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.
overdraft fees only affect people who don’t have a lot of money. I remember being ruined by them as a college student several times. they should be illegal. let them figure out how to get the operating revenue from people with more capital.
I dropped Wells Fargo after they re-ordered my pending payments to maximize overdraft fees.
I’d actually overdrawn like 25 bucks after making a couple 3-5 dollar purchases followed by $50 purchase. They moved the big payment up front so each of those little payments incured a 30 dollar fee.
Fuck them.
This, never do business with Wells Fargo.
I had that happen too with BoA, a long time ago. My initial reaction was “how in the fuck is this legal?!”
Then I nearly blacked out as a torrent of un-forgotten media, of all the jokes, comedic hate, and disparaging sentiment towards banks, flooded back to my minds eye.
Sadly, my only answer to this problem was “make more money”, which really isn’t an answer at all. Later, I switched to a credit union, which I would have done earlier had I known that was an option.
I worked as a banker there in the early 2000s and those OD fees was brutal. I remembered when it went from $24 to $35 and how much it completely devastated people’s lives.
Right before I quit, ANYONE with an OD fee that I saw, I just reversed it without question. Then I got in trouble for reversing thousands of dollars before I was written up. I put in my 2 weeks after and in those 2 weeks kept on reversing charges.
I would tell people to not bank here when I worked there unless you have at LEAST 25k cash or investments or a mortgage over 250k. Otherwise, you’re going get FUCKED by fees.
Yeah, I remember when they hosted this whole festival in my town giving away free hotdogs and just going way over the top…
The fact that this was like a week after Wells Fargo was officially banned from doing business in California and really needed a good PR win likely had NOTHING to do with it… rolls eyes
My sister has an almost identical story with that bank.
Had U.S. Bank do that to me when I was a high-schooler on my first job. Time stamps on the transactions came in pending - next morning I had 2 overdrafts and fees to go with them. Cleared that account out the next day after getting them to waive the fees.
I’ve heard of shit like this, and not just from banks. A friend of mine had his insurance drop him without telling him, solely so they could send him a notice about it in the hopes that he’d renew and have to pay extra in “Coverage Gap” fees…
This shit needs to be illegal.
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.
Pretty sure banks already got smacked for this and structuring transactions to maximize fees is illegal now.
I got a few dollars from 5/3 bank cause of a class action for exactly this.
Okay, yes, but counterpoint from my conservative relatives “Why were you simply not more responsible? I never have this problem.”
Probably because they have enough money in their account to always have padding. People who live pay check to pay check don’t have that luxury.
Yes but what you’re not understanding is that living paycheque to paycheque is actually a sign of your moral degeneracy. The system is perfect and judges us all equally and fairly.
Yep. Around 2014 I was absolutely ruined by exactly this, and ended up having to drop out of college about it. Never did finish my degree. Over about half a year trying to get my finances back in order while being slammed with overdraft fee after overdraft fee after overdraft fee, I ended up “”““owing””“” Suntrust Bank something to the tune of like $1200 that they pulled out of their asses by reordering items. Meanwhile I’m overdrafting my account by $8 to get some ramen packs that I could eat for the next 2 weeks, knowing damn well this $8 case of maruchan ramen is going to end up costing me $43 after the overdraft fee. Legitimately the closest I’ve ever been to just killing myself to escape the grind.
They’re fucking lucky that all I did was settle up and close my account the following year, because they deserve arson, and I know some people that would have been more tempted to that than I was.
This is an awesome proposal that 99% of Americans can get behind and I can’t wait for our oligarchs to kill this legislation before it ever gets introduced to congress.
Sadly it’s not about helping the American people, it’s about Republicans making sure Democrats don’t get credit for helping the American people
How about no overdraft fees? You know what we should do to people who have no money? Charge them more money.
This is my issue with the whole “charging poor people for not having money” thing. The bank is a business and not a human right. However, most employers require you to have a bank account in order to be paid. Seems to me, if society needs you to have a bank account, it should be nationalized and mandated that everyone is to be given a fee-less bank account. The bank account could be administered by the government. Big banks can still exist and rich people can dump their money into those oil-investing sonsofbitches meat hooks till the cows come home.
But banking is free… Running out of money is not.
Yeah I’m in the same boat. But I can’t say the bank put the gun to my head and made me overdraft! I did that, yes, it’s due to my financial situation which is the result of everything else going tits up.
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.
Someone said how overdrafting is a thing you can turn on or off. Should be turned off by default. If you turn it on and overdraft, then I see no issue with having a fee.
When I was younger, I was literally living paycheck to paycheck. This was back in the day when you were handed a physical check and had to cash it, so there was a time delay between you getting your money and having to buy things like food to not starve, or gas so you can fuel up your car and go to work so you don’t lose your job. I lost count of how many times I overdrafted by just a few dollars, or even a fistful of change. One especially egregious overdraft fee was the result of being overdrafted by $0.02. At one point in time, I called the bank and asked if they could forgive the penalties for accidental overdrafts of only a few dollars or a trivial sum of money spent on necessities. They told me to take a hike, pay the fees or else have my account closed and the balance sent to collections.
I realized I was losing so much money to overdraft fees so frequently that I asked my relatives to lend me some cash to use as a buffer, and only then was I able to finally dig myself out of that hole and get stable, saving the money that would otherwise be lost to frivolous fees to build my own pool of savings. But not everybody has loving and trusting relatives like I do. Some people are all on their own. Even though my financial situation has improved dramatically to the point where I will probably never had an issue with overdrafting ever again, I still want the practice outlawed completely. I hated it so much and I felt like the world was the most unjust place ever that these slimy fucking bankers could hustle someone they know for a fact is broke by burying them in fees and stealing money right from out of their pockets when they got paid.
I’ve been in that situation too. It’s so frustrating to me that the banks are essentially robbing poor people, knowing that they’re poor.
The worst was when some banks would reorder their transactions so everything posted before your paycheck. Even though I’d make my deposit before writing checks for rent, insurance, phone bill etc, magically all those clear before the deposit then I’d be like -$700 in the red before payday again. I went to the bank (TCF, now Huntington) to plead my case but they didn’t care. I closed my account there and went to a more reputable bank. Never was a problem again. Now the practice of banks reordering transactions is illegal, I believe.
The issue isn’t necessarily the amount. People shouldn’t overdraw their accounts and it seems prudent for the banks to charge for giving you an impromptu quick loan.
The issue is how fees are applied. Let’s say someone overdrew their account for $100. To get there, they had six miscellaneous debits totaling $75, and their rent check, which all hit their account on the same day. Rather then settle it in time order, they decide to settle the largest first, under the theory that customers want their largest checks to have the best chance of clearing in this situation. But the rent check puts them under, incurring a fee, but then when all six miscellaneous debits hit, they each incur a fee also! If the fee is $30, that’s $210 just in fees! Even at $3, though, that customer is still paying $21 in fees. But if they processed the rent check last, the account would have only overdrawn once.
If used to be that if there wasnt enough money in the account, the check bounced. Maybe we should go back to that. But if people want overdraft protection, the bank should be limited to just one charge in a statement period. Then they can keep it at $30, but customers don’t risk escalating fees just because of the order in which banks process charges.
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But the bank didn’t support instant savings transfers and took a couple days to transfer the funds.
In case you, or others run into this in the future, know that cash (at almost every bank) posts to your checking account immediately. So for our situation if you were able to go back time and do this again, go into the bank and do a cash withdraw from savings, get the cash in hand, then hand it right back to them as a cash deposit to checking.
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Nobody wants to risk escalating fees, but these escalating fees amount to 18, rather than $150.
This is a positive step forward
I misunderstood this entirely.
Not to go on the “we have it better here”… But it hasn’t occurred to me you guys get charged a fee per transaction, that’s wild. My bank, if i go into an overdraft, will charge a % of what i owe after 24h of not clearing it. There’s no “pay X because you went under”. I pay interest on what i owe to the bank per day till i clear it.
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 was me a few years back, pretty much guaranteed to get a few overdrafts per month, just the cost of being poor. But I use a credit union and they actually called to ask if I would like to cancel the “overdraft protection” so that my card would simply be declined if I didn’t have the funds. I said no… getting my insurance canceled or being embarrassed at the grocery store didn’t seem like a better plan than consistent over draft fees. It’s very hard to live right on the margin like that.
Lucky you. I keep trying to get that for my kids, so they learn early not to overdraft with no luck. At one point I had managed to get that set up for my accounts but then got a little ahead so use another account for overdraft protection
It was me too at one point. Spending a few years in banking was very educational and changed my whole perspective on money. Bankers treat money in a way you just don’t see anywhere else, since money is THE commodity in banking.
In short: the value of a dollar is not in the dollar itself. The value is in what you can get out of that dollar. Every dollar you have is either A.) Earning you money, B.) Doing Nothing, or C.) Costing you money.
The worst possible thing anyone can do, in my opinion, is to not know where their money is going. Tracking finances is intimidating to a lot of people. It forces them to face situations that can be filled with anxiety. Especially when they don’t have a lot of money. But it’s a critically important step to financial wellness. You can’t make decisions about how to spend your money when you can’t see what you’re doing with it.
I started tracking my finances a decade ago and I will tell anyone that the money I’ve spent on personal finance/accounting software is one of the best investments I’ve ever made. That small expense has paid for itself many times over. Whatever system you use doesn’t have to be super complex or expensive. All that matters is that it helps you achieve your goals.
Reposting this from below because I think more people need to see it-
If this works, making overdraft fees $3 is fucking huge.
Some points, directly from the Consumer Financial Protection Bureau:
• Among households that frequently incurred overdraft/NSF fees, 81% reported difficulty paying a bill at least once in the past year.
• Among consumers in households charged an overdraft fee in the past year, 43% were surprised by their most recent account overdraft, 35% thought it was possible, and only 22% expected it. Consumers who overdraft infrequently are more likely to be surprised by a fee
• While just 10% of households with over $175,000 in income were charged an overdraft or an NSF fee in the previous year, the share is three times higher (34%) among households making less than $65,000.
Yeah, I’ve only wrote a handful of checks in my life, and I always saw straight through the “we offer to fuck you, for your benefit!” bullshit. Decline their “offer” whenever available, the only one who benefits is the bank. If I don’t have enough money now, I don’t want the transaction to be approved and get fucked with a $35 fee “for my benefit”, and I don’t want to be hit with a second fee “for my benefit” when that becomes an “extended overdraft” when - now I know this is hard to believe but - if I don’t have money on day 1, I’m very likely to not have money on day 5.
Also, back when banks could more openly fuck you with a smile, BofA would process transactions in this order: debits, then credits. This would cause accounts to fall negative for minutes or even seconds as they processed the pending transactions, and BofA raked in fees. I was a very vocal pain in the ass for my local branch managers, and had that bullshit removed each time, but I had the time to go sit in a shitty crowded bank for an hour and bitch at whoever until I got my $35 back. Anyone with a 9-5 would be fucked.
Banks as a profit center can suck my ass. I’ve been a “member” of about 20 banks, and there are only 4 I like(d), one of which got acquired by a big bank and the fee list quadrupled while the features were slashed. Be very carefully about where you store your money - thieves are often eager to shake your hand.
Heck if overdraft fee’s are only 3$ 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.
It’s not free borrowed money but I’m sure someone with poor financial literacy may see it that way (which is like the majority of young people). If you over drafted $30 it is a 10% fee, and that’s every time you run your card buying something. It’s a fee you will pay with your future potential wealth.
My parents removed overdraft from my account after my sister overdrafted her card all the time in HS. It should not be on by default and it should be legally mandated that you have to sign a waiver understanding that overdraft is a shitty fee designed to keep you from ever building wealth or savings.
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My problem when i was younger was i didn’t pay attention much to my bank account and would unknowingly overdraft. So i would get hit with 10 over draft fees out of nowhere for buying gas here, a pop there, a drink at a restaurant, just small charges that if i were smart didn’t need and would have just done what you did. It’s the un anticipated overdrafts that killed me when i was younger.
Agreed. That’s an option on my acct. Unfortunately it doesn’t stop majority of those with poor financial literacy to go nuts with it. It would be best if the option did not exist at all.
The idea of “owing” has changed a lot the last 100 years. Used to be ok to have a little debt. Meant you weren’t going anywhere, you were part of the community, invested. Thats changed now that you owe some obscure billionaire or hedge fund down the line. Means nothing. Changing the idea of how we handle debt as opposed to not letting people acquire it feels more appropriate.
Do they charge a flat fee in the US for overdrafting your account instead of absurd interest on the overdrawn amount?
Typically yes… Even my Credit Union has a $35 fee for the first overdraft in a given time frame and then it goes up by $5 for each subsequent overdraft in that same period.
The same credit union will, as a courtesy, refund up to 3 overdraft fees per year but only if you call in and basically beg a customer service rep because you’re aware of the policy.
Do they not? I know I’ve had my debit card bounced before. Maybe it’s just a thing with my bank. Only thing they’d do is transfer money from a savings account, charging you 15 dollars instead of nothing if you’d done it yourself.
Biden might be a senile old fuck, but this is a good thing.
The list of good things he’s done is getting very, very long. Too bad most Americans have the political memory of a knat.
That’s still 3 dollars more than what it should be, but I like that we’re moving in the right direction.
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.
The President can just do that?
What the hell are these other guys been doing for the last few decades?
Without trying to turn this into a political discussion, the reason the Biden administration can do this is because of work the large majority of Congressional and Senate Democrats (and only 3 Republican Senators) did with the Obama administration passing the “Dodd–Frank Wall Street Reform and Consumer Protection Act” in 2010.
One of the things that law did was create a new part of US Government called the Consumer Protection Financial Bureau (CPFB). This bureau did a bunch of stuff you likely enjoy today.
So the Biden Administration is able to work with the now-existing CPFB to put in place these great protections for consumers
Thanks Obama
This is nice an all, but when do we get universal healthcare?
