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>>Basically, a bank account where the bank does not extend you credit. A purely 'pre-paid' affair.

That's like......every normal bank account? At least in Poland, UK and Germany(as you mentioned). By default you don't get any overdraft, you can't go below zero so to speak. If you do(with an offline transaction that wasn't authorized live with the bank) then usually you get 24 hours to pay it off and start paying heavy penalties beyond that point.

that is precisely what “overdraft fees” means

Britain does have a "basic account", usually used by people with debt problems. It has no unarranged overdraft facility.

Example: https://www.barclays.co.uk/current-accounts/basic-account/

I assume the debit card is configured to refuse offline transactions.

So what happens if a deposit is reversed when there aren’t sufficient funds to cover it?

It’s a good question. There aren’t many circumstances that this would happen, however when it does there are still no fees on the account (at least the ‘Cash Account’ at the bank I worked at) - it would go into a negative balance, not incur any fees and when the next credits came in, they’d get eaten by the negative balance.

This usually meant the customer would need to call up a service centre, who would arrange a ‘planned overdraft’ of sorts, still with zero fees, but it would allow them access to a portion of their funds and we’d do the same again the following week and so on.

Very inconvenient for all involved, these people are often completely financially illiterate (and frequently just illiterate) and have zero clue how to manage their bank account. I tried to educate them consistently, but week in week out I had the same conversations with the same people when they didn’t understand how they had no funds available to them, even though they’d been ‘paid’ that day.

honestly thanks for responding in good faith/spirits, probably was a bit overly snarky

I appreciate the thought put into the answer, and I do grasp that the point is that the EU system has converged on much faster resolution times than the US and different social systems based on that etc. There just always are tons and tons of weird edge-cases (what if you get a court-ordered transaction reversal or order to the bank somehow etc) that lead to the same "you're overdrafted, and you have to pay up and then pay a fee..."

I reckon the situation would be, eg., a waiter taking a check on a card.

First: this situation does not happen in EU. Alle restaurants have connected handheld devices.

But when an EU citizen go to the US and pays? I reckon that the restaurant would have a check that bounces and won't get paid.

Yes - you can't make offline card transactions, you don't get a chequebook, but there are no overdraft fees because there's no overdraft facility. The nine largest banks are legally required to offer Basic Bank Accounts to practically anyone.

This, combined with the fact that welfare must be paid by bank transfer in nearly all circumstances, means that a) essentially everyone in the UK has a bank account and b) cheque cashing isn't really a thing. Some banks have an account-opening service specifically for people with no fixed address and/or no identity documents.

From a UK perspective, the situation in the US just looks like a completely avoidable policy failure.

https://assets.publishing.service.gov.uk/media/63f7bbd78fa8f...

https://england.shelter.org.uk/professional_resources/no_fix...

>>usually used by people with debt problems.

That's the first time I've ever heard that assumption, and I live in the UK - basic checking account(with no overdraft) is just what everyone has by default, if you want credit you just apply for a credit card - that's my experience at least.

It is literally in the subheading on the Barclay's page I linked: "If you don’t qualify for a regular current account, don’t yet have a UK account, or you’re experiencing financial difficulty, this could be the right account for you."

Most people have an ordinary account like this one: https://www.barclays.co.uk/current-accounts/bank-account/

However, the general situation for overdrafts seems to have changed since I left the UK — I don't know the details: https://www.theguardian.com/business/2020/jan/28/uk-banks-ov...

Well yes sorry - the linked account is indeed a "basic" account for people in difficult position, I suppose. But what Barclays calls "regular current account" also doesn't have any overdraft, not unless you applied for one.

When I was living in the UK I tried to get an account with no 'unarranged overdraft' but the banks I tried with made it hard enough that I gave up.

You needed the magic word "basic", and confidence in your right to the account.

The banks presumably make a loss on these accounts, at least in the short term, and seem to hope you'd give up and try with a different bank.

A Bulgarian guy in a flat share was keeping his money under the bed as he had been turned away by the banks. I printed the "Basic" account information and with that in hand he had an account the next day.

(This might all be 10-15 years out of date.)

You can't really overdraft a polish bank account that doesn't have explicitly declared overdraft facility.

This is combined with the fact that no account supports cheques anymore.

Many of my friends even went as far as using that as a method to handle their personal finance as students.

Transfer most of the money to the savings account and then when getting declined buying food top up the card account and rely on it instantly being available. Having negative trigger each time going above the pre-planned spending for the month.

Hell, I still do it. I have one card for groceries which gives me a mental picture of how much I have spent on food given what day it is when it gets declined each month.

I would presume this comes from being the generation that grew up only knowing about debit cards. Most got a personal one at the age of 13 or so and never really used cash. Guessing it is even earlier today.

Didn't get a credit card until first time I was planning to rent a car when travelling knowing how much easier it would be.

> Didn't get a credit card until first time I was planning to rent a car when travelling knowing how much easier it would be.

I still don't use a credit card for that. I have a debit card that's part of Visa, so most businesses don't care whether it's debit or credit.

They definitely do though - all big brands like Avis, Europcar, Hertz will refuse a Visa Debit card, it has to be a Credit card - I always have to use smaller local rental companies which are willing to take a risk on a debit card. At least that has been my experience renting around Europe.

Interesting. I'm mostly in Asia and Australia these days. Though recently I rented a car in the Netherlands, and my debit card was just fine.

(I don't have a credit card.)

> That's like......every normal bank account?

No. Every normal bank account can go overdrawn. Try it: low value purchases or withdrawals are not transactional (they are eventually consistent).

In most EU banks a line of credit is something you apply for. Cards are usually also attached directly to the account.

Banks in Denmark are obligated to extend a basic account to all customers and usually do it with a debit card. Ie. no offline transactions and no transactions that can not be immediately cleared.

I don't know why you dismiss this. If you are from the US then be aware that EU and US banking systems are wildly different (where the US system is really good for the wealthy people).

If you are from EU, then it sounds like you haven't changed your banking situation or stayed up to date in at least 15 years.

In the US, it's possible to become overdrawn even if you wait for a check to clear. Assuming there is a check "writer" and a check "casher"

- A portion of the check is made available to the casher (said to be "cleared", but not really) before the writer's bank even responds

- After the writer's bank has cleared the check, it can still reverse the transaction and take back the funds. For example, if the check is found to be fraudulent.

So, for example, you can deposit a check into your account, wait a month to be sure it's cleared, take the money out, and then have the money "taken back"; leaving your account in the negative. As such, even for accounts that don't have any "line of credit", the bank still winds up "lending you money". Effectively, EVERY bank account in the US has credit built into it in some way.

It definitely seems like there are some bad policy going on here. I would recommend lobbying to have it changed – None of these things can happen in EU countries, so it is not technically given that it has to work like that.

How does it work to where fraudulent checks can’t be clawed back in the EU?

You can't write checks. You give your bank account number and the debit is done online in real time.

And what happens if they transfer money to you via debit online in real time, and then _that_ turns out to be fraudulent. Does the bank that paid the money to you get it back from your bank, or does it eat the cost?

Note that, when we're talking about a fraudulent cheque, and it being clawed back, it's already been cleared by the source bank. As such, there is no longer a difference between the check and a real time debit.

Approximately nobody uses any checks in the EU countries we are talking about here. (And I don't think those accounts would come with a check book. That's something you specifically have to ask for, and might come with a credit check.)

I had a lot of frustration in the UK, when I tried to get a bank account that could not be overdrawn.

Basically, I wanted the German experience where your transaction is just declined, if you don't have the funds, without further repercussions. In the UK, the banks might or might not approve that transaction, and definitely charge you an outrageous fee either way.

The only choice on offer in the UK at the time was whether you pre-arrange an overdraft, which is slightly cheaper (but still expensive). Or whether they give an you an 'unarranged overdraft', which you can't not accept, which is crazy expensive.

Well yes, but (at least in my experience) there is no fee for just going into an unarranfed overdraft, as long as you've paid it off within 24 hours.

My UK bank at the time (I think it was NatWest or Santander or so) charged me for every (attempted) payment or (attempted) withdrawal, even when they failed.

The easiest way would probably be ro get a Revolut/Wise account and charge it from the account that can go in overdraft.

But I agree, the traditional banks have had a hard time getting up to speed while new banks seems to see it as a way to handle their liability: At Revolut scale you can not manage individual customers with negative balance while offering the service at a competitive price point.

Revolut and Wise (and Monzo) were only just getting started when my story happened.

At the end (around 2017 or so), I got a Monzo account, and was very happy with them.

There is a large population of people in America that depend on being able to overdraft. It doesn't make sense to me, it doesn't make sense to you, but if they were given the option between "overdraft" and "no overdraft" they will always choose overdraft. It's important to be aware of this use case for understanding the US system as practiced.

IME they eventually end up abusing it (repeatedly not paying the fees) and then the bank closes their account, at which time they move on. One way they strategically avoid or delay paying the fees if they can't / don't want to is by avoiding direct deposit. Then, you can either deposit the check (ready to pay overdraft fees and get account positive) or cash the check at a check-cashing (for a fee that will likely be less than the overdraft + overdraft fees).

This is touched on in the article. In fact a fintech startup Ingo Money is trying this.

> And then there’s one decision which I just love aesthetically: if you’re willing to wait ten days, Ingo will discount your fee straight to zero. Why ten days? It is past the window where fraud discovery will result in the funds being clawed back plus (ahem) a bit of annoyance tacked on as a product decision.

Yes, I saw that later as I read further.

That's exactly what I would want to use, if I had to use checks. (Luckily, I don't ever have to interact with checks.)

Revolut is an example of one of these banks – However, they probably do not cash checks.

I think Monzo in the UK also offered that. That's who I switched to in the end. (But I've since left the UK.)

That is always funny to hear complaints about high credit/overdraft fees. If they are high for individual how about not to use credit and there will be no fees?

Huh? That's exactly what I wanted!

I wanted an account that would not give me any credit. I did not want any credit.

But I also wanted the bank to do the mental arithmetic for me, and just refuse when I don't have enough funds. Instead of me having to carefully track my balance manually, lest I accidentally use any credit I don't want to.

(For context: I usually try to keep my liquid balance fairly low, and stick the rest into savings and/or investments.

It's ok for me, if a payment bounces every once in a while because of that. It's all about trade-offs. I can usually fix it pretty quickly by transferring some money from my savings account, or from my brokerage.

With an account that helps me there, by not offering any unwanted credit at all, I can manage my finances a bit more aggressively, instead of having to keep up some safety cushion against arithmetic mistakes on my part.)

See also https://news.ycombinator.com/item?id=39201675 for how that non-overdraft account works in practice for people who don't want to take on credit, but also don't want to have all their money in their 'checking' account.