The $36 soda: Overdrafting in America | Hacker News Reader

The $36 soda: Overdrafting in America

banksimple.com

177 pointsloganlinn174 comments

In 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.

Well, 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.

I 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.

There are more honorable ways to make money than to label something as 'free' and then attempt to incorporate as many hidden fees as possible.

Bah! It's not like anyone would ever fall for that.

    Sent from my iPhone

True which is precisely why banks used to charge a small monthly fee to have an account. Then one bank offered "free checking" and all the rest had to follow suit or lose all their DDAs. There are evil banks out there, and customers flock to them.

Frankly if you were looking for dishonorable behavior there is much worse going on at banks. For instance its widely known that a certain bank will report its current customers to chexsystems for the slightest infraction (a few overdrafts, or a returned deposit). Effectively this makes the customer unable to open an account at a competitor. So they remain stuck with bank of scam-erica.

Yeah, tell me, how much are those electrons costing the bank, again?

Unless they're also giving you free checks, that's pretty much the cost. A human being will rarely look at anything. Everything is handled by automated computer systems.

I think you're missing out on a lot of things. The bank definitely has costs that go into supporting its customers: branches and employees to staff them (most banks, not all of course), phone support people, the very computer systems you talk about, and people to keep them running and add new features to them. Most mainstream banks' free checking accounts make these things available to account holders, so I don't know how you can say they don't cost anything.

I haven't set foot in a bank branch in over a year, and then only to deal with a problem caused by the confluence of their antiquated model and that of another company.

I've never once made a phone call to, or received one from, my current bank in the ~7 years my current checking account has been open.

I don't know who you think they're maintaining such anachronisms for, but it ain't this free checking user.

The computer systems have to be created and maintained for their wealthy depositors regardless. The marginal cost of adding less affluent customers is laughable, and more than paid for by the interest they can earn from a few hundred dollars in deposits.

Next time you walk by a bank branch, take note of how many people are inside. That would likely indicate that your something of a anomaly.

Um, zero?

That was pretty much the case whenever I went in to a bank branch in past years. Often I was the only one there, never was the employee to customer ratio less than 5:1, and anyone who was there was most likely to be 60+.

A visit to a physical bank branch is the anomaly today, not a lack thereof.

The thing that matters is that those are available to you. The bank does some modeling on how much use all of those facilities will get, and plans accordingly. You figure into that planning whether you go or not. I don't know the stats on how many free checking users use bank branches, but we both know it's more than zero. Same with phone service.

As far as the computer systems, those scale with number of accounts, not number of dollars. Given that the majority of accounts are likely to be free, or low net-worth accounts, it stands to reason that free checking customers make up a significant portion of the cost of operating these systems.

In some countries regulation will state that the bank needs to send a physical account summary to people every so often (month? quarter?) which has a mail cost to it.

My bank charges me for that.

It's true that this is predatory. It's also notable that if banks don't reach out to poor people with free checking and the like, the federal government gets on their case for being "discriminatory".

This isn't to absolve any banks, but rather to mock the federal government and their chronic flailing about while trying to control the financial sector(+). It's shades of the same mindset which led to subprime mortgages being subsidized, purchased by the million by Fannie Mae and the FHA. "Banks are a bunch of meanies. They ought to do charity instead."

(+) and this isn't to say that the sector couldn't use a little control, just that the Feds aren't proving themselves very competent at it.

> It's true that this is predatory. It's also notable that if banks don't reach out to poor people with free checking and the like, the federal government gets on their case for being "discriminatory".

In a sense, yes. But you should rather compare it to the good examples mentioned in Europe, which also have free accounts for poor people. I wonder what those banks do different.

  It's the exact type of behavior I would expect 
  from a bank.

From an American bank. There is no German, Dutch or French bank that does that and I doubt Spanish, Italian or Swiss banks do it. Sure, if I overdraft, I pay (serious) interest over the amount overdrawn for as long as I am overdrawn, but you aren't hit with any fine at all.

In fact, I have arranged that I actually can't overdraft. Automatic bills just bounce when I'm underfunded. That's between me and the companies whose bills bounced.

As a European I still marvel at the craziness of American banks. I just graduated college this summer, working at a startup now, so cash is tight, have some student loans, yet I never overdraft cause I can't. If I could, I know the temptation would be too big. (Do have a credit card though, which essentially is an overdraft as the bill comes the 26th of each month, but is automatically paid in full).

As an American who moved to the Netherlands, I can vouch for this. My fellow countrymen don't know what they're missing:

* There are no ATM fees levied by another bank's ATMs.

* There are no ATM fees levied by your bank for using another bank's ATMs.

* There are no fees or minimum transactions for using your debit card at a business.

* You are allowed to overdraft, you just pay an interest rate to the bank for the money you owe (mine is 10%, up to €2,500).

* There are no bounced check fees, because:

* There are no checks. Non-debit card transactions are done via online banking, are free, and usually instantaneous.

* All banks use 2-step authentication (phishing is nearly impossible).

I was confronted by the joke of US banking again recently when I had to mail someone in the US a check, which they lost, found 6 months later and cashed... generating an overdraft fee in my US account.

Totally unnecessary.

"There are no fees or minimum transactions for using your debit card at a business." isn't always true. For (small) business with not enough transactions, accepting debit cards is an expense, and below 10 euros they often charge 0.25. Nothing major though.

And the big downside to all of the above? Credit card acceptance is very very low. Tourists can only purchase train tickets by credit card at Schiphol Airport. Everywhere else the option is disabled due to fraud issues.

For (small) business with not enough transactions, accepting debit cards is an expense

Here in Ireland it's not uncommon for shops to insist on cash only for amounts less than €10 (except in some extrenuation circumstances (like the ATM in their shop being broken)).

Credit card acceptance is very very low.

That has definitly not been my experience. Perhaps you are thinking of chip-and-pin credit cards. Here in Ireland (& IME UK), credit cards are accepted in many, many point of sales/retailers. But they might only accept chip and pin credit cards, which I believe are uncommon the USA.

In the Netherlands very few stores accept credit cards, most accept just the dutch "PIN" and "Maestro" (=EMV). Not many people in the Netherlands have a credit card.

Vice-versa however, I was able to pay at WalMarts in the US with my Dutch debit card with no issues (once I hit the right button, it's confusing).

Most stores and restaurants acecpt VISA in Belgium, and our banking system works as described above.

About the charges, you're correct. I originally thought that this practice was a violation of the merchant's agreement... but I was wrong: http://www.pin.nl/en-US/Zakelijk/Pages/Veelgesteldevragen.as...

Still, it occurs infrequently.

About the credit card acceptance: Good! Most Dutch people have a healthy and rational fear of credit card debt, and the fact that you can't use your Visa to buy groceries encourages good consumer behavior.

Sad if you're a tourist, but easily solved by taking out some cash from the ATM which, on this side at least, is free! :)

Exactly this - the UK banks tried to move closer to their US cousins a number of times, but each time consumers managed to stop a lot of these charges becoming commonplace, particularly with regard to charges or ATM fees.

If you want a really convoluted banking system, try Japan. Its not that you get charged for using another bank's machine, you just can't, with the ned result being that you are always on the hunt for the convenience store that contains your banks machine. My bank also offers no automated payments, and entering payment details is a sea of impenetrable numbers.

Speaking of UK banks. I had the unfortunate privilege of having to use one. My salary wasn't posted on time but all the scheduled drafts went through. A few were rejected and not only did they hit me with the overdraft fee, they also hit me with an additional fee of mailing me a letter saying they were rejected. 3 of them to the tune of 20£ each.

I believe the UK consumer watchdog organization took them to court over this and I had some of it refunded. Later, they emailed me that due to this ruling they were raising monthly account fees for everyone.

It’s not the same everywhere, though. In Germany the fees for using another bank’s ATM are quite high. I think the average is something like 5€ or so.

Italian banks are terrible. Lots of fees, they don't pay interest at all, and the hours are ridiculous. Most stores are open from something like 8:30/9 - 12:30, then 15:30 to 19:30. With banks it's along the lines of 8:00 - 13:00, 15:00-16:00 or something odd like that. Ours raised the interest rates on us the day before we were supposed to sign the paperwork for our mortgage.

OK, the reason I doubted it is because it is very easy for anyone to open an account in a neighbouring country and profit from the better arrangements there. I know people living in Germany who haven't bothered to open a local account, because their Dutch account works just fine.

Not all of Europe is quite so 'small scale'. It'd take me a couple of hours to drive to Slovenia, and 3 for Austria.

Where I come from in Canada, people make day trips of over two hours and a half each way to go to the shopping mall... heck, my commuting was two hours each way in Montreal, every day.

But I do admit that if I were living in eg. Napoli, I wouldn't want to go to the Netherlands or wherever just to open a bank account.

They are an 8-hour drive from their bank

Don't forget the British banks, they seem as rotten as the Americans.

(I never thought I'd miss the German banks.)

More generally: from an unregulated bank. The tradeoff that came out of the Great Depression was that the government insures bank deposits, and in exchange the banks agree to be bound by rules that enforce responsibility - both fiduciary and to their communities. Over the past 20 years, the American banks have succeeded in shedding many of the regulations that used to bind them to those terms of responsibility. Not only has that resulted in more cynical and opportunistic 'service' to customers, but also it has resulted in the financial instability that led to the big crash of 2008.

I had a free checking account with TCF National bank (US). After getting hit number of times with overdraft fee, I went to my local branch, asked for a manager and explained that I want to disable overdraft protection on my checking account. Manager told me he can't do it and that I have to write a letter (they didn't have any forms for that) explaining things and send it to their HQ. Needless to say, I closed my account the same day.

I 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.

All 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.

Yes, 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.

Banks 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.

Not 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.

Same here... I was with KeyBank for a while too and had this happen. Fifth Third is even worse about it.

They 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.

I 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."

It'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.

and when you are living paycheck to paycheck, you don't often have the time or energy to wander the maze of niggling details.

Time and energy? Perhaps. I think the primary issue is math and accounting illiteracy. Most Americans have no financial education whatsoever.

I 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.

What bothers me the most is that there are engineers who will use their creative skills in such a way.

Their precious human capital could be used to create further knowledge and advance progress, instead it's used to exploit.

It's hard to fault them. They've got to pay off those huge student loans somehow...

I am not here to defend those engineers, but it's a very easy trap to fall in to. An interview I enjoyed reading, as a warning, was with a programmer who wrote adware [1]. It was just one more small step each time, first kicking competitors off, than maybe sneaking in an easier re-install, then maybe not going away... In the case of these overdraft fees, it doesn't even seem to me that it would take a particularily skillful or creative engineer to implement it, just a conniving enough boss to ask. After that, it's just any one person who's willing to do it for the paycheque, and we see many other people do much worse to get a paycheque.

As an engineer myself, it's even scarier when the problems are challenging and exciting, but the application scares me. Oh man, would I ever like to try and put together advanced intercept/listening systems (think cell phones, over the air)! I get excited thinking about all the technical challenges, so if someone wanted to pay and support me to do it, wow that'd be interesting! It takes me a moment to stop and think to realize that I don't want to be involved in giving that kind of power to the people who would want it.

[1] http://philosecurity.org/2009/01/12/interview-with-an-adware...

Their precious human capital could be used to create further knowledge and advance progress, instead it's used to exploit.

You've just described the entire history of finance and nearly all of modern economics.

> Their precious human capital could be used to create further knowledge and advance progress, instead it's used to exploit.

You'll be the one signing the paycheque, yes?

I've heard it mentioned as 'largest payment first', with the stated argument that it's most likely to be a loan or some other important payment, but has the practical effect of triggering charges on way more items.

It's For Your Benefit, citizen.

(Also, the cash advance interest differential for credit-cards, which is higher, and only paid off after all other charges are covered, rather than any sort of temporal ordering)

The government acts For Your Benefit, citizen. Business acts For An Exciting Opportunity, Especially For You!

Also, the cash advance interest differential for credit-cards, which is higher, and only paid off after all other charges are covered, rather than any sort of temporal ordering

FWIW, in Canada credit card issuers are required to apply payments to whichever balances you're paying the highest interest rate on -- it's not even temporally ordered.

Are you complaining that they're required to service the more expensive (to you) debts first? Why?

UK banks used to have a god racket (don't know if they still do, don't read the relevant blogs) where they'd offer 0% balance transfer cards but with expensive purchase interest. Then, any payments you made went to paying off the oldest debt first (on which you were paying 0% interest) leaving the purchases quickly gaining high interest payments.

No, not complaining. (It doesn't affect me anyway; I never pay any interest.) Just observing that in Canada the rules work to the advantage of consumers and the sky hasn't fallen yet.

I think the UK is now like Canada; payments to the card issuer must now be offset against the dearest loan first.

> It's For Your Benefit, citizen.

I take exception to using “citizen”, here, since it implies the gov't is somehow at fault…

In reality, the banks had indeed devised such a scheme, and for the obvious reasons, but it's since been disallowed by government intervention, along with a few other things sucha as actually being able to opt out of overdraft “protection” (this was just a few years ago but fortunately I don't have to care about what US banks do anymore).

This 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.

This 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.

Is there an easy way to get into USAA for non-military people?

USAA 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.

Their customer service is amazing too. I've never had a bad experience with them.

How does deposit by phone work?

Take a picture, send it in. (I think it requires a special app.)

There's an app that has you take a photo of the front and back of the check, and they accept that for deposit.

It's amazing. I started a new job and their paycheck provider screwed up, so I wound up with paper checks. I couldn't afford the delay in mailing them to USAA, so I tried the app deposit method. Take a pic of front, take one of back (after writing a few lines 'deposit only' yada, yada), and it was deposited instantly.

You enter the details of the check, how much it is for and the like. You take a picture of the front and back of the check. That is it. They must do some sort of OCR on the image you upload because it usually takes me more than one try before it will accept most of the checks I have tried.

Like others have said, there is an app. Prior to the app (and still available), you would scan both sides of the check and email the images.

They also have a deal with UPS that allows you to go to a UPS store where they swipe your ATM card, scan the check and process the deposit. It's free. I believe the UPS method is the only one available to USAA bank customers that are not eligible for the insurance products. It's not too bad. There are a lot of UPS stores and their hours are at least as good as most banks.

Oh, thanks. I only realized that he was talking about checks. When I read `deposit', I only thought `deposit cash' due to my upbringing.

Wait, really? I was under the notion that the banking was service only. I'm in!

Strongly second that---USAA is fantastic.

You're going to uni, but your father keeps tabs on your account? I don't know whether it's you or him, but really, you should both be able to trust you to take good financial care of yourself. It's an ability everyone needs and that you can't learn early enough.

I wouldn't say that's completely unheard of when I went to college. If he's watching it because he doesn't trust you to manage your own money that's one thing, but there are other reasons for being able to manage an account.

For instance, if the father wasn't a custodial on the account he can't deposit money in the event he needs it. My parents would have to mail me a check or pay a $25 bank transfer fee because they bank elsewhere. With student privacy laws, the father can't directly see school bills. Those have to go to the student, even if the parents are paying. My school also had a student account where you could pay for food, vending, and laundry. This is a separate account that requires replenishing, so the guys I knew would sometimes call their folks asking them to deposit some money for expenditures (freshman/sophomore year, everyone pretty much had some side income by then).

For instance, if the father wasn't a custodial on the account he can't deposit money in the event he needs it.

When did that start? I've deposited money many times into other people's accounts without problems; you don't even have to show ID -- just fill out a deposit slip with their account number and hand over cash.

In person? Not sure about that, but I know that recently I tried to set up payments between BofA and WellsFargo and I wasn't able to do automatic or online transfers of amounts over $1000.

When I was younger I had a joint custodial account with my father, for a similar purpose, though it wasn't my primary checking account. It's much, much easier to move money between two accounts you control.

He probably doesn't keep active tabs. I doubt he wakes up and says "I wonder what <my name> bought yesterday" (if he did, that'd many boring weeks, followed by a day where I went grocery shopping).

as caw[1] said, it's really more so that he can easily transfer money to the account in the event I need it.

[1]: http://news.ycombinator.com/item?id=3158076

That's pretty common. When I was in college, my parents wanted to keep tabs on the account they deposited working money in. It gives them peace of mind, especially considering the sums being discussed. The only time it ever came up was when I switched from take 15 hours to 22 and my burn rate shot through the roof.

I would also recommend Charles Schwab.

If you open an investment account with them, and keep at least $1500 in there, you get a nice checking account -- refunds ATM fees, free rental car insurance, good customer service.

Honest question, since I haven't done it in 10 years, but what is the big hassle in switching banks? Shouldn't it be as easy as signing up for a new account and taking a cashiers check out of the old one and closing it. I'm curious to know what other hurdles they put in place to keep you locked in.

You don't need a cashiers check, you can write an ordinary check.

If you have bill pay setup then you have to copy all those accounts to the new account.

You have to keep track of which checks you have outstanding, and especially if you have some people who take their time to cash them you may have to wait 6 months before you can close the account.

You are just making my point more. Not only are you missing a bunch of other things that would need to be done (What about my HSA? What about all my other recurring payments not setup through the bank? What about my direct deposits?), it would take a substantial amount of time to take care of that. Why would I want to waste a day doing all that crap? I would definitely forget some things too.

Yes, it's possible, but it's a pain in the ass. I should be able to export my entire account from Bank A and login to Bank B and import it in a matter of minutes. They know that it is difficult, that's why they are doing these fee raises and getting away with it.

In the UK (and some other countries) your new bank often offers to take on all that hassle with your old bank, as an incentive to switching.

Banks don't close accounts. So you can have a reoccurring charge on a canceled debit card show up on a canceled bank account get charged for it get an over draft, have a negative balance which you get charged for every day. Then once the balance is negative enough they sell your 'debt' to a third party debt collector.

PS: The first half of this happened to me costing me close to 300$ in 2 weeks and it's only me double checking that everything was fine that I got informed. At no point in this process did they attempt to contact me and they would have gladly let this grow into the thousands before contacting me for payment etc. O and the debt card had been canceled for over 3 months before that transaction happened.

They don't by default, but they can completely close an account. When they politely refuse, tell them your debit card and checks have been lost and need to be canceled. The bank is on the hook for charges to a debit card that has been reported lost, so it solves the problem of recurring charges to the debit card.

I had reported the card lost which is why it was canceled for 2 months before I closed the account. However, reoccurring charges setup before that point are transitioned into direct bank drafts and continue after that point. As to closing the account, they teller said "it's closed" what are the magic words to say after that?

Send a letter by certified mail to the bank informing them that Mr T. Eller confirmed that the account is closed and that any additional fees, costs whatever are not your responsibility any more?

In that case they either have to react or, if they dream up some fantasy fees later, you have at least something in writing (and maybe grounds for a complaint about fraud with the DAs office) ?

I'm amazed with what US banks can get away:

Selling your private data to some sleazy marketing organization, unless you opt out? A criminal offense here

Charging more the 15% annual interest on any credit granted (including cards)? A criminal offense here

Threatening you because some scumbag used your "pre-approved credit card" scamogram (for which you never asked) to defraud you? They'd be laughed out of court

While I don't believe that it should be the governments role to protect consumers from their own stupidity it should crack down hard on this sort of outright fraud. Good faith is a basis of contract law and contracts designed to defraud one party should be outright illegal (and are actually unenforceable in a lot of countries)

> As to closing the account, they teller said "it's closed" what are the magic words to say after that?

"Could you write that down for me, sign and stamp it, please?"

Bill pay, direct deposit, automatic savings withdrawal, subscription services, saved billing info (iTunes, Amazon) to name a few.

Free startup idea: create a pseudo-bank that provides a pass-through account number for all this stuff.

Which 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.

Downvote 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.

You'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.

The 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."

I'd be interested to know the stats on how many people have had overdraft fees and never let it happen again (or seldom) vs. those who get them routinely.

It's happened to me. Once. Never again.

FDIC studied it in 2006:

http://www.fdic.gov/bank/analytical/overdraft/

They state that the sampling wasn't random and shouldn't be extrapolated, but for the banks with automated overdraft protection that they studied closely, 4.9% of customers had 20 or more overdrafts per year and paid 68% of all non sufficient funds fees collected by the banks. An additional 4% of customers had between 10 and 19 overdrafts and paid about 16% of the fees (so as a group, people with more than 10 overdrafts a year paid 84% of overdraft fees).

The people with 20 or more overdrafts averaged about $1,500 a year in overdraft fees.

I'm not sure why people are downvoting you... I get what you're saying and don't completely disagree.

But I think it's worth noting, because I'm not sure if I got the point across: I was intending to overdraft on the final, large fee. The insane overdraft fees only affected me in an unexpected way because they go out of their was to also screw people on the order of withdrawals.

Yes, that's definitely evil. Mind you, you're not falling victim to that ploy again and again. Millions of others are.

Very true. Some aren't inquisitive enough to find out why/how they're being screwed.

Isn't "intending to overdraft on the big charge" analogous to "intentionally reading from freed memory because you think it hasn't been reallocated yet"?

relying on undefined system behavior is dangerous.

Your bank should have public documentation about those procedures. So it's not exactly undefined.

The bank does have public documentation about those procedures. Edit: I realize now that may have been your point.

Like eru suggested, I had an idea of what was to happen based on my understanding; I would incur an overdraft free on that purchase. Little did I know there were cases I'd not known about.

There are some payments which can only (or which otherwise charge some non-trivial surcharge) be made via direct-debit/automated payments. Power bills are the obvious one here, I think they couch it as a discount for online payments, and bump the baseline prices if you want to pay by cheque (by post - which you hope then arrives, and clears, and ...)

So keep enough in your account to deal with those bills. Really, you should know how much your monthly utility bills are, and budget for them.

All I'm hearing are excuses to make changing your situation someone else's responsibility.

What about the banks that charge a fee for checking your balance (yes, they exist) to screw over customers like this. I have a friend who got an overdraft fee for checking his account balance once.

He should probably switch banks.

Please 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.

I 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.

+1, thanks for sharing.

Should I move, I now know two banks I should not dream of doing business with.

heh, 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.)

There 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.

After 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.

> That actually pissed me off a little more

I greatly admire that.

The second half of your conversation should have been to close your account and change banks.

Credit unions are the only banking institutions I will deal with now.

Bank 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.

I 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!

Another 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!

This 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.

I 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.

No 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.

I 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!

I 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.

Of 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.)

A 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.

I 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.

I concur with a strong preference for a "deny all" option. I have credit cards for when I require a temporary line of credit.

That's how most (if not all) banks work in France. They charge you overdraft fees as a loan at the maximum legal rate (which is about 20% annually, or 1.5% monthly according to Wolfram).

That way, if you have a 2 € overdraft for one month, you'd only pay 3 cents of fees. However, if you have 1000 € of overdraft during one year, you'd pay a total premium of 200 €. Seems to make much more sense than a flat fee.

?US? Bank? Not surprisingly, given this discussion, ING Direct USA is a daughter of a Dutch bank http://www.ing.com/Our-Company.htm

STOP 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.

I'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?

The 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.

> The main disadvantage I've seen is that smaller ones have less leverage and so you pay more ATM fees to other banks.

Many credit unions are now part of ATM networks where you can use any of the members' ATMs fee-free, and in some cases can use other members' branch offices for free as well (at least for routine stuff). Depends somewhat on your location and your ATM-using habits; if you need to use a random mall ATM that doesn't help, but there are usually several member ATMs nearby.

I notice this because the only free ATMs I know of are too far out of my way to be practical. I would probably do better to move to a larger credit union, but I don't know of any others I could join.

The main advantage as mentioned above is that they don't tend to screw you. I'm a member of the a state credit union and have been for years. The people are more friendly, more helpful and overall provide a better experience. My cu offers all the things you listed and the only entry requirement for it is living in the state.

The downside, at least with my credit union, is that there are zero branches outside the state. When I lived in a different state for 2 years it wasn't a big deal since I could mail them checks for deposit and every store now offers cash back with even the smallest purchase (avoiding ATM fees).

BTW, BofA was the last bank I was ever at and I will tell everyone to avoid them like the plague. Simplifying numbers here, but someone gave me a $500 check that bounced. When the check bounced they took out the $500 (what they should have done), but then put a lock on the other $500 in the account. I went to branch and asked for an explanation. After a few explanations that didn't make any sense I told the manager I wanted to close my account right then and there. He said he couldn't, so I said I wasn't leaving until he did and threatened to call the police and claim theft (I was an idiot college kid at the time). Long story short, he closed the account, gave me a check and I have been a happy CU member ever since.

Yeah, my credit union had, until recently, a single branch in my hometown. Debit cards and the CU Service Centers thing has made this a complete non-hassle. The only real problem is that when I call them, I do it across time zones.

This is another funny thing that's different in the US compared to EU, your credit ratings are done backwards.

Here, if you have never had a loan or credit card, never missed a bill payment, have a steady income, then your credit history is perfect. If you want a loan or a credit card, you'll get one instantly.

I have a home mortgage, a student loan, and a credit card I rarely use, and my credit rating is slightly worse than someone who has the same income as me, but no loans or mortgages. But in the US, it would be the exact opposite, I would be the one with a great credit rating, and the other guy would have problems getting a credit card.

So weird. :-)

I might be working in the US in the future, and I'm really dreading having to deal with US banks. I will definitely look into getting an account with a credit union instead.

For 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 ]

lol sounds like Wells Fargo...

My 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.

I 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.

Made 2hrs after of walking out of a Wells Fargo. http://fuckwellsfargo.com

Guess: 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 (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; now, in Acorn.)

Thanks. 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...

Wait ... 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...

Once 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.

How 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.

Personally, 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.

I 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.

I 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.

My 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

I 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.

Call the bank and ask, and consider whether she may be lying to you to protect her preferences.

i 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

Yep. Example would be having your account tied to your PayPal. It will remove regardless if you have the overdraft protection or not.

I 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.

I 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.

Almost 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.

Omitting 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

cheaper overdraft if you qualify, http://www.banking.pcfinancial.ca/a/products/chequingAccount...

When are these guys going to launch?

Banking 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

Would 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...

This 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.

Or you could just not buy shit that you can't afford.

Honestly, is this post valuable information previously unknown to anyway, or a cheap PR/SEO gambit by the company that posted it?

I 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?

I 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.

I 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.

What the heck bank is this? I bank with the reviled BofA, and once a year or so I misjuggle my accounts and bounce something, and every time they courtesy credit the fee, which is their official policy.

Usually when this overdraft sob story is posted to a forum with a call for revolution, it is by someone who is a habitual line skater who is miffed they keep geting caught out.

If you wonder where those downvotes are coming from, it's the hordes of HN-libertarians who smelled a quasi-sort-of-but-not-really-socialist sentiment in your post from the front page and were instinctively, even mindlessly, drawn here.

Heaven forfend we have a single post anywhere that doesn't jive with the bootstraps, fuck-you-got-mine, randroid hivemind mentality.

Crazy things like overdraft fees don't exist at all where I live (The Netherlands), you simply pay interest on the amount that you get below 0. So I doubt it is a symptom of anything. It's just another way in which the USA's predatory capitalism works.

>When someone can't keep an extremely small amount of cash on hand at all times. //

Your "extremely small amount of cash" is my families disposable income for the entire month. That is, all we have to live on after tax and direct housing costs.

A simple accident/incident (last year a small section of our roof caved in, the insurance company says it wasn't covered as there wasn't a 'storm') can wipe that amount out easily. It took us several months to afford the repair.

Of course if we'd be living off the state it would have been fixed immediately assisted by our tax payments ...

sp: family's

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