Overdraft fees could drop to as low as $3 under new Biden proposal
Overdraft fees could drop to as low as $3 under new Biden proposal
The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest move by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.
The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest effort by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.
The change could potentially eliminate billions of dollars in fee revenue for the nation’s biggest banks, which were gearing up for a battle even before Wednesday’s announcement. Exactly how much revenue depends on which version of the new regulation is adopted.
Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started as a courtesy offered to some customers when paper checks used to take days to clear, but proliferated thanks to the growing popularity of debit cards.
I still don't get how folks don't love this president. All these things are great for typical folks like me.
Because it’s all tiny changes that don’t effectively help people. No big structural changes cause the billionaires managed to put a stop to that with their agents in the Senate. And so the average citizen is left to blame the person they see as the cause of it all, cause he’s the big boss obviously.
Citation: gestures at everything
The things he has done do effectively help people, but since he doesn't constantly brag about it people don't notice.
The IRA is a big structural change that puts us on a path where we might actually escape global armageddon. It doesn't get us there, but it puts us on the path and buys us just a little bit of time. And its entire philosophical approach builds constituencies massively, which means the longer it exists, the more it will go into a virtuous cycle. So long as Trump doesn't get in next cycle and dismantle it from within, it will be incredibly sticky.
It's almost certainly the most important bill passed in any of our lifetimes. Not just climate-wise, but legislation-wise. It's very technical and kind of boring, which makes it not as exciting, but it's still absolutely huge.
I don't give a fuck if people hate Biden for whatever reasons they have. But at least this one piece of major progress, somehow passed through an uncontrolled congress, must not be denied. If we deny it, that's probably it for our civilization. If we let the achievement be ignored, climate policy will probably be over and the ecosystem will be allowed to die. Any other issue is petty next to total collapse of the global climate and if passing this bill was ALL he could achieve -- even ignoring some of the other stuff like filling departments with the most diverse crowd ever in American history -- it would still have been a good term for a president. Better-liked presidents have achieved less.
Very little 'big structural changes' can happen without Congressional support, and Biden at this point has an actively hostile Congress.
I can understand why people blame him anyway, but that doesn't actually make much sense.
Leading this with - I will vote, and I will vote for democrats if it’s what’s needed.
But the reason I view the (objectively good) things that he’s doing with a grain of salt is that it feels like he’s only doing them because of an impending election.
Why - when the democrats had control of all 3 branches of government in 2020 and 2021 did they not do anything that mattered?
They could have unpacked the courts by expanding them. They could have ensured abortion rights. They could have fixed the voting rights act (or implemented something that addresses gerrymandering, racial or otherwise). They could have overturned Medicare Part D. They could have fixed the compromises made when the ACA was written. They could have fixed the Citizens United decision. They could have amended the TCJA so that the tax cuts for the wealthy sunset alongside with the tax cuts for the poor (or even flipped it, so the tax cuts for the poor are made permanent, and the tax cuts for the wealthy sunset, unlike how it was written)!
They could have done so very, very much. But instead they wrung their hands about Manchin and Sinema, claiming that’s why they were a ‘do-nothing’ congress, and waited to lose the house so they could claim gridlock and return to merely being an alternative to republicans.But even the core of that justification is dumb. They could have supported candidates prior to 2020 that weren’t just republicans running on the democrat ballot.
The issue I think people have with Biden is not that he himself is a bad guy (although he did contribute majorly to the prison-industrial system in the U.S., and championed preventing student loan discharge through bankruptcy when he was a senator).
It’s that he’s the figurehead of a political party that is more interested in gaming the system than they are in leading the people it is supposed to represent. The only real difference between democrats and republicans in that regard is that republicans deliver on their (often wildly unpopular) policies, and their base respects them for it, even if it means they will die homeless in a polluted gutter.
The Democratic Party, and by extension, Joe Biden, do not lead, and thusly do not earn respect. Their moves are only the smallest incremental moves, and that does not work at a time when the world and society is redefining itself several times within each generation.Man. Sorry. My soapbox is tall today.
But he won't stop a war between 2 countries that he isn't in charge of so I can't see myself voting for him /s
I don't love him. I think he's taking half measures mostly as an attempt to maintain an economic status quo while pushing for a little bit of social justice (as a treat). It's a move in a positive direction... but mostly because it's the best way to be in opposition of the other side.
I'll still vote for him, because that's the only two choices we're given for the presidential election. I'll still push for better, and vote more for who I think will actually make a difference at lower levels (state/local races), but I literally can't vote for who I "love" because it just won't make any difference.
Love doesn't enter into the equation, sadly.
This is actually a good example: the very concept of overdraft fees is obviously a tax on poverty that should be made illegal as soon as possible.
Instead, Biden (who's been known to lie a lot even by politician standards) wants to lower them. In a year. If he's re-elected.
Even his aspirational campaign promises are a compromise between the obvious only just course of action and retaining the status quo that enriches his owner donors.
Well there has already been things like this that are done in his current term like no surprise billing and capping student loan amounts to the initial principle. I like that he keeps putting out new things rather than waiting for after the election. We have had to much of this, oh its an election year so lets hold off on things which then take time to get going. At least if he does get re-elected it can go into place quickly rather than starting at square one.
It's weird to have parasocial relationships with politicians, it's how fascists get elected. Always hold them accountable.
Seems to me they get elected when more normal folk fight amongst themselves while their small but rabid following is 100% behind them.
Lead poisoning is real
I don't love genocide.
Overdraft fees should just be illegal. Bank knows how much money is in there. Don't allow withdraw if it's insufficient.
What happens if you have $5 in your account and visit two stores and purchase something for $4 in each store? Not all stores process transactions immediately. Is the store supposed to just accept the loss and the bank doesn't honor the transaction? I think if it's a credit based debit card overdraft has to be a thing in order for this to work.
Not all stores process transactions immediately.
They can, if they choose to do so. You say not all process transactions immediately, but I don't know of any that process offline card transactions.
Is the store supposed to just accept the loss and the bank doesn't honor the transaction?
If they choose not to process the transaction immediately, yes, pretty much. They can retry the transaction periodically until it goes through, or they can use the payment information they have to identify the buyer and demand payment.
What happens if you have $5 in your account and visit two stores and purchase something for $4 in each store?
Then your bank sees the first transaction, does some very rudimentary math, sees the second transaction and says "Not enough in account to complete purchase" and bounces the card.
This already exists for bank cards in the form of a maximum line of credit. If you have a $500 line of credit and you try to purchase two $300 widgets on credit, I guarantee you that the second transaction will fail to go through. But if you have a $500 bank balance and try to do the same thing, you get an Overdraft Fee instead.
When I make a purchase using a debit card, it goes through this machine that accesses the debit network and my bank, on the other end, says "yes, the pin is correct and the chip looks good, and they have enough funds". Similar process for credit cards. Why wouldn't the transaction be processed at that point other than to create the deliberate risk that the person might overspend if you allow them to?
Brazil, 20 years ago, I was a student on a shoestring budget. I set my debit card so that I'd get an SMS after any purchase so I'd be on top of things in case shenanigans happened. I go to the small grocer on the corner, slide my card and type my pin. Before I can put my wallet back in my pocket, my phone dings. My bank was telling me where I purchased, when, how much it was, and how much was left in my account.
Are you telling me first world banks can't do this today? Is it Brazil that's so ahead technologically or is it greed preventing the banks from getting such a basic system in place?
This might be one of the unintended side effects of the law. If you have a low balance account or a 'bad' credit rating. Banks might simply stop offering debit cards that work on credit card stations.
This probably won't happen unless overdraft fees are underwriting the risk of unpaid overdrafts. I'm not sure how many people just cancel or abandon accounts that go negative. I'd guess that it's low but only banks would have the actual numbers.
Why would you spend $8 when you only have $5?
Outside of fraud the only reason you're account is going negative is from you spending money that's not there. It's not a "poor" fee, it's a fee that banks are within their rights to charge you for spending money that isn't yours.
People need to have some semblance of financial responsibility, it's not society fault that they spend money they don't have
Overdraft is a service you can turn on and off at most banks. If it's turned off, it works exactly as you described and the transaction is rejected for lack of funds
Banks push you to accept it though. If you’re a young adult and go to get a bank account, they’ll try to talk you into it. I’ve also declined it, and have it randomly be turned back on.
Why should it be illegal when you can just tell the bank to turn it off? Serious question.
The ability to turn it off is, itself, a consequence of the Consumer Protection Financial Act. Biden is using the same legal language to implement a change in the maximum fee.
I wasn't aware you could do that. I don't use debit so unsure.
overdraft fees only affect people who don't have a lot of money. I remember being ruined by them as a college student several times. they should be illegal. let them figure out how to get the operating revenue from people with more capital.
I dropped Wells Fargo after they re-ordered my pending payments to maximize overdraft fees.
I'd actually overdrawn like 25 bucks after making a couple 3-5 dollar purchases followed by $50 purchase. They moved the big payment up front so each of those little payments incured a 30 dollar fee.
Fuck them.
This, never do business with Wells Fargo.
I had that happen too with BoA, a long time ago. My initial reaction was "how in the fuck is this legal?!"
Then I nearly blacked out as a torrent of un-forgotten media, of all the jokes, comedic hate, and disparaging sentiment towards banks, flooded back to my minds eye.
Sadly, my only answer to this problem was "make more money", which really isn't an answer at all. Later, I switched to a credit union, which I would have done earlier had I known that was an option.
I dropped them when they charged me an overdraft fee because I over drafted because they charged me an overdraft fee. Then they charged me an over draft fee for over drafting because if the second overdraft fee. Most expensive $5 in gas I've ever paid for.
I worked as a banker there in the early 2000s and those OD fees was brutal. I remembered when it went from $24 to $35 and how much it completely devastated people's lives.
Right before I quit, ANYONE with an OD fee that I saw, I just reversed it without question. Then I got in trouble for reversing thousands of dollars before I was written up. I put in my 2 weeks after and in those 2 weeks kept on reversing charges.
I would tell people to not bank here when I worked there unless you have at LEAST 25k cash or investments or a mortgage over 250k. Otherwise, you're going get FUCKED by fees.
I've heard of shit like this, and not just from banks. A friend of mine had his insurance drop him without telling him, solely so they could send him a notice about it in the hopes that he'd renew and have to pay extra in "Coverage Gap" fees....
This shit needs to be illegal.
My sister has an almost identical story with that bank.
Had U.S. Bank do that to me when I was a high-schooler on my first job. Time stamps on the transactions came in pending - next morning I had 2 overdrafts and fees to go with them. Cleared that account out the next day after getting them to waive the fees.
Why are overdraft fees even allowed?
If the account doesn't have the funds, don't allow the withdrawal.
If someone needs to borrow money, they will use a credit card.
I don't know if all banks allow it but you can turn overdrafts off and get that exact behavior. It's hard to believe but overdraft protection was originally advertised as a feature.
It's nice that you can turn off overdraft protection but some US banks will then charge you a Non Sufficient Funds (NSF) fee when a transaction is refused because it would overdraw your account. So you get fucked either way.
My credit union isn't great, but one time I was $600 short on my tuition payment and they let the transaction through and gave me a call later that day and asked when I expected to pay it back. I told them two weeks and they said "okay". I'm not even sure I was charged anything.
How will the executives and top shareholders afford their private jets if you start taking away their cruelly excessive fees?
For real though, overdraft fees are fucking evil. "Since you are now out of money, you will have to pay back even more of the money you don't have" is just evil.
I believe it's a holdover that originated in the limits of technology in the past. Before the Internet or even dial-up card verification, purchases were made "on faith" if writing a check or paying with a card. The fees were there to prevent banking customers from abusing the pretendness of pretend pretend money. Without the discouragement, a person may go try to buy something at multiple places, and even if a vendor called the bank to verify funds were available, each time the bank would say, "oh yeah, funds are available," until all the paper came back to the bank.
That being said, it's the future, accounts can be verified and mathed upon instantly, and these fees have no place anymore, although I'm sure the banks will try and sell them as, "we're just trying to help out the poor by allowing them needed money when they might not yet have it available, for a small convenient fee."
Especially since the technology of today can mess up in such interesting ways....
My brother had enough to buy a fancy new laptop he had been saving up for, so he did, but the website goofed and accidentally processed the order TWICE... He canceled the second order and they refunded the money, but he still owed a fuckton in overdraft fees, and since the cancellation wasn't instaneous and his bank charges him an extra fee ontop of the overdraft fee for every day his account is in the negatives...
Yeah he was fucked for awhile
Always use Credit for online purchases kids, the charges are far FAR easier to dispute if there's a fuck up and it doesn't overdraft.
what they don’t tell you up front is that it’s up to the user to put a lock on the account so if there is no money, it stops allowing a withdrawal. And then to charge a fee as ‘overdraft protection’. But by default it’s open. It’s very shady Facebook-privacy style way of stacking it against the user just so they can make money on ignorance. Their business is to keep the user ignorant. Very end stage capitalism if scamming is defended as a business model.
Same goes for spending limits and region tracking/locking on checking accounts and associated debit cards.
When moving from BoA to a credit union, I was astonished at how this service was enabled by default. I once purchased a large TV and got a call from the bank's security department confirming the transaction, as I was putting it in my car. I would expect no such service from a major bank.
Don't forget how if you do freeze your account you often cannot block recurring or online purchases
FYI, only in the us.
In Europe a bank account has a 1000$ limit (like a cc) with its appropriate interest (bit less as cc). No lump fee tho
It really depends on what you negotiate with your bank, at least in Germany, though it always takes the same form: Either the withdrawal gets instantly bounced, or you negotiated an automatic credit. On average about 12% interest, definitely limited to 1000 or thereabouts or whatever lower sum you negotiated and the bank allows (depending on your regular income), if you're poor and they're a public or cooperative bank they probably just won't give you one, or cancel it if you're constantly in the negative, or limit it to something like 50 bucks, "buy food for the end of the month" type of territory. (And if you're banking with a private bank that's your own damn bloody fault they make a business out of fucking over their customers).
And while those 12% sound high if used as intended -- need to pay something but your wage check is still five days away or so -- then the interest is negligible. It's not a substitute for an actual credit which are way cheaper and any honourable bank will tell you to refinance if your account is constantly in the red. You after all pay them to manage your money, not steal it.
Oh: When bouncing certain kind of transactions (all modern online ones) the transaction will just fail, you'll see it right there on the POS terminal. With older offline stuff the bank will refuse and bill whoever wanted to withdraw from your account some small amount, you'll then have to deal with that later as they're bound to add it to the bill you have to pay. Long story short if you're short on money don't have your utility bill on automatic withdrawal, transfer the money manually they won't break your knees for delaying it a couple of days.
It's actually worse than just debits before credits. It's debits in reverse order of amount, then credits. So if you get your paycheck deposited in the morning, stop for gas, pick up a coffee, go shopping, go home and pay your utility bills and rent, they can order it so the rent goes through first, then the bills, shopping, gas and coffee all trigger separate overdrafts, then the paycheck is added last, stealing hundreds of dollars from you when you didn't spend a cent you didn't have.
Pretty sure banks already got smacked for this and structuring transactions to maximize fees is illegal now.
I got a few dollars from 5/3 bank cause of a class action for exactly this.
Yep. Around 2014 I was absolutely ruined by exactly this, and ended up having to drop out of college about it. Never did finish my degree. Over about half a year trying to get my finances back in order while being slammed with overdraft fee after overdraft fee after overdraft fee, I ended up """"owing"""" Suntrust Bank something to the tune of like $1200 that they pulled out of their asses by reordering items. Meanwhile I'm overdrafting my account by $8 to get some ramen packs that I could eat for the next 2 weeks, knowing damn well this $8 case of maruchan ramen is going to end up costing me $43 after the overdraft fee. Legitimately the closest I've ever been to just killing myself to escape the grind.
They're fucking lucky that all I did was settle up and close my account the following year, because they deserve arson, and I know some people that would have been more tempted to that than I was.
This is good. What would be even better would be severely slashing APR on incurred credit card debt. Interest should be reasonable amounts that allow people to realistically pay back credit debt without barely being able to keep up with some financial mistakes.
Tie credit card rates to savings interest. Let them fight it out.
I wouldn't call that better necessarily but rather also good.
This is an awesome proposal that 99% of Americans can get behind and I can't wait for our oligarchs to kill this legislation before it ever gets introduced to congress.
Sadly it's not about helping the American people, it's about Republicans making sure Democrats don't get credit for helping the American people
How about no overdraft fees? You know what we should do to people who have no money? Charge them more money.
This is my issue with the whole "charging poor people for not having money" thing. The bank is a business and not a human right. However, most employers require you to have a bank account in order to be paid. Seems to me, if society needs you to have a bank account, it should be nationalized and mandated that everyone is to be given a fee-less bank account. The bank account could be administered by the government. Big banks can still exist and rich people can dump their money into those oil-investing sonsofbitches meat hooks till the cows come home.
I think the us used to have banking through the post office https://en.m.wikipedia.org/wiki/Postal_savings_system
Seems like the kind of thing conservatives would hate.
But banking is free.... Running out of money is not.
Yeah I'm in the same boat. But I can't say the bank put the gun to my head and made me overdraft! I did that, yes, it's due to my financial situation which is the result of everything else going tits up.
How about no overdraft fees?
I mean, this is the same argument with student debts that we had four years ago.
You'll get some Harvard snob issue a white paper explaining how overdraft fees disproportionately affect middle-income people (ie, people with bank accounts) and therefore eliminating them is regressive. You'll hear a bunch of hemming and hawing from banksters, about how this will destroy jobs and create enormous amounts of bank fraud and actually technically increase fees for everyone else which isn't fair to them. And then you'll see a court issue some briefing about how this violates the Farts McGee clause of the Jefferson draft of the Declaration of Independence, so it isn't an enforceable bureaucratic change in states that contain a vowel.
Finally, we'll get ten thousand Op-Eds arguing "Overdraft Fees Are Good Aktuly", and in six weeks I'll be on the phone with my mother asking whether China is trying to undermine the banking system by tricking Joe Biden into defunding her mortgage. Overdraft fees will double by 2025, the Leftist Radicals in the Democratic Party will get blamed, and Donald Trump will win in a landslide thanks to "Bankrun Biden" memes that have inundated social media in the last six weeks of the race.
Someone said how overdrafting is a thing you can turn on or off. Should be turned off by default. If you turn it on and overdraft, then I see no issue with having a fee.
When I was younger, I was literally living paycheck to paycheck. This was back in the day when you were handed a physical check and had to cash it, so there was a time delay between you getting your money and having to buy things like food to not starve, or gas so you can fuel up your car and go to work so you don't lose your job. I lost count of how many times I overdrafted by just a few dollars, or even a fistful of change. One especially egregious overdraft fee was the result of being overdrafted by $0.02. At one point in time, I called the bank and asked if they could forgive the penalties for accidental overdrafts of only a few dollars or a trivial sum of money spent on necessities. They told me to take a hike, pay the fees or else have my account closed and the balance sent to collections.
I realized I was losing so much money to overdraft fees so frequently that I asked my relatives to lend me some cash to use as a buffer, and only then was I able to finally dig myself out of that hole and get stable, saving the money that would otherwise be lost to frivolous fees to build my own pool of savings. But not everybody has loving and trusting relatives like I do. Some people are all on their own. Even though my financial situation has improved dramatically to the point where I will probably never had an issue with overdrafting ever again, I still want the practice outlawed completely. I hated it so much and I felt like the world was the most unjust place ever that these slimy fucking bankers could hustle someone they know for a fact is broke by burying them in fees and stealing money right from out of their pockets when they got paid.
I've been in that situation too. It's so frustrating to me that the banks are essentially robbing poor people, knowing that they're poor.
The worst was when some banks would reorder their transactions so everything posted before your paycheck. Even though I’d make my deposit before writing checks for rent, insurance, phone bill etc, magically all those clear before the deposit then I’d be like -$700 in the red before payday again. I went to the bank (TCF, now Huntington) to plead my case but they didn’t care. I closed my account there and went to a more reputable bank. Never was a problem again. Now the practice of banks reordering transactions is illegal, I believe.
How I left Bank of America:
My previous paycheck had $350 in overdraft fees that came out of my current check. Because I had automatic deposit for my paychecks they allowed for borrowing against your next paycheck.
I borrowed $500 to cover the $350 in fees they stole from me plus a $150 service as compensation for my pain and suffering, withdrew all my money, cancelled automatic deposit, and walked away.
I'm sure they sent it to collections, but looking back on it 20 years later: still worth any damage to my credit rating.
The issue isn't necessarily the amount. People shouldn't overdraw their accounts and it seems prudent for the banks to charge for giving you an impromptu quick loan.
The issue is how fees are applied. Let's say someone overdrew their account for $100. To get there, they had six miscellaneous debits totaling $75, and their rent check, which all hit their account on the same day. Rather then settle it in time order, they decide to settle the largest first, under the theory that customers want their largest checks to have the best chance of clearing in this situation. But the rent check puts them under, incurring a fee, but then when all six miscellaneous debits hit, they each incur a fee also! If the fee is $30, that's $210 just in fees! Even at $3, though, that customer is still paying $21 in fees. But if they processed the rent check last, the account would have only overdrawn once.
If used to be that if there wasnt enough money in the account, the check bounced. Maybe we should go back to that. But if people want overdraft protection, the bank should be limited to just one charge in a statement period. Then they can keep it at $30, but customers don't risk escalating fees just because of the order in which banks process charges.
I misunderstood this entirely.
Not to go on the "we have it better here"... But it hasn't occurred to me you guys get charged a fee per transaction, that's wild. My bank, if i go into an overdraft, will charge a % of what i owe after 24h of not clearing it. There's no "pay X because you went under". I pay interest on what i owe to the bank per day till i clear it.
Nobody wants to risk escalating fees, but these escalating fees amount to 18, rather than $150.
This is a positive step forward
Banks LOVE overdraft fees. Not just big banks. Even your local bank or credit union pays close attention to that "Fee Income" line item which overdraft fees are part of. Fee income is unique in that it doesn't require an increase in assets (by making loans) to generate. It's not technically "free" money for the bank but it's dirt cheap. It's a smaller but also not insignificant source of revenue.
The main problem with overdraft fees is that they are inherently predatory. They automatically target poor(er) people who are more prone to spending money they don't have and are unable to secure cheaper credit. The average overdraft user tends to use it repeatedly and consistently. Overdraft fees are nothing more than an extremely high interest loan. Much like payday lending, it can create a cycle that the borrower is unable to get out of. Best case scenario, the bank is aware of this but has little incentive to do anything about it. I actually worked for a bank at one time that was intentionally lenient with their overdraft policies. It was a good move for the customers but it didn't eliminate the debt cycle.
Banks are required to offer "counseling" to people who routinely overdraw their accounts but that usually is nothing more than a letter that gets mailed out to the customer and nothing more.
Some banks like to be extra shitbaggy about it and will actively structure their policies and batch processing procedures to maximize overdraft fees. Doing things like posting debits to the customers account before credits intentionally on the same day and maintaining a policy that that qualifies as an overdraft. To me, that's just evil and should be illegal.
I think there's multiple issues with overdraft "protection", one of which are excessive fees. Overdraft "protection" routinely contributes to a cycle of bad debt for people who often can't afford to pay their bills much less repay debt with incredibly high interest rates. Some banks justify it as a service that "helps" their customers. I think it's as helpful as a pack of cigarettes. Yeah, it's technically the customers choice to use it. And they shouldn't. It's a really bad deal for them. But more of the responsibility is on the banks here because they know the statistics. They know the mess that they're contributing to. Best case scenario, they turn a blind eye because $$$.
On the other side, consumers as a whole need better financial education. Many of them don't understand that they could do a lot with the money they're spending on fees and interest. Consumers also need to be better about choosing who they do business with and asking questions. Banks are required to disclose all their fees and account policies. Ask for them and ask for an explanation if you don't understand them.
Lastly, don't do business with banks, or anyone for that matter, who clearly has no interest in the well being of their customers. I'm going to pick on Wells Fargo specifically because, ...well, If you don't know what kind of company Wells Fargo is, then you have been living under a rock for a long time. Wells Fargo shouldn't even exist. Their repeated, flagrant criminal activities, violations of the law, and disregard for the well being of their customers should have seen them run out of banking entirely. And they're not the only bank like this, but they're the most egregious. Instead, they still exist because people keep doing business with them. You're a lot more likely to be treated better by a bank or credit union that views you as more than just a random number.
This was me a few years back, pretty much guaranteed to get a few overdrafts per month, just the cost of being poor. But I use a credit union and they actually called to ask if I would like to cancel the "overdraft protection" so that my card would simply be declined if I didn't have the funds. I said no... getting my insurance canceled or being embarrassed at the grocery store didn't seem like a better plan than consistent over draft fees. It's very hard to live right on the margin like that.
Lucky you. I keep trying to get that for my kids, so they learn early not to overdraft with no luck. At one point I had managed to get that set up for my accounts but then got a little ahead so use another account for overdraft protection
It was me too at one point. Spending a few years in banking was very educational and changed my whole perspective on money. Bankers treat money in a way you just don't see anywhere else, since money is THE commodity in banking.
In short: the value of a dollar is not in the dollar itself. The value is in what you can get out of that dollar. Every dollar you have is either A.) Earning you money, B.) Doing Nothing, or C.) Costing you money.
The worst possible thing anyone can do, in my opinion, is to not know where their money is going. Tracking finances is intimidating to a lot of people. It forces them to face situations that can be filled with anxiety. Especially when they don't have a lot of money. But it's a critically important step to financial wellness. You can't make decisions about how to spend your money when you can't see what you're doing with it.
I started tracking my finances a decade ago and I will tell anyone that the money I've spent on personal finance/accounting software is one of the best investments I've ever made. That small expense has paid for itself many times over. Whatever system you use doesn't have to be super complex or expensive. All that matters is that it helps you achieve your goals.
Yeah, I've only wrote a handful of checks in my life, and I always saw straight through the "we offer to fuck you, for your benefit!" bullshit. Decline their "offer" whenever available, the only one who benefits is the bank. If I don't have enough money now, I don't want the transaction to be approved and get fucked with a $35 fee "for my benefit", and I don't want to be hit with a second fee "for my benefit" when that becomes an "extended overdraft" when - now I know this is hard to believe but - if I don't have money on day 1, I'm very likely to not have money on day 5.
Also, back when banks could more openly fuck you with a smile, BofA would process transactions in this order: debits, then credits. This would cause accounts to fall negative for minutes or even seconds as they processed the pending transactions, and BofA raked in fees. I was a very vocal pain in the ass for my local branch managers, and had that bullshit removed each time, but I had the time to go sit in a shitty crowded bank for an hour and bitch at whoever until I got my $35 back. Anyone with a 9-5 would be fucked.
Banks as a profit center can suck my ass. I've been a "member" of about 20 banks, and there are only 4 I like(d), one of which got acquired by a big bank and the fee list quadrupled while the features were slashed. Be very carefully about where you store your money - thieves are often eager to shake your hand.
Also, back when banks could more openly fuck you with a smile, BofA would process transactions in this order: debits, then credits.
Oh, you've just scratched the surface... It was a truly fucked up algorithm they used.
First, they keep a running balance. This is the number they show you online, at ATMs, etc. this number includes all transactions in chronological order. It is not your available balance.. Your previous day's ending balance is your "available" balance, but they hid that number from you pretty well.
Next, suppose you have a $500 overdraft limit. You deposit $900 on top of a $100 balance, and then go on a $700 shopping spree. If they processed your debits first, they would have to decline your $700 debit, because it exceeds your overdraft limit. Declining the transaction, they don't get to charge an OD fee. If they apply the deposit in chronological order, you'll have plenty of money to cover the debit, so they don't get to charge an OD fee in that situation either. What to do, what to do... Got it! We can add the credit to the overdraft limit! That way the charge can go through now, and we can apply the credit later! So, we don't have a $500 OD limit; with that $900 deposit, we have a $1400 OD limit! That's plenty enough to cover your $700 charge, and let's us tack on a $35 OD fee, too!
Next, they don't just apply debits before credits. They also change the order of your debits.
Suppose you have $500 available. You make 20 $20 purchases ($400 total) and deposit $500 on Friday night. Your balance Monday morning is $100, with another $500 pending. You use your online bill pay to pay your $500 rent on Monday.
On Tuesday morning, you expect your balance will be $100 with $500 pending debits and $500 pending credits. Worst case, your rent payment accrued an OD fee, right?
Wrong. They moved Monday's rent payment to the top of the stack, even though it won't even be mailed out until Wednesday, and won't actually be cashed until Friday at the earliest. $500 off a $500 balance is zero. Now they start counting the 20 transactions you conducted last Friday night, with an OD fee on each and every one.
It wasn't just BOA that did this. It was all major banks, most regional banks, most credit unions. Basically, everyone did it, until they were finally slapped down about 15 years ago. Fuckers.
The thing I don't see anyone talking about is how you can either go in and tell your bank to no longer allow your account to go in the negative making it so your funds just stop and can't spend more negating overdraft fees. Or, like I did go in and open a credit line specifically designed to withdraw when you overdraft. This also negates the fee. It does accrue interest like any credit if you are unable to pay it back when it's due but still you don't have overdraft fees. Like overdraft fees are just lazy people tax. Not even poor people tax cause it's super easy to get them to go away. 🙄
Bingo. Mine had some weird 2-layer thing where I had to go back and have them turn the second layer of "protection" off, so there's that. But yeah, refuse the "service".
While we're at it, why is anyone using banks for personal finance?! FFS, put your money in a credit union who isn't actively working to rob you.
FFS, put your money in a credit union who isn’t actively working to rob you.
Even credit unions aren't above this shit. At the end of the day, its a Principle-Agent problem. Some Credit Union execs will hose their clients as gleefully as any BoA VP.
Not everyone is able to use a credit union. Not only do they have limited membership but more importantly may have financial requirements.
For example after a financial catastrophe caused by a medical issue, one step in my recovery was moving everything to a credit union. However I was refused, based on my newly fallen credit score. I only got in by co-signing from my spouse (unemployed, so wtf)
If I overdraft it pulls from another account that I have. I still get hit with an overdraft charge even though there was money in the other account to cover it. It's not necessarily as simple as you say.
You could bring up the argument of changing banks, but aside from that one issue, the bank I use has done really well by me, to include reversing a debit (not credit) card charge when there was a bad charge.
Realistically, the overdraft charge should be eliminated and banks just shouldn't allow the charges to go through unless there is a separate account that has money to cover it.
Unfortunately some people don't qualify for credit but yes, they could request no overdrafts.
Heck if overdraft fee's are only 3$ I would have over drafted all day when I was younger. That's free borrowed money
Honestly banks should just block debit cards and return checks if it's short by any amount. Get rid of all that funny business all together.
It's not free borrowed money but I'm sure someone with poor financial literacy may see it that way (which is like the majority of young people). If you over drafted $30 it is a 10% fee, and that's every time you run your card buying something. It's a fee you will pay with your future potential wealth.
My parents removed overdraft from my account after my sister overdrafted her card all the time in HS. It should not be on by default and it should be legally mandated that you have to sign a waiver understanding that overdraft is a shitty fee designed to keep you from ever building wealth or savings.
Do they charge a flat fee in the US for overdrafting your account instead of absurd interest on the overdrawn amount?
Typically yes... Even my Credit Union has a $35 fee for the first overdraft in a given time frame and then it goes up by $5 for each subsequent overdraft in that same period.
The same credit union will, as a courtesy, refund up to 3 overdraft fees per year but only if you call in and basically beg a customer service rep because you're aware of the policy.
Do they not? I know I've had my debit card bounced before. Maybe it's just a thing with my bank. Only thing they'd do is transfer money from a savings account, charging you 15 dollars instead of nothing if you'd done it yourself.
Reposting this from below because I think more people need to see it-
If this works, making overdraft fees $3 is fucking huge.
Some points, directly from the Consumer Financial Protection Bureau:
• Among households that frequently incurred overdraft/NSF fees, 81% reported difficulty paying a bill at least once in the past year.
• Among consumers in households charged an overdraft fee in the past year, 43% were surprised by their most recent account overdraft, 35% thought it was possible, and only 22% expected it. Consumers who overdraft infrequently are more likely to be surprised by a fee
• While just 10% of households with over $175,000 in income were charged an overdraft or an NSF fee in the previous year, the share is three times higher (34%) among households making less than $65,000.
Biden might be a senile old fuck, but this is a good thing.
The list of good things he's done is getting very, very long. Too bad most Americans have the political memory of a knat.
He's not senile... He does have a life long stuttering problem though which makes him an easy target for such accusations at his age.
"Hows your mental focus?"
"Oh its focused. I says it's, uh, I thinks it's, uh, I - I haven't - look. I have trouble even mentioning, even saying to myself, even to my own head the number of years. I no more think of myself as as being as old as I am than fly. I mean it's just not, err, uh. I haven't observed anything in terms of - there's not things I don't now that I did before"
That's still 3 dollars more than what it should be, but I like that we're moving in the right direction.
The President can just do that?
What the hell are these other guys been doing for the last few decades?
Without trying to turn this into a political discussion, the reason the Biden administration can do this is because of work the large majority of Congressional and Senate Democrats (and only 3 Republican Senators) did with the Obama administration passing the "Dodd–Frank Wall Street Reform and Consumer Protection Act" in 2010.
One of the things that law did was create a new part of US Government called the Consumer Protection Financial Bureau (CPFB). This bureau did a bunch of stuff you likely enjoy today.
So the Biden Administration is able to work with the now-existing CPFB to put in place these great protections for consumers
Thanks Obama
Is it still legal for them to hold drafts and post the biggest one first to cause people to incur more fees? If there are multiple pending transactions they should be required to post the one the user transacted first. So if I made 6 $5 purchases then later overdrew on a $100 purchase, but I had the money to cover the first 6 purchases, I should only get 1 fee. Whereas I believe it's still legal for them to post the larger transaction first, overdraw you, then charge a fee on every other transaction even if you made them first. That's some real bullshit.
I had a paycheck bounce once. It bounced 3 days after the money was added to my account. Woke up to a -500is ballance. When the paycheck bounced, bank of America charged a retroactive 35 overdraft fee to each transaction I had made.
This is nice an all, but when do we get universal healthcare?
Not an American. How much do you guys normally pay for overdraft? 3$ is still a lot for me
$35 usually. Then a $5-$10 per day for each day it is over drafted. Usually it caps out at a certain amount. Now a days a lot of banks let you use your savings, or credit card with them as a backup for no charge.
That's very harsh
biden will say anything to get reelected
already had three going on four years to live up to his campaign promises like the ones that directly affects our lives
seems like he waited until election year to the throw the scraps out
https://www.politifact.com/truth-o-meter/promises/biden-promise-tracker/
... did you even look at that link? I'd say 25% kept, 5% compromise, 1% broken, and the rest stalled or in the works is pretty damn acceptable. But I guess you won't be happy unless he personally gives you a puppy and a blowjob.
I welcome this move by Biden that will actually help struggling Americans. Biden has already fulfilled more promises in full than Dumpster did in 4 years.
https://www.politifact.com/truth-o-meter/promises/trumpometer/
Idiots will always find a way to make unflinchingly good news into bad news
Unless youre a banker?
Right now there is absolutely no news because this is nothing more than a proposal. It’s not bad news because the proposal is great for most folks. It’s not good news because, just like every other time the hype train starts for any kind of financial reform, it still has to make it out and remain unchallenged long enough to actually affect lives. It’s just another news cycle talking about shit we have no control over (unless you’re in the high 7 digits or more; I’m not).
Think before you attack someone.