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Comment by mimikatz | Hacker News Reader

Rushing to get ahead of a change that kills the business model? https://finance.yahoo.com/news/ally-bank-kills-overdraft-fee...

"Ally Bank kills hated overdraft fees — a huge money-maker for banks"

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Capital One 360 used to provide overdraft lines of credit, which let you draw up to $1000 beyond your balance and then pay the balance and a minimal interest fee later as an alternative to overdraft fees.

But they discontinued them for new accounts, I wonder why?

People who overdraft have an average balance of $350 in their deposit account. My hunch is it was too much risk even with Capital One’s predictive risk models. Better to sell them on credit cards instead (where the rate builds the risk of default in).

Back in they day, I’d overdraw my checking account by $980 with a $20 overdraft fee. Then I’d bring it up to $0 after a month and overdraw it again. It was cheaper than putting $980 on a credit card, not that I had that much in available credit. I was broke in the 00’s.

If you were bringing the balance back to 0, it would not be cheaper than using a credit card. What am I missing?

You're missing that financial illiteracy that causes someone to have enough money to reliably pay payday loans but not enough to pay their bills minus the loan fees.

I was certainly trapped in debt for reasons.

The interest rate on my credit cards was higher then the effective 24-ish percent interest rate I was paying (2% per month).

If you repay your card at the end of the billing period you do not incur interest. I ask this because if you were truthfully resetting to a $0 balance, your credit card was free. This is a common misconception.

I didn’t have enough money to pay it off and keep it paid off. That probably wasn’t clear. I’d get paid and have to choose between paying off the debt and paying rent. The reason I would take the account to zero and then overdraw again was that the account would be closed if overdrawn for longer than 30 days.

I wonder what its valuation will be if overdraft fees are completely gone before the deal closes.

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