Thanks, Mr. Banker, for My Overdraft Protection!
You know, I think it's kind of nice how my bank is always thinking of new ways to help me. It's been like that my whole life. When I was a kid, for instance, my dad took me downtown to the First National Bank, which was right next door to the Alceon Theater, where you could watch two movies for a quarter on Saturday afternoons. I had ten weeks' allowance in my pocket -- five dollars, all in Benjamin Franklin 50 cent pieces. That's when "all about the Benjamins" meant something! Anyhow, we gave Mr. Roover, who sat at a desk by the door, my life savings at that point, and he gave me a little blue book that had all my information in it. "Every month," my dad told me, "the bank is going to add a little bit of money to your account as a way of saying thanks for your deposit. It's called interest. And it will grow and grow until you have a lot more than you put in." I thought that was pretty keen, let me tell you. And I still do.
The years passed, and I got new banks, but each of them did the same kinds of nice things for me. One time, I got a toaster for opening a new account. I think I still may have it someplace. Another time, they let me pick out my very own theme for my checks. I got really cool NASCARs. The interest on my accounts went up and down, depending on the economy, you know, but I know my bank always did its very best to make sure they were adding as much as possible to my nest egg. I appreciated that then, and I do now. I know that someplace, in some office somewhere, there's always a banker sitting there thinking of new ways to reward his or her customers. That's just the way they do things, bankers. They're the salt of the earth.
Which brings us to this year, when it came to my attention that my bank has been doing something secret to help me for quite some time. See, I have a debit card, mostly because I can't be trusted with a credit card. Oh, I pay my bills and all, but sometimes it's tough to remember about that, what with all that's going on every day, and anyway I have a tendency to whip out my plastic all the time instead of using the perfectly good cash I might have in my pocket. So the bills go up up up, and I'm spending somebody else's money, basically. So I use debit. I always have enough in my bank account to cover my spending, of course, so there's no problem with that, but when I use that card I don't owe anybody anything, and I like that a lot. Whatever smart banker thought that up was really using his noggin.
Anyway, there was obviously some other banker somewhere who was also thinking about new ways to make my life safer and easier, and he thought to himself, I guess, "Hey, what if that Mr. Bing who's been such a good customer for so long, were to make a mistake and plop down his plastic when he didn't have enough green in the machine? True, he's never done that, but what if he did?" And so that banker, from the goodness of his heart, I think, went to his boss, who went to his boss, who went to his boss, and pretty soon they gave me something even better than a toaster! It's called "overdraft protection," and I never even knew I had it at all until I started reading the papers the last couple of weeks. What a great concept! I love it! No matter what you spend with your debit card, no matter how absent-minded or confused you might be, even if you have no money at all in your account, the nice bank will make sure that you're not embarrassed. They'll pay your tab! I don't know about you, but that makes me feel all warm and toasty.
And I think it's mighty nice that they sprung it on me as a surprise, too. I love surprises, especially when it has to do with my money.
Now, you read a lot about how people are upset about this thing, but I just don't get it. Take my friend Patty. She went to the Starbucks the other day and got a chai latte. Lord knows why she drinks that stuff, it tastes like waste water to me, but she likes it and is willing to pay almost $5 for it. Anyway, it seems like she can't stand to spend any cash, either, because she puts down her debit card to pay for that little sum and then goes out and enjoys her latte, not knowing that she didn't have the dough in her poke to cover it.
In the old days, she would have had the terrible experience of having this pimply faced kid behind the counter say to her, "Your card is declined, you deadbeat fool." But not these days! Why? Because Mr. Banker was on the case and had covered her with this overdraft protection, too! Now, does she say thanks? Is she grateful? No way. It seems that a couple of weeks later she got her bank statement and discovered that the bank had charged her a little processing fee for the protection it had provided to her without her even asking for it. Hey! Everybody's got a cost of doing business, don't they? I can see she might have wondered why her latte now cost her $34 once that little fee had been assessed. But really. What price can you put on the nice thing that the bank had done? I'd say it's priceless.
Even better -- Mr. Banker and his friends have now listened to ungrateful people like Patty and are implementing their own new rules. They're promising not to charge that fee to rampant overspenders more than four times in one day. I think that's very gracious, too, don't you? I wonder what new things they'll think of next to help and protect us. One thing's for sure. I know they're thinking of something.
Follow Fortune's Stanley Bing on Twitter: www.twitter.com/thebingblog
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Switch to a credit union. If everyone did it, the banks would be out of business. Oh the sweet revenge.
Gah. I am confused.. So Overdraft protection.. I thought it was a small credit line that covers you so you DO NOT GET an overdraft at all.. It is for people with $5000+ average balances..
I swear what is being discussed is just plain 'overdrafting'... But I might be wrong.. Please advise....
I thought this practice of charging a large fee for any 'overdraft' goes back 10+ years.. Ive asked citibank for ODp for years... They only get maybe 1 or 2 of these horrid things from me a year.. But people i know (poor people mind you) get lots of these each year... It is a direct result of banks demanding direct deposits, etc. for other certain services...
What's the Matter with Banks, Part II:
Using a credit-rating system that is unfair, that rewards bad behavior such as taking out lots of credit cards and only paying minimum balances, but that, among other things, does not reward paying more than the minimum, avoiding using credit, or pre-paying bills.
Selling shoddy loans to naïve consumers, never revealing to the naïve consumer that taking a mortgage is indeed a sale for them, not a favor or a service that they are providing to you.
The resulting Mortgage Meltdown, which they claim hurt them, but that really resulted in their collecting billions in interest and then their taking the homes of buyers away from them (which lenders had to know would happen) and selling them for fair market value or maybe less in some cases, thus recouping the original loan money in addition to having collected mostly pure interest on the loan up to the point of foreclosure.
Using shoddy appraisals that resulted in artificially inflated values.
And constantly blaming the consumer victims for all this.
"rewards bad behavior such as taking out lots of credit cards and only paying minimum balances, ..but does not reward paying more than the minimum, avoiding using credit or pre-paying bills."
Is not quite accurate. Lots of credit cards with balances over 40% of the credit limit will adversely effect credit scores not reward the user. Minimum payments usually contribute to that hike in the balance. Credit scores will go up as the card holder reduces the amount of outstanding debt as a percentage of the total credit available. The catch-22 of the credit rating system is this: how can a lender know you will repay what you've borrowed if there is no record of your ever having borrowed or repaid anything?
What's the Matter with Banks, Part I:
ATM fees, sometimes on both ends.
Excessive overdraft fees.
More overdraft fees on debits that you didn’t know about that were created by overdraft fees that you were not notified of in a timely manner.
Withholding deposited funds (while earning interest on them), including measly payroll-sized local checks and cashier’s checks—and then charging overdraft fees (which you won’t be aware of for days) on incoming debits that would have been covered. Hundreds of dollars in overdraft fees later, you receive a notice—but too late! You’ve already been out buying groceries and gas, thus creating a debit, on which, of course….
Failing to immediately debit accounts when a debit card is used, knowing that this way the consumer will not realize that he or she is overdrawn, thus resulting in more fees collected from the consumer.
Paying interest that is so far below the inflation rate that it amounts to, literally, less than nothing
Using Homeland Security laws to justify not honoring deposits on the same day or within 24 hours after they are made.
Bailouts.
Paying colossal bonuses to CEOs even after their colossal—and immoral—failures.
Taking TARP funds, then not using them to help home owners stay in their homes.
Refusing, when you call, to let you talk to a human.
Failing to teach local managers to use judgment rather than to blindly obey and say, “That’s the policy.”
Read on for Part II
Is your beef that customers are automatically signed up for this or that there are fees for overdrafts? I think the fees are completely reasonable. I do agree that customers should have to set this stuff up instead of being auto-enrolled. But overall, personal responsibility seems to the be key here. The answer is stay on top of your finances. I don't know what other people do, but I check my accounts daily online to make sure I know what's going on. I understand some people don't/can't keep a cushion in their checking accounts, but if you know what is going on in your account, you can make sure you are not over-drawing your checking account.
My favorite part is that they actually had to pass a law that they had to process the debits to minimize the fees.
In other words, if you had $100 in your account, and you took 10 debits for $5 each, and one debit for $100.01, they'd take out the $100.01 first.
And then charge you 10 overdraft fees!
When I bought my house, I opened up a second checking and savings account for house expenses only. I kept most of it in the checking. Just a little in the savings. They waived the "monthly charge" for the checking (what is this "interest" of which the writer speaks?), but because after paying for stuff like plumbing and electrical, I no longer fit the "platinum" qualifications.
About a month ago I realized they had been taking $10 out of my savings EVERY MONTH for "fees".
I lost about $300 before I realized it. I mean, I hadn't been touching the savings at all so after a few months I had stopped looking at every statement.
I thought they were supposed to make money by investing our money, not by nickel and diming the average person to death.
I'm remindied of the lyrics to a song by the band Chicago.
The lyrics go:
"While the city sleeps,
Men are scheming,
New ways to kill us,
And tell us dirty lies"
You have confused, fundamentally, what 'overdraft protection' is... This is what it sounds like - no overdraft fee, no 'embarrassment'...
what you refer to IS THE OVERDRAFT.... you do not get over draft protection unless you have so much money it is very unlikely you will need the overdraft protection...
hehe...
This happened to me last month. My bank is terribly behind on updating anything. You go to the ATM and you get one balance, you go online and get another, then if you go to the teller, another all together! Even if you keep meticulous notes, it's almost impossible to really know what you have in the bank. Anyway, instead of posting my deposit to my account first like they were supposed to since it was processed before 2PM, they waited a day to post it and tried to charge me $128 because 4 debits went through (all of which were $5 or less!). I refused to pay it and told them to close my account. They decided it would be best if I stayed and took the fees off. This is why I hardly ever use my debit card. I never know when $2 might cost me $34! I took the ODP off, but I still prefer cash.
I am still living out the (playful) "shame" in my household of spending $35 for Rick Astley's "Never Gonna Give You Up" so I could "rick-roll" my partner on voice mail. The credit union had the last laugh. :)
i remember having a banking client back in the 70's and 80's. we introduced ATMs to the market; electronic passcards, debit cards, automatic bill payment services, etc. back then, banks gave away these services for free. if you wanted OD protection you signed up for it and they gave you a line of credit.
then the S&L debacle hit and banks had to scramble for new ways to make money with fees for everything. never in my wildest imagination did i ever think the fees and their associated revenues and profits would be so huge or their efforts to generate these fees so predatory. there's no question regulations have to be put in place to protect the consumer from these sharks; especially when the victims are the ones who can least afford it. when you have a $12 an hour job with no benefits, there's no way you can afford to maintain a high balance to avoid these situations.
Thank you for posting this! I had just such a situation last month. For whatever reason, I was in the unfortunate position of not having enough money in my checking account and a bunch of charges hit the account at one time. Some auto-pay charges, some charges from stores I had made purchases from a week prior but for some reason the amounts didn't come out right away, and it was just a mess of a situation. I believe that 4 charges caused me to go over the limit, two of them being a $3 charge and a $10 charge. Every time I received this wonderful protection, my fabulous bank charged me $25.00. As described in the article, I had no notification when making my $3 purchase that my account was overdrawn, my overdraft protection just kicked in and "protected" me. Unfortunately (of course), there is no ability to use your savings account (where I had plenty of money to cover the shortage) as an overdraft protection, you must use your credit card so that the bank can then try and earn money off the balance when you don't pay it in full at the end of the month. I receive email notifications to my phone about my accounts... but, oddly enough, the notifications about my overdrawn account didn't show up until 2 days later. Just not in enough time to transfer the money over before that handy overdraft protection kicked in. Ya got me this time, bank!
Sorry about the double post. I thought it got rejected for questionable language...
The entire American system is about to collapse, just you watch. The clock is about to strike midnight. And those fools in Washington thought our biggest enemies were abroad...what fools. Banks and insurance companies are choking out the most they can from us in these dying months. The REAL economy is about to die, do not trust Wall Street figures or rising stock markets. The REAL economy is comprised of none such things. It is comprised of you and me, the small businesses, gainfully employed people spending money. That is going to stop this holiday season and we shall never recover, because those fools in Washington have utterly tossed us to the wolves. The rampant massive hike in credit card rates, surprise overdraft fees, obscene health care premiums, etc. coupled with the sheer number of unemployed out there, the number of bankrupt cities and states, the fact the Fed is making our dollar more useless every day they print more, the massive trade deficit, upcoming inflation and the sheer politically polarized state of our country is all coming to a nexus. We are doomed. The crooks on Wall Street and the fools in Washington have finally done us in! Obama has done NOTHING to change the financial system. They're screwing us WORSE than ever! 30% credit card rates, up from less than 10% on people with good credit who never miss a payment? How is THAT allowed? Regulation, please!
The solution is simple. Cut up your credit cards, close your Big Bank accounts and move all your business to your local credit union. Problem solved.
I have been using credit unions for years to get away from "standard bank practices" like these. Then my credit union started doing this "overdraft" trick as described here. So I switched credit unions. The new one started doing it too! But at a slightly lower rate ($20 instead of $35)!
I definitely agree that credit unions are far preferable to traditional banks, but one must watch out, as the credit unions are starting to use bank tricks to scam profit too.
and here I was annoyed with Chase's 10$ ODP
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