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Comment by mcherm | Hacker News Reader

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!

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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.

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.

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.)

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

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