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Comment by Bartweiss | Hacker News Reader

Yep, significant difference. I've seen several stories of people prosecuted for spending improper deposits, but presumably a loan - where risk is implied and defaulting is an understood practice - is a different beast.

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He seems to be trying to justify his actions by calling it a loan, but I've never heard of a loan where the bank tells you that you can just start over drafting your account and let it go negative, then pay us back later.

Overdraft lines of credit are definitely a thing and can be arbitrarily large depending on the account holder.

My bank keeps trying to sell me this, I don't see why this would be a good idea. Does anyone here use this?

Also, one time our old bank erroneously withdrew a 6 figure sum from our operating account which put the balance far in the negative. I was stunned that they covered it and bemused to see a 35$ overdraft fee as the next line item on the statement. The charges were reversed within 48 hours.

I scratch my head sometimes at how its at all possible for large banks to make these kinds of mistakes.

I used an overdraft line of credit once, accidentally. Then I turned it off. The bank salesman had sold it to me as “overdraft protection,” and at the time I didn’t know what “overdraft protection” meant, so sure, protection is good, right?

I guess what they’re “protecting” you against is the embarrassment of having a rejected transaction. And then they charge the overdraft fee, and a fee for using credit, and more fees until you notice and fix it. And if you’re overdrawing on a debit card, then you’re probably poor and those fees are a substantial burden.

It’s one of the reasons I decided to close my Chase account.

>And if you’re overdrawing on a debit card, then you’re probably poor and those fees are a substantial burden.

It's even worse than that. Banks have been caught reordering transactions to maximize overdraft fees.[1]

For example, say you have a $100 in you account and you use your debit card to pay the following amounts (in time order): $4, $15, $60, $41.

the first 3 will go through, then the last one $41 will put you over the limit and you'll pay one overdraft fee.

But if you reorder the transactions and submit them like this: $60, $41, $15, $4, then you go over the limit by the second transaction and pay 3 overdraft fees instead.

Nice huh?

[1] http://www.nytimes.com/2016/02/29/business/dealbook/overdraf...

Wow, this is another reason we need developers to study ethics. No one should have agreed to write software that _reordered_ transactions to maximize fees.

I believe this practice is no longer allowed. But of course is still happening.

The article mentions a bank that now notifies customers in fine print about this practice on the basis that "it is good as long as the customers are notified".

So definitely still happening. (article from 2016)

In the UK (and presumably Australia) you can get an overdraft on your account and you don't get charged a fee. You get charged interest (like around 18%/year) charged only for the days. So it can be used as a buffer against charges, whilst you keep your money in a higher interest rate account.

I use it in occasion but have never really thought of it as a line of credit because there is no interest, rather a flat $35 fee. I find it to be useful. Sometimes I miss a deposit and one of my checks takes me in the negative. The overdraft protection keeps me from bouncing a check, which is a crime and you can have a warrant issued for your arrest.

I know someone who uses this. He's a contractor and small business owner, so his earnings are high but his cashflow is incredibly variable.

I don't think there's much justification for most people to have overdraft lines; it seems to primarily be a tool for people who have plenty of money but trouble knowing when it will be present.

I actually think it is a very good idea for most. I have plenty of money but I generally sweep most into various accounts and keep a minimal amount in my checking. On occasion things will miss and I might write a bad check.

If the bank doesn't cover it, then you could accidentally write a hot check, which can actually be a felony.

So I am happy to pay the bank $35 for my mistake on occasion if not just to avoid the possibility of someone turning my bad check in to the prosecutor.

I don't know about Australia, but in the U.K. that's pretty much standard. Most current accounts come with an authorised overdraft limit, even if it's just a few hundred pounds. I've had to specifically state that I don't want one when opening an account.

Overdraft protection is an explicit line of credit (read: loan) that you agree to open along with your bank account.

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