I use citibank and they've recently announced that they're going back to the old ways of just declining the charge, and eliminating overdraft fees. Hopefully that's a trend that other banks are also following.
Like...allow up to $500 to be overdrafted with interest being charged. If you reach $500 in overdraft, then decline any further charges.
In the US people that do direct deposit are also treated differently by the banks. Both on the surface, i.e. you get better interest rates, and under the hood (fraud models adjusted).
The reason that you have an option is actually not because of Chase's goodwill, but due to an Obama-era law that requires banks allow end users to turn off overdraft protection: https://www.cbsnews.com/news/obama-signs-sweeping-financial-...
There are some unfortunate and annoying loopholes. In particular, if you have a recurring, subscription based fee (instead of a typical debit card transaction) they can and still will charge you overdraft fees for that.
I prefer to have overdraft protection turned on. I usually keep very little money in my checking account and transfer any excess to other accounts. But a couple of times I screwed up the timing (my own fault). Paying my bank an overdraft fee was a lot better than bouncing a check.
I have to wonder what the incentive is for them to go back to that instead of easy profit
Many credit unions can open a no-frills checking account as essentially a probationary account for you that you can convert into whatever you want after a few months of good history.
Source: I used to work at a credit union and we did this for people all the time.
This isn’t my domain, but just spitballing, we could use public funds to advertise credit unions in low income neighborhoods. Would credit unions want this, or would it lead to harmful consequences? Another way of asking this is, how come credit unions take these customers that banks won’t?
If USPS banking helps the unbanked by only 50 units of help instead of a maximum of 100, it’s still a 50 point improvement. If Morgan Stanley or JPMorgan can offer me a better banking deal than the post office could, that’s no reason to not have the post office offer banking.
I agree it should be open to everyone, but don’t agree that there can be a maximum of zero-point-zero difference in customer base vs other banks.
I'm not saying people can't change, but it's naive as hell to think that they will on a dime such as you suggest.
Sadly, there are many who will not become more responsible with time. But there are also many who will, and I'm glad to have been able to play the smallest role in helping people who genuinely want a fresh start.
What I have a harder time believing, and not just in this situation but in a lot of conversations about the unbanked, is that these people will, after a lifetime of having problems with the banking system, suddenly "see the light" and start behaving in ways that are compatible with that same banking system.
This "fresh start" seems like the bad narrative, to me. I believe people seek it, and I believe they're hopeful about it, but I don't believe it's realistic to just assume. I definitely want to live in a world where people can choose to change, but suggesting that they actually will do that is, to me, not realistic.
I feel like a more effective approach would be to change how the banking system works, but I imagine that comes with a myriad of undesirable costs.
It seems likely to me that people who can't navigate the current banking system at a basic level would struggle with any banking system you introduce.
Or just any system in general.
Or are you saying that a bank manager is actually hard to find in NYC?
In other words, the people involved usually are trustworthy in a generic "is it safe to bank with them", they're just not plugging into the system in a way that fits the defaults.
I'd almost argue that the banking system ought to be more flexible to maximize its compatibility with as many people as possible, and thus far hasn't because of the drive to maximize certainty and minimize all forms of risk.
I have no answers or real solid ideas for how to do this, but "it's all on them" doesn't quite feel right. These are (mostly) good people who will pay you back if you lend them money, and that should matter!
I think my comment got construed as "people can't change so it's all their fault" and I meant it more as, "financial systems should be willing to move closer to where these people are already at, and stop demanding these people make all the changes."
I also don't know how feasible that is, so... IDK! Just thinking via writing, I guess.
It's so easy to slip through the cracks in the system, so to speak. A sudden medical bill or car problems, for instance. I realized on my drive to work today that my car is the only thing keeping me from poverty. Luckily, I have tools in the back and would probably be able to fix it myself. :) Also, once you're in it, you're in it, and it's a strong cycle. You don't always have the luxury of things we often take for granted like having a nice outfit to wear, reliable transportation to an interview, and finally not even having a mailing address if you even end up getting a job offer.
It's like the places that offer a free shower and "nice" outfit (for an interview) to homeless people. Sometimes all it takes is that little boost to get (to be sure, the right person with the right attitude) someone back on their feet.
I've luckily never been in that situation, but I can empathize and understand how a completely ordinary person could quickly end up there.
In my experience, many are simply doing it as a form of KYC (i.e. customer authentication) than an actual "is this a bad customer" check.
I have seen some really janky shit too. Every FI I have ever worked with ultimately decided to implement some "exception" process to be able to work with customers when there is some system outage or other unexpected results come back.
Additionally, every institution I worked with also provides some form of second-chance product offerings to customers who come back with a red-hot report. Obviously, these products do not offer overdraft or other line-of-credit features, but they are real checking accounts for all other purposes.
From my perspective, it's not an ideal system. But then again, I don't know that ideal is possible or desired. I think if Chex didn't exist, something else certainly would take its place. I've watched some other vendors exit the space recently, so I think they are now the last/biggest player.
1. Implement this product as specified, doing everything in my power to ensure rules are being followed throughout.
2. Quit my job in protest, bringing down my tiny startup company. 10 people are immediately out of work. Our client finds someone else to implement chex for them anyways.
I think we are coding ourselves into dystopia - where technology will not be serving us, but we will be serving it. We might be there already.
Which 'governance structure'/'rule creating structure' is going to ensure that the moral elements are considered? Or do they simple wave through the legislation big corporations' lobbyists have written? Will big corporations' so-called the 'ethics committees' give us the moral outlook we need? (I don't think so - they are about justifying the unjustifiable, it seems to me.) What is better - that 10 people you are out of work, or that - as you say - someone else will implement this?
These questions are very hard to answer. There are lots of coders who will do whatever-it-is without hesitation.
Ultimately, I guess we will have to do as we each see fit. What I say: morality is a question for the individual, so how do you judge yourself? That is one way to guide oneself through the mire.
Like in theory, someone who closes an account $2.50 in the negative does very little damage to the bank directly. The $2.50 is a small fraction of the annual overhead of the bank account.
Yet these behaviors are highly correlative of unprofitable checking customers. The entire checking account model seems to be based on whales that return the bulk of the profits. If you sneeze wrong, your statistically 10x less likely to ever become that whale.
From a profit maximizing POV, it totally makes sense for banks to do this. But from a "banks are a basic utility" point of view, it doesn't seem to make sense.
A banker is nothing more than a fallible human. Why record in my inner monologue they’re to be seen as more than that?
Prior to open discourse online, public relations teams did a stellar job convincing people financiers are special. I’ve been in the room with people that attend Davos. They mock and ridicule the public as they decide who is worth what to their bottom line. They’re uniqueness is a hallucination.
Contemporary society is leveraging well understood propaganda techniques to take advantage of the same biological quirk religion stumbled upon by accident.
One person is one person. Not some figurative thought leader we must kowtow to.
I just pulled the BofA 2021 10K [1] and it shows $3.5bln in service charges, but $24bln in interest income.
Disclaimer: I work for a neobank (chime) which inverts this model and has none of these fees and does free overdraft
that's simply not true. the marginal cost of a checking account is on the order of a dollar. the breakeven on that is on the order of holding (and otherwise using) a deposit of a $100 for a month or two. banks are not losing money on the balance of their checking deposits in any conceivable way.
that's a just-so story told and retold uncritically to convince the gullible that fees are "necessary". they're not. they're pure profit, and borne of pure greed. no bank requires fees to function profitably.
we need to say no to these unsubstantiated, regressive fees, full stop.
That said, don’t let your views blind you to the truth. Unscrupulous actors will often drive an industry into predatory practices, it’s correctable but only when people understand the dynamics involved.
indeed.
those sunk costs don't matter in this context, which is why they were originally, and should continue to be, excluded. it's extraneous, obfuscating, and most damningly, apologetic.
My ChexSystems entry wasn't removed until there was a lawsuit against the bank.
Seems like a win win for everyone. Banks should probably be required to allow at least a minimal bank account even to people who aren't the best with their money.
Before the 2008 real estate collapse, this number was less than $100,000 per month.
During the recession, I noted it was going as high as $600,000 per month. At one location in Sunnyvale Ca.
It was the statement of revenue the credit union had - the overdraft section was a single line on the document... I am uncertain as to why they posted it, aside from a "transperency" for the credit union members...
To clarify, if you've had a checking account closed because of outstanding fees, and you never paid those fees, it will show up in ChexSystems.
This deserves scrutiny, e.g. for bad record keeping. But at its core, if you're regularly borrowing via overdrafts and bouncing checks, you're looking for a different banking product than the garden-variety checking account.
Or an account that does not permit cheque writing and will bounce a transaction instead of letting it overdraft.
https://www.nafcu.org/compliance-blog/overdraft-protection-m...
If they make it really easy for you to opt in/a quick checkbox then they can make money. That said if someone is living so tight and wants a transaction declined if their account doesn’t have the funds, the financial should make that easy and obvious to do. Behaving otherwise is predatory.
Seems like the problem might be that this system will also prevent people who have a bad reputation in it from getting one of these accounts?
Could. In practice, plenty of banks fill this niche [1].
Source: I used to work in retail.
From the perspective of people trapped in this system paying 10% in fees to cash a $300 check is outrageous - but at this point it's more or less what they have to do and that's "just the way things are".
I had the overdraft fees problem with BofA too and recently some suit was settled/I got a $20 check.
JDBs suck but I did turn my stuff around eventually eg. 300s to 750s.
There was no recourse that I could find despite spending quite a bit of effort trying.
This was many years ago but remains a mystery as my credit was, and remains, great.
It should be noted that overdraft services have been opt-in only since 2010:
https://www.consumerfinance.gov/rules-policy/regulations/100...
Wait, so which one is it? Do banks want to exclude people with overdrafts because they're bad customers (for whatever reason) or do they want those people because they can rake in the overdraft fees?
With the proliferation of "free checking" without so much as a minimum balance in most cases banks have essentially created a selection system to continually marginalize customers that aren't profitable while selecting for customers that are.
From the standpoint of a business (which banks are) this is understandable. However as has been noted in other comments banks also serve a utility function and for the the type of customer that routinely doesn't have $2.50 in their checking account to trigger that overdraft in the first place several hundred dollars in fees might as well be a million. Of course they take off and the account gets closed. Now, because of a $2.50 loss to a bank, they're essentially excluded from the most basic functions of the financial system while people like us continue to benefit from free products, preferred interest rates, credit card points, etc.
Simultaneously, if due to some perfect storm of events (cash flow, mistakes, etc) if customers more similar to us somehow end up in this situation we'll pay the fees. The bank has a "valid" reason to boot the poor, they make a ton from the middle-ish class, and they stay in good favor with those of us that are more wealthy. They can't lose.
The extremely simple (but overall less profitable solution) is to just decline the charge.
My preferred status at banks is being subsidized by the poor and that doesn't sit right with me. I've tried credit unions but they're almost completely unable to meet my needs.
They want customers they can extract usurious and otherwise abusive fees from. They don't want the subset of those that will fight back against said abuse, which is what they use ChexSystems for. The latter also randomly hits some people from the (rest of the) former group, but not enough of them to impact the bank's finances.
As far as the debit card issue goes- if you are bad at managing your accounts- you should always opt out of overdraft ability, an option that consumers have legally had for several years. If you opt out of electronic overdrafts, your bank cannot legally charge any overdraft fees for those transactions (they will probably decline the transaction... but if they do allow it, you can't be charged a fee if you have opted out). see https://www.consumerfinance.gov/about-us/blog/understanding-...
https://www.investopedia.com/what-to-know-and-do-if-you-re-l...
It's known (quite infamously) to essentially keep unbanked populations unbanked. Long story short if you've had overdraft fees, bounced checks, etc opening new accounts at banks that utilize ChexSystems becomes nearly impossible.
On one hand there have clearly been people that have taken advantage of banks being siloed and abuse overdraft protection, etc to essentially get loans they can knowingly abscond with. Just move on to another bank. Repeat.
On the other hand, ChexSystems is much less well known and a bit more "shadowy". The old story of "I use my debit card, mismanage my activity against direct deposit/balance, get hit with overdraft, then overdraft again once the fee hits, etc and next thing I know I'm $500 in the hole because of a $2.50 debit at a convenience store and now I'm essentially banned from every bank."
In the case of the debit card example (or credit cards) banks could do what they used to and actually decline the charge. However they've clearly figured out it's much more profitable to allow the charge and just hit people with (often excessive) overdraft and over credit limit fees.