The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest effort by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.
The change could potentially eliminate billions of dollars in fee revenue for the nation’s biggest banks, which were gearing up for a battle even before Wednesday’s announcement. Exactly how much revenue depends on which version of the new regulation is adopted.
Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started as a courtesy offered to some customers when paper checks used to take days to clear, but proliferated thanks to the growing popularity of debit cards.
“For too long, some banks have charged exorbitant overdraft fees — sometimes $30 or more — that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines,” President Joe Biden said in a statement. “Banks call it a service — I call it exploitation.”
Banks LOVE overdraft fees. Not just big banks. Even your local bank or credit union pays close attention to that “Fee Income” line item which overdraft fees are part of. Fee income is unique in that it doesn’t require an increase in assets (by making loans) to generate. It’s not technically “free” money for the bank but it’s dirt cheap. It’s a smaller but also not insignificant source of revenue.
The main problem with overdraft fees is that they are inherently predatory. They automatically target poor(er) people who are more prone to spending money they don’t have and are unable to secure cheaper credit. The average overdraft user tends to use it repeatedly and consistently. Overdraft fees are nothing more than an extremely high interest loan. Much like payday lending, it can create a cycle that the borrower is unable to get out of. Best case scenario, the bank is aware of this but has little incentive to do anything about it. I actually worked for a bank at one time that was intentionally lenient with their overdraft policies. It was a good move for the customers but it didn’t eliminate the debt cycle.
Banks are required to offer “counseling” to people who routinely overdraw their accounts but that usually is nothing more than a letter that gets mailed out to the customer and nothing more.
Some banks like to be extra shitbaggy about it and will actively structure their policies and batch processing procedures to maximize overdraft fees. Doing things like posting debits to the customers account before credits intentionally on the same day and maintaining a policy that that qualifies as an overdraft. To me, that’s just evil and should be illegal.
I think there’s multiple issues with overdraft “protection”, one of which are excessive fees. Overdraft “protection” routinely contributes to a cycle of bad debt for people who often can’t afford to pay their bills much less repay debt with incredibly high interest rates. Some banks justify it as a service that “helps” their customers. I think it’s as helpful as a pack of cigarettes. Yeah, it’s technically the customers choice to use it. And they shouldn’t. It’s a really bad deal for them. But more of the responsibility is on the banks here because they know the statistics. They know the mess that they’re contributing to. Best case scenario, they turn a blind eye because $$$.
On the other side, consumers as a whole need better financial education. Many of them don’t understand that they could do a lot with the money they’re spending on fees and interest. Consumers also need to be better about choosing who they do business with and asking questions. Banks are required to disclose all their fees and account policies. Ask for them and ask for an explanation if you don’t understand them.
Lastly, don’t do business with banks, or anyone for that matter, who clearly has no interest in the well being of their customers. I’m going to pick on Wells Fargo specifically because, …well, If you don’t know what kind of company Wells Fargo is, then you have been living under a rock for a long time. Wells Fargo shouldn’t even exist. Their repeated, flagrant criminal activities, violations of the law, and disregard for the well being of their customers should have seen them run out of banking entirely. And they’re not the only bank like this, but they’re the most egregious. Instead, they still exist because people keep doing business with them. You’re a lot more likely to be treated better by a bank or credit union that views you as more than just a random number.
This is good. What would be even better would be severely slashing APR on incurred credit card debt. Interest should be reasonable amounts that allow people to realistically pay back credit debt without barely being able to keep up with some financial mistakes.
It’s good, but its offering crumbs to people who are starving. Overdraft fees were extremely predatory and we’re being promised that after decades of that, maybe it will be reigned in, if we’re lucky.
Meanwhile, the fucking world is ending.
Don’t let perfect be the enemy of good.
Tie credit card rates to savings interest. Let them fight it out.
I still don’t get how folks don’t love this president. All these things are great for typical folks like me.
This is actually a good example: the very concept of overdraft fees is obviously a tax on poverty that should be made illegal as soon as possible.
Instead, Biden (who’s been known to lie a lot even by politician standards) wants to lower them. In a year. If he’s re-elected.
Even his aspirational campaign promises are a compromise between the obvious only just course of action and retaining the status quo that enriches his owner donors.
Lead poisoning is real
It’s weird to have parasocial relationships with politicians, it’s how fascists get elected. Always hold them accountable.
Leading this with - I will vote, and I will vote for democrats if it’s what’s needed.
But the reason I view the (objectively good) things that he’s doing with a grain of salt is that it feels like he’s only doing them because of an impending election.
Why - when the democrats had control of all 3 branches of government in 2020 and 2021 did they not do anything that mattered?
They could have unpacked the courts by expanding them. They could have ensured abortion rights. They could have fixed the voting rights act (or implemented something that addresses gerrymandering, racial or otherwise). They could have overturned Medicare Part D. They could have fixed the compromises made when the ACA was written. They could have fixed the Citizens United decision. They could have amended the TCJA so that the tax cuts for the wealthy sunset alongside with the tax cuts for the poor (or even flipped it, so the tax cuts for the poor are made permanent, and the tax cuts for the wealthy sunset, unlike how it was written)!
They could have done so very, very much. But instead they wrung their hands about Manchin and Sinema, claiming that’s why they were a ‘do-nothing’ congress, and waited to lose the house so they could claim gridlock and return to merely being an alternative to republicans.But even the core of that justification is dumb. They could have supported candidates prior to 2020 that weren’t just republicans running on the democrat ballot.
The issue I think people have with Biden is not that he himself is a bad guy (although he did contribute majorly to the prison-industrial system in the U.S., and championed preventing student loan discharge through bankruptcy when he was a senator).
It’s that he’s the figurehead of a political party that is more interested in gaming the system than they are in leading the people it is supposed to represent. The only real difference between democrats and republicans in that regard is that republicans deliver on their (often wildly unpopular) policies, and their base respects them for it, even if it means they will die homeless in a polluted gutter.
The Democratic Party, and by extension, Joe Biden, do not lead, and thusly do not earn respect. Their moves are only the smallest incremental moves, and that does not work at a time when the world and society is redefining itself several times within each generation.Man. Sorry. My soapbox is tall today.
I totally get that and I do not like the situation, but when the choice is with or without lube im not going to forego the lube in protest of the situation.
I’m there, too. It’s just such a gross compromise.
The crux of the issue is probably structural. If you only get two choices and both are chasing the same sources of money in a system that heavily favors a very small set of investors, then, well… any effort to get votes by distinguishing themselves is ultimately performative.
In the end, we all wind up getting served shit sandwiches, but one party tells us they don’t want to feed them to us, and the other party has convinced their voters that shit sandwiches are delicious, or at least more offensive to ‘them’ than they are to ‘us.’
Its just getting worse to. Citizens united really bufu’d our system massively. Republicans may have been usually the worse option but there were individuals who it made sense to vote for. But decade by decade that just disapeared. By 2000 or so (citizens united) it was such that could never vote for one and since then its become literally life and death. Its become a bit like modern media. Something not being totally crappy or massively screwed up is reason to praise.
Because it’s all tiny changes that don’t effectively help people. No big structural changes cause the billionaires managed to put a stop to that with their agents in the Senate. And so the average citizen is left to blame the person they see as the cause of it all, cause he’s the big boss obviously.
Citation: gestures at everything
yeah still. I have never had so many beneficial things come out of a presidential term in my life.
Trump got us “free cash” and virus test kits. Bush got us “free cash”.
Obama got us crappy healthcare. Which he stole from Republcain Mitt Romney cause Obamacare is literally Republicans dream healthcare system.
Nobody remembers the starting circumstances of the Democratic presidents brought in to clean up Republican messes.
From my interactions with co-workers, it can be that simple. And also the trans trans trans are coming to steal your kids and wife. Diabolical
yeah in particular obama was just getting the economy going at the end of his term and it was trump that railed for lower interest rates to overheat the economy just before covid and is the main reason rates had to be raised at break neck pace under biden. Democrats are burdened with stabilizing the situations that republicans have intentionally destabilized. Like right now they will only allow 2 month budget extensions keeping us on the edge of shutdown constantly. That is no way to run a government.
Fuck Lieberman for ruining Obamacare. It could have been so much more
The Democrats always have a scapegoat to explain why they just couldn’t get [insert leftist goal] done.
It’s always a lie, or rather, it’s not the truth. The Democrats are neoliberals, and there will always be that one bad democrat who prevented [insert leftist goal], because they don’t want to, but benefit from their voters believing they do.
You can keep your tinfoil hat on but the truth is that Democrats are on average a whole fuck of a lot better. Lieberman was never the type of Democrat you’re thinking of. He’s now trying to get Manchin to run under the No Labels pack so Trump can be king and we can truly see what climate change looks like if we do nothing at all to curb its effects.
I’ll just be over here telling you all “told you so” when everything you criticize Biden of becomes 10x worse under a true monster like Trump
What you’re saying has nothing to do with what I’m saying.
Yes, the Democrats are better then Trump. How does that invalidate what I said?
You can vote for them, and that might make sense. Just do it with your eyes open, because believing in them for anything other then “not being Trump” is a fools errand.
I would argue that the insulin thing was not tiny at all. Biden has been a good President.
Very little ‘big structural changes’ can happen without Congressional support, and Biden at this point has an actively hostile Congress.
I can understand why people blame him anyway, but that doesn’t actually make much sense.
The things he has done do effectively help people, but since he doesn’t constantly brag about it people don’t notice.
The IRA is a big structural change that puts us on a path where we might actually escape global armageddon. It doesn’t get us there, but it puts us on the path and buys us just a little bit of time. And its entire philosophical approach builds constituencies massively, which means the longer it exists, the more it will go into a virtuous cycle. So long as Trump doesn’t get in next cycle and dismantle it from within, it will be incredibly sticky.
It’s almost certainly the most important bill passed in any of our lifetimes. Not just climate-wise, but legislation-wise. It’s very technical and kind of boring, which makes it not as exciting, but it’s still absolutely huge.
I don’t give a fuck if people hate Biden for whatever reasons they have. But at least this one piece of major progress, somehow passed through an uncontrolled congress, must not be denied. If we deny it, that’s probably it for our civilization. If we let the achievement be ignored, climate policy will probably be over and the ecosystem will be allowed to die. Any other issue is petty next to total collapse of the global climate and if passing this bill was ALL he could achieve – even ignoring some of the other stuff like filling departments with the most diverse crowd ever in American history – it would still have been a good term for a president. Better-liked presidents have achieved less.
I don’t love genocide.
neither do i. I would not be surprised if there is not high agreement on that with folks.
Well, you said you don’t get why people don’t love this president. That’s an obvious reason.
I don’t love that he’s a genocide collaborator. That’s why his Democratic support is so low.
Well thats two different things and a very broad definition. I, for example, am american and pay my taxes. Im just as much a collaborator therefore unless I stop paying my taxes or supporting the US, no? Now granted I don’t want to support genocide but there are some rather severe consequences for me if I don’t pay my taxes. And is that enough. I mean we are talking genocide. Should I actively fight? That would involve violence on my part. Would I be slipping into being just as bad as the genociders? The idea of pinning the israeli things on him is a step to far for me.
Biden went around Congress to send more weapons to Israel. That’s quite a bit different than paying your taxes.
He did not go around congress he basically expedited the sales. This really goes back to 911. Many countries pushed back on us for iraq/afghanistan but still did the show of support. Heck they sent their own troops. He could have not done it but it would have repercussions outside of our relationship with Israel. All the same. We paid for the production of the weapons with our taxes. To me railing that biden is a genocide collaborator but then ignore the direct ways they support the genocide, like financially with taxes. Well its being a hypocrite. My support is fine because you know living my nice life is important but his support because of the complex decision making around global relationships in regards to responsibility of his position. Well thats not. Oh and lets ignore that its typical of what presidents and global leaders have done in these situations.
https://www.cnn.com/2023/12/29/politics/biden-congress-israel-military-aid/index.html
He literally bypassed Congress. That happened.
Though ultimately, you are right. We are all complicit in this genocide. We should do something about that.
When has any US president not been friendly towards Isreal, no matter what the IDF is doing?
That’s irrelevant to whether I love Biden or not.
I can just as easily hate the United States lol
My point is voting for Trump to spite Biden isn’t going to improve the situation with Isreal and its neighbors. If anything it’ll make it even worse.
So your point is irrelevant and off topic? I’m not voting for Trump and I didn’t even mention voting.
Well if everyone else is doing it, it must be okay!
Tolerance does not equate to love.
I wouldn’t love living under a dictatorship. Sorry to put my own needs and my family’s needs first.
Okay even if you’re voting for Biden, you don’t have to love him and that’s what this is about.
Ah yes, I forgot Biden is personally committing genocide in a country he’s not president of.
He personally bypassed Congress to send them more weapons.
So you’re ignoring the vote yesterday when 72/100 senators voted to continue supporting the war? How is that bypassing Congress when Congress approved it. And I assume you think Trump will do a better job? Well maybe you’ll get what you’re wishing for and we’ll end up in a Christian dictatorship. I’m sure that’ll be soooooooo much better than what we have now.
That’s the bully pulpit in action; Democrats lining up behind their President.
And I assume you think Trump will do a better job?
I didn’t even mention anything about voting. We’re talking about whether you should love Biden.
Unfortunately our choices are Biden and Trump.
Biden is not perfect, but when compared to Trump I sure do love him. When compared to Obama or Carter? Not as much.
But we don’t get a 3rd choice in America, we get to pick whether we like Biden or Trump more, and if you don’t like Biden enough to not vote for him, you better fucking love Trump.
Is it fair that those are our choices? No.
But life isn’t fair, so you better figure out which one you hate more.That’s irrelevant to the discussion! We were talking about why people don’t love Biden, not about voting.
You don’t have to love Biden to vote for him, and as a corollary, you don’t have to love Trump to not vote for Biden. I completely understand people who hate Biden and still choose to vote for him. They don’t believe there’s another choice and I know why they think that way. I am not commenting on how people should vote.
What I don’t understand are the freaks that love Biden. What the fuck?
That’s still 3 dollars more than what it should be, but I like that we’re moving in the right direction.
How about no overdraft fees? You know what we should do to people who have no money? Charge them more money.
How about no overdraft fees?
I mean, this is the same argument with student debts that we had four years ago.
You’ll get some Harvard snob issue a white paper explaining how overdraft fees disproportionately affect middle-income people (ie, people with bank accounts) and therefore eliminating them is regressive. You’ll hear a bunch of hemming and hawing from banksters, about how this will destroy jobs and create enormous amounts of bank fraud and actually technically increase fees for everyone else which isn’t fair to them. And then you’ll see a court issue some briefing about how this violates the Farts McGee clause of the Jefferson draft of the Declaration of Independence, so it isn’t an enforceable bureaucratic change in states that contain a vowel.
Finally, we’ll get ten thousand Op-Eds arguing “Overdraft Fees Are Good Aktuly”, and in six weeks I’ll be on the phone with my mother asking whether China is trying to undermine the banking system by tricking Joe Biden into defunding her mortgage. Overdraft fees will double by 2025, the Leftist Radicals in the Democratic Party will get blamed, and Donald Trump will win in a landslide thanks to “Bankrun Biden” memes that have inundated social media in the last six weeks of the race.
Overdraft fees should just be illegal. Bank knows how much money is in there. Don’t allow withdraw if it’s insufficient.
What happens if you have $5 in your account and visit two stores and purchase something for $4 in each store? Not all stores process transactions immediately. Is the store supposed to just accept the loss and the bank doesn’t honor the transaction? I think if it’s a credit based debit card overdraft has to be a thing in order for this to work.
What happens if you have $5 in your account and visit two stores and purchase something for $4 in each store?
Then your bank sees the first transaction, does some very rudimentary math, sees the second transaction and says “Not enough in account to complete purchase” and bounces the card.
This already exists for bank cards in the form of a maximum line of credit. If you have a $500 line of credit and you try to purchase two $300 widgets on credit, I guarantee you that the second transaction will fail to go through. But if you have a $500 bank balance and try to do the same thing, you get an Overdraft Fee instead.
Why would you spend $8 when you only have $5?
Outside of fraud the only reason you’re account is going negative is from you spending money that’s not there. It’s not a “poor” fee, it’s a fee that banks are within their rights to charge you for spending money that isn’t yours.
People need to have some semblance of financial responsibility, it’s not society fault that they spend money they don’t have
Outside of fraud the only reason you’re account is going negative is from you spending money that’s not there.
Because of the timing of credit to accounts, you can easily find yourself in a situation in which you have a $500 balance, a $300 deposit, $600 in charges, and an overdraft fee entirely due to the order in which the bank processes the transaction events.
Often, the events can be days apart and the bank still initiates the debts before the credits. As noted above, the bank may even initiate the transactions in reverse order of size, so that you get the maximal number of fees in a given rebalancing.
People need to have some semblance of financial responsibility
This isn’t a problem for people who use credit cards rather than debt cards. Credit cards have a set credit balance and if you try to spend more than the balance the transaction simply fails. Since you pay the card off once a month, you don’t have a dozen different transactions hitting your account in a particular order. So your maximum exposure, against the most bad-faith of banks, is one overdraft fee a month.
But credit cards are issued based on credit history. If you’re opening your first bank account and you don’t start with a high balance, you won’t get one. So fucking with debt cards isn’t a sign of financial responsibility, its a sign of financial predation.
It’s a form of scam. Any conversation of responsibility ultimately has to recognize the bank as a predator. Otherwise, you’re just setting people up to get preyed upon.
Not all stores process transactions immediately.
They can, if they choose to do so. You say not all process transactions immediately, but I don’t know of any that process offline card transactions.
Is the store supposed to just accept the loss and the bank doesn’t honor the transaction?
If they choose not to process the transaction immediately, yes, pretty much. They can retry the transaction periodically until it goes through, or they can use the payment information they have to identify the buyer and demand payment.
Would be insanely risky to process a day’s worth of transactions offline, precisely because of the risk that transactions would bounce. Hell, the whole reason credit cards exist is to defer this risk. Businesses pay 2-3% of the transaction value to avoid this risk.
Not particularly risky. I mean, they did it all the time back in the day, with both cards and checks. You had all the information you needed to send the buyer to collections, and/or make a criminal complaint.
I mean, they did it all the time back in the day, with both cards and checks.
Writing a bounced check is incredibly easy, and a big reason why lots of businesses refused to accept checks even at the height of their popularity.
Same with early credit cards.
Overdraft is a service you can turn on and off at most banks. If it’s turned off, it works exactly as you described and the transaction is rejected for lack of funds
Why should it be illegal when you can just tell the bank to turn it off? Serious question.
The ability to turn it off is, itself, a consequence of the Consumer Protection Financial Act. Biden is using the same legal language to implement a change in the maximum fee.
I had a paycheck bounce once. It bounced 3 days after the money was added to my account. Woke up to a -500is ballance. When the paycheck bounced, bank of America charged a retroactive 35 overdraft fee to each transaction I had made.
The thing I don’t see anyone talking about is how you can either go in and tell your bank to no longer allow your account to go in the negative making it so your funds just stop and can’t spend more negating overdraft fees. Or, like I did go in and open a credit line specifically designed to withdraw when you overdraft. This also negates the fee. It does accrue interest like any credit if you are unable to pay it back when it’s due but still you don’t have overdraft fees. Like overdraft fees are just lazy people tax. Not even poor people tax cause it’s super easy to get them to go away. 🙄
If I overdraft it pulls from another account that I have. I still get hit with an overdraft charge even though there was money in the other account to cover it. It’s not necessarily as simple as you say.
You could bring up the argument of changing banks, but aside from that one issue, the bank I use has done really well by me, to include reversing a debit (not credit) card charge when there was a bad charge.
Realistically, the overdraft charge should be eliminated and banks just shouldn’t allow the charges to go through unless there is a separate account that has money to cover it.
It’s actually worse than just debits before credits. It’s debits in reverse order of amount, then credits. So if you get your paycheck deposited in the morning, stop for gas, pick up a coffee, go shopping, go home and pay your utility bills and rent, they can order it so the rent goes through first, then the bills, shopping, gas and coffee all trigger separate overdrafts, then the paycheck is added last, stealing hundreds of dollars from you when you didn’t spend a cent you didn’t have.
Okay, yes, but counterpoint from my conservative relatives “Why were you simply not more responsible? I never have this problem.”
Why are overdraft fees even allowed?
If the account doesn’t have the funds, don’t allow the withdrawal.
If someone needs to borrow money, they will use a credit card.
I believe it’s a holdover that originated in the limits of technology in the past. Before the Internet or even dial-up card verification, purchases were made “on faith” if writing a check or paying with a card. The fees were there to prevent banking customers from abusing the pretendness of pretend pretend money. Without the discouragement, a person may go try to buy something at multiple places, and even if a vendor called the bank to verify funds were available, each time the bank would say, “oh yeah, funds are available,” until all the paper came back to the bank.
That being said, it’s the future, accounts can be verified and mathed upon instantly, and these fees have no place anymore, although I’m sure the banks will try and sell them as, “we’re just trying to help out the poor by allowing them needed money when they might not yet have it available, for a small convenient fee.”
Especially since the technology of today can mess up in such interesting ways…
My brother had enough to buy a fancy new laptop he had been saving up for, so he did, but the website goofed and accidentally processed the order TWICE… He canceled the second order and they refunded the money, but he still owed a fuckton in overdraft fees, and since the cancellation wasn’t instaneous and his bank charges him an extra fee ontop of the overdraft fee for every day his account is in the negatives…
Yeah he was fucked for awhile
Always use Credit for online purchases kids, the charges are far FAR easier to dispute if there’s a fuck up and it doesn’t overdraft.
My credit union isn’t great, but one time I was $600 short on my tuition payment and they let the transaction through and gave me a call later that day and asked when I expected to pay it back. I told them two weeks and they said “okay”. I’m not even sure I was charged anything.
FYI, only in the us.
In Europe a bank account has a 1000$ limit (like a cc) with its appropriate interest (bit less as cc). No lump fee tho
Is it still legal for them to hold drafts and post the biggest one first to cause people to incur more fees? If there are multiple pending transactions they should be required to post the one the user transacted first. So if I made 6 $5 purchases then later overdrew on a $100 purchase, but I had the money to cover the first 6 purchases, I should only get 1 fee. Whereas I believe it’s still legal for them to post the larger transaction first, overdraw you, then charge a fee on every other transaction even if you made them first. That’s some real bullshit.
Heck if overdraft fee’s are only 3$ I would have over drafted all day when I was younger. That’s free borrowed money
Honestly banks should just block debit cards and return checks if it’s short by any amount. Get rid of all that funny business all together.
