THE BLOG

Overdraft This!

03/18/2010 05:12 am ET | Updated May 25, 2011

"Overdraft Fee" is such a harmless sounding name. Focus groups must have reacted negatively to the bank's second choice, "Kick You While Your Down Fee." I really hate overdraft fees. The Fed has made banks allow you to opt out of them, but my family has received calls from banks telling me it's foolish to opt out. Really? Congress is trying to further regulate the banks' ability to charge them. An overdraft fee is essentially a short-term loan. If you bounce a $1 Slurpee the bank can charge you $35 (which is essentially an interest charge). Because your bank account is now negative and you can't do any banking until you pay it back, the length of that loan is usually one day. At first glance that looks like an interest rate of 3,500% (unconscionable but still incorrect). Because we are used to seeing loans in terms of Annual Percentage Rate, we have to multiply 3,500 by 365 days. Now you can clearly see that your bank is kind enough to loan you the $1 to buy that Slurpee at 1,277,500% interest. Don't you love unregulated capitalism?

Remember, dear readers, that you can be sent to jail if you loan money to your friend at a rate higher than 18%. That's right. An individual can't charge more than their state's usury limit, however if you are a business then you can charge much more (from my credit card's 27% to the Slurpee's 1 million percent). If you bought a $100,000 house at a million percent, it would take you 2 billion years to pay it off. But don't worry you'll have the last laugh, because the Sun is going to foreclose on you before the bank gets the last penny... which makes you laugh at those stupid banks.

Why are things a crime for the normal citizen, but daily routine for the Big Guys? In life it seems that doing something that is "small scale immoral" gets you in trouble, while doing something that is unfathomably immoral is legal. Kill one person and you get life in prison. Kill 1 million people and it's called War. War, we're told, is a legal and "necessary evil." Yeah well, killing my rich mother-in-law is what I call a "necessary evil" too but I don't see the "I Need A Ferrari Defense" going over too well with the judge.

Here's another example of business vs. individual: Say you loan a friend a book but he keeps forgetting to give it back. You then break into his house and take it home. Don't plan any vacations because you are going to jail. However if you are late in paying the bank for your car then they'll come to your house and repossess it. Why do the banks always win? It's almost as if there is someone who is always there to change the rules and bail them out.

Lastly, what can happen to you if you make an illegal copy of a CD? The FBI can charge you criminally. But when Walmart makes a copy of Mountain Dew and calls it "Mountain Lightning," that's called "corporate business smarts." Let's see if Wachovia will sue me if I try opening a bank called "Wackjovia." Oh, they'll bankrupt me into eternity. But it would be fun to have Citibank sue me because I chose to open a Schittibank. In fact, all the banks would end up suing me because they each take singular pride in being the sch*ttiest.