks do this but they will easily reverse all but one of them if you call without even arguing. If you argue a bit, I think they would reverse even the legitimate one.
- ceejayoz 15y agoNot KeyBank. I had a situation like this in college. Several levels of escalation finally got two of six overdraft charges lifted, but I was told that two reversed charges was the limit per year, no matter what the reason.
- bherms 15y agoSame here... I was with KeyBank for a while too and had this happen. Fifth Third is even worse about it.
- wnight 15y agoThey were lying. There are no limits like that because that wouldn't make sense. I really wish we threw managers like that in jail though. They know they're enough of a roadblock that their denial to help will squash most legitimate complaint, letting them keep most of their stolen money. A 5-8 years sentence for fraud for them and coworkers who aided and abetted this would do wonders to stopping this kind of thing.
- xbryanx 15y agoI was able to get fees like this reversed once, but not before I got a very demeaning, public, and personal lecture about personal responsibility from the banker. To quote from the BankSimple article, "After that, I said some bad words."
- bdhe 15y agoIt's a very easy trap to fall into if you're living check to check and make even the slightest mistake. In each such story online, I've heard a claim that they specifically have algorithms to maximize the penalty fees on these mistakes. Its another instance of a practice that disproportionately affects the poor. Unless you're living paycheque to paycheque, you would never even bother looking into such niggling details.
- noahth 15y agoand when you are living paycheck to paycheck, you don't often have the time or energy to wander the maze of niggling details.
- dodedo 15y agoTime and energy? Perhaps. I think the primary issue is math and accounting illiteracy. Most Americans have no financial education whatsoever.
- jm4 15y agoI disagree. Living paycheck to paycheck is not necessarily exclusive to lower earners or those short on time. Personally, when I did live paycheck to paycheck I had nothing but time. For most Americans, more money means bigger bills. Got a raise worth $300/mo? Let's go get a new car that's going to cost us $400/mo! I understand that some people work multiple jobs, take care of kids, etc. Those people barely have time to breathe, let alone manage finances. Even so, managing finances is a fact of life. Time, more money or whatever else you can think of will not break the cycle of living paycheck to paycheck. It requires a change in attitude and habits. The first simple fact is you have to spend less than you earn. It's a basic concept that so many people fail to grasp. If it's payday and you have leftover money from the last check you have savings. Don't go out and spend it like it's found money. Set it aside. Do this over and over again and you have an "emergency fund". Guess what? Now you are not living paycheck to paycheck. The second is that you have to take on an active role in managing finances in order to accomplish this. That means planning, budgeting, tracking and adjusting. The most difficult part is making the decision to start and then taking the first step. There a hundred excuses one could come up with for living paycheck to paycheck, having debt or some other financial mess. Predatory banks, too little money (when still earning more than a reasonable amount), not enough time. None of it changes the fact that you are still living paycheck to paycheck. The only thing that changes that is planning your own finances instead of letting these other things plan for you.
- fletchowns 15y agoThis practice should be illegal, just like processing withdrawals before deposits is now illegal, which was also done to maximize overdraft fees (at least I'm pretty sure it's illegal now). Our government needs to make it easier to switch to a different bank. Tons of people would leave these awful banks for credit unions and such if it was easy to do. I mean it's possible to switch banks, it's a big headache though. People just have too many other things to worry about right now to deal with headaches like that.
- younata 15y agoThis is precisely why I have USAA as my bank. I was originally going to get a Wells Fargo account, but that changed when I decided to go to uni in Florida - before the wachovia merger happened. My father decided that not being able to keep tabs on my account was a dealbreaker, so I ended up getting a USAA account. Worked out for the best, because USAA has some of the best customer service in the industry.
- ww520 15y agoIs there an easy way to get into USAA for non-military people?
- dkokelley 15y agoUSAA banking is available to everyone. Some nicer services (deposit by phone, insurance) are for service members only. For what it's worth, my brother (Air Force) sold me on USAA after he signed up with them. I worked at Wells Fargo at the time, so I had the best accounts. I'm happy I made the switch. Also, their web interface and iOS apps are excellent. By far the best I've seen.
- kstenerud 15y agoWhich 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.
- kstenerud 15y agoDownvote all you like, but so long as your response to getting screwed is "I always get screwed by these evil people" rather than "Shit, they got me. I'm going to take steps to protect myself.", you'll forever be a victim. I used to suffer the same mentality until I finally woke up and started to take responsibility for my own future. Things happen to victims. Victors make things happen.
- mkr-hn 15y agoYou're being downvoted because it looks like you're blaming the victims. Everyone would seek out good information for making decisions in a perfect world. But we don't live in that world. Sometimes it's necessary to protect people from the worst tendencies of corporations.
- kstenerud 15y agoThe fact that banks collected 38 BILLION from customers in overdraft fees would seem to suggest that people AREN'T choosing to change their habits, even on such a simple thing as this. Yes, by all means, make the banks stop gouging people like that (especially maximizing fee collection by ordering largest-to-smallest). But really, once you've suffered overdraft fees once, there's no excuse for suffering it again and again; especially not when there's such a simple solution as cash. As George W. Bush once said, "fool me once, shame on — shame on you. Fool me — You can't get fooled again."
- deleted 15y ago[deleted]
- impendia 15y agoPlease tell me that you called them, or walked into the nearest branch, and demanded that they reverse all but one of the charges, and, either (1) They agreed, or (2) You promptly closed your account.
- jc4p 15y agoI had a similar situation happen at Bank of America except in my situation I wasn't relying on a single overdraft, I wasn't expecting any. They put in a transfer from my savings to my checking a day after they said it would go through and did the exact same sorting of large purchases to charge my multiple fees. It took me two and a half hours to get the charges reversed, 30 minutes of which were spent in the nearest BoFA location until I learned I had to commute around town to go back to the original place I opened my account to even discuss the situation.
- impendia 15y ago+1, thanks for sharing. Should I move, I now know two banks I should not dream of doing business with.
- jeffool 15y agoheh, my phone conversations ended much the same. They told me to go to the branch where I opened my account as well. A state away. (As I mentioned elsewhere, I got them wiped off eventually.)
- daemin 15y agoThere has been a few situations in Australia where contractors / self employed business people have invoiced the banks for making them wait to be served in line. From memory the banks have paid those invoices, not sure that would work in the USA but if they wasted 2-3 hours of your time for which you can bill serious amounts on, then it might be worth a shot.
- jeffool 15y agoAfter a long while of phone conversation, they told me "no". I went into the branch and talked to someone there. They also told me "no". Then their spouse walked in; I'd known their spouse for years it turned out! They wiped the fees out for me. That actually pissed me off a little more... But I certainly wasn't going to tell them that. I've not overdrafted since.
- bullseye 15y agoBank of America is currently facing a potential class action lawsuit for this very practice. I have no idea where it is at, or if it will be successful, but one can hope.
- agosnell 15y agoI had a bizarre overdraft charge from Suntrust, as well (although I got them to reverse it.) It happened this summer when I was closing my checking account with them. The closing date was set to the day that the last scheduled charge was going to hit, and so they gave me my cashier's check with all the funds except the $25 for the last scheduled charge. But there was also going to be a credit for $0.10 in interest on the account (which was necessary to pay the $25 charge.) Apparently the system was able to calculate all of that properly so that the debit matched up to the funds left in the account on the closing date, but on that day the debit was processed before the 10-cent credit. So they wanted to charge me $75 in fees because of a 10-cent overdraft that their system created!
- dminor 15y agoAnother trick: some banks count the purchase _authorization_ against your funds, rather than the _capture_, when you buy online. But the merchant may reject your order if the address verification failed. If you mistype your address multiple times, you've got multiple holds on your money. Even if the merchant voids the authorization, they conveniently don't process the voids immediately. So you can end up with overdraft fees despite having enough money in your account!
- protomyth 15y agoThis is especially nasty with charges made at the gas pump where places like Holiday will authorize $75 and take their sweet time removing the auth after the actual charge.
- gscott 15y agoI found out the hard way that Citibank when they put a hold on funds processed by credit/debit until they clear (say I bought a candy bar for $1.50) they do not pay out of those funds. They release the funds back into the account, where if I was 1 cent short they would charge an overdraft even though the day before they were holding those funds which I thought innocently would go to pay for the candy bar. The good news now even though they send me overdraft notices they stopped charging the overdraft fees for at least this type of transaction.
- rdtsc 15y agoNo only that. SunTrust presents it to you as an "advantage" -- "We don't want your largest bills to be unpaid". Somebody in the marketing and PR department got a bonus for making that shit up. It is like they slap you in the face, then smile at you and ask you how your day is going.
- marshray 15y agoFor 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 ]
- steve8918 15y agolol sounds like Wells Fargo...
- eogas 15y agoMy 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.
- jcromartie 15y agoI 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.
- steve8918 15y agoIn 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.
- hugh3 15y agoWell, let's face it -- it's not like banks actually make money any other way out of checking accounts. Any bank account with less than... I dunno, $50K in it... is probably costing the bank far more than it's worth. The bank ain't a charity.
- fennecfoxen 15y agoI don't think it's how much the account has in it, these days, half so much as the amount of payments they put on their check card. Cash flow and merchant fees are where it's at.
- pyre 15y agoThere are more honorable ways to make money than to label something as 'free' and then attempt to incorporate as many hidden fees as possible.
- minikomi 15y agoBah! It's not like anyone would ever fall for that. Sent from my iPhone
- Qz 15y agoI 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.
- gujk 15y agoCall the bank and ask, and consider whether she may be lying to you to protect her preferences.
- anaccountiguess 15y agoi had something like this happen with Netflix. my account at TCF Bank was low and the transaction was denied. then, apparently, Netflix tried the transaction again and succeeded, which overdrafted my account. i asked the bank what the difference between the transactions was and they just shrugged. it's possible your friend's explanation is accurate
- majorlazer 15y agoYep. Example would be having your account tied to your PayPal. It will remove regardless if you have the overdraft protection or not.
- tsotha 15y agoOnce 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 15y agoHow 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.
- andrewljohnson 15y agoI 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 15y agoI 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.
- andrewljohnson 15y agoI would rather depend on the market to correct the problem for people like you. There are many banks that will draft your Savings account if you overdraft your Checking account. Choose a new bank, and keep the government out of it. It only becomes a regulatory issue because it is catastrophic for poor people. But once again, it's just a bandaid regulation if you make the practice illegal, because poor people will remain poor.
- rorrr 15y agoOr you could just not buy shit that you can't afford.
- jstatus 15y agoWhen are these guys going to launch?
- MichaelApproved 15y agoI 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.
- ww520 15y agoI 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.
- Rinum 15y agoMy 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
- GigabyteCoin 15y agoAlmost 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.
- deleted 15y ago[deleted]
- jarek 15y agoOmitting 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 http://www.ingdirect.ca/en/chequing/index.html cheaper overdraft if you qualify, http://www.banking.pcfinancial.ca/a/products/chequingAccount.page?region=ON&language=en&signinop=OB http://www.banking.pcfinancial.ca/a/products/chequingAccount...
- gujk 15y agoHonestly, is this post valuable information previously unknown to anyway, or a cheap PR/SEO gambit by the company that posted it?
- ck2 15y agoSTOP 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 15y agoI'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 15y agoThe 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.
- hop 15y agoMade 2hrs after of walking out of a Wells Fargo. http://fuckwellsfargo.com http://fuckwellsfargo.com
- alanh 15y agoGuess: 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 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 http://cl.ly/0p0k2H3x2V0y3s0r2v25; now, in Acorn.)
- hop 15y agoThanks. 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...
- paulkoer 15y agoWait ... by applying the overdraft fee aren't you effectively overdrawing your account even more? There should be an overdraft fee for that! Kinda weird they haven't figured that out yet...
- TheRevoltingX 15y agoI 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 15y agoI 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.
- fmavituna 15y agoBanking 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 15y agoWould 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 15y agoThis 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.
- mcherm 15y agoI 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!
- T-hawk 15y agoOf course all banks could work that way. Their management just thinks it's more profitable to charge the fees instead. (And they may actually be right; these decisions aren't made on a whim; lots of complex analysis goes into it.)
- pinko 15y agoI have no connection to ING Direct other than as a customer, but I love this feature and use it /all/ the time. I just don't ever have to pay careful attention to my precise balance, since the interest on a day or two of being $50 "overdrawn" is trivial. And every now and then when some huge auto-bill hits or a check I forgot about gets cashed, it simply clears instead of creating a multi-hour hassle for me to clear up.
- adestefan 15y agoA lot of banks have this option, but you need to ask about it when you open your account. I decline it since I'm well aware of my balance and would rather not have the open line of credit sitting on my credit report.
- r0s 15y agoI 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.
- dodedo 15y agoPersonally, 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.