Read the fine print before you sign up for an account, and don’t let your account get overdrawn.
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SDS commenting on my post on overdraft fees.
The first problem with this advice is to “read the fine print.” It’s not that reading the fine print is a bad idea—it’s just that nobody does it. We skim over fine print every day. If we didn’t, we’d never do anything other than read fine print. If we did read the fine print, we (as a general rule) couldn’t understand it. If we could understand it, the banks generally reserve the right to change any of it with or without notice. And if the banks didn’t change the terms, there’s a better than even chance that they wouldn’t follow their own rules. That’s not how they roll. But leaving all that aside, we know that most people don’t read most of the fine print. Sometimes we pretend, as a legal fiction, that they do—or that only reckless or negligent people don’t read the fine print. In reality, reading the people who read all the fine print all the time aren’t prudent—they’re pathological. People should not need to wade through pages and pages of legalese to enter into basic consumer transactions.
The second problem is the “don’t let your account get overdrawn” part. First, I’ll echo SDS’s advice. Don’t let your account get overdrawn. But many people are going to let their account get overdrawn. Some are mentally disabled. Some are bad with finance. Some are just careless. And some do everything right but the bank rearranges credits and debits in order to hit them with multiple overdraft fees. (Example: Suppose you have $100 in an account. On Tuesday, you deposit $150, buy a $6 sandwich with a debit card, take out $20 at an ATM, buy a $0.50 cent pack of gum, and pay a $110 cable bill. The bank first credits the cable bill, putting you at -$10. It hits you with a $37 overdraft fee. Then it hits you with three more fees for the ATM, the sandwich and the gum. Then it credits you the $150. If the deposits had been ordered sensibly, you should have over $100. Instead, you’re significantly below zero and the bank imposes $8 fees every day until you figure out what happened.)
Overdraft fees don’t add any value. They’re not necessary or proportionate to any service rendered. And even if somebody screws up their banking, they shouldn’t pay a fee so high it’s either predatory or punitive.
People on fixed incomes who have worked all their lives and are still living next to poverty are having benefits directly deposited into their bank accounts. Maybe the spouse who normally handled the finance is dead—and they’re trying to make their way with the help of the nice people at the bank who are taking three or four hundred dollars in unearned overdraft fees every month. It’s unconscionable.
(via squashed)
