Author Topic: WSJ Article on Overdraft Fees  (Read 5634 times)

wajlee

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WSJ Article on Overdraft Fees
« on: April 02, 2014, 12:35:39 PM »
"Overdraft Fees at Banks Hit a High, Despite Curbs"  (You might have to Google the title to get around the WSJ paywall.)

I find it hard to believe, but this article claims that there were on average 7.1 "overdraft incidents" PER CHECKING ACCOUNT last year!  Revenues from overdraft fees were $31.9 billion in 2013.  By my calculation that is 0.2% of U.S. GDP being spent on overdraft fees!  How is that possible?  If it's true, then I can see the reason why Chase hands out $150 for opening a checking account.  I feel kind of guilty that the people who are most in need of financial education are subsidizing my "free" bank account.

Paul der Krake

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Re: WSJ Article on Overdraft Fees
« Reply #1 on: April 02, 2014, 01:16:42 PM »
Wells Fargo used to reorganize the transactions of the day to maximize the number of overdraft fees. There was a huge lawsuit, but I can't find definitive information on whether this is still allowed or not, it seems that it's the deceptive explanations that were struck down, not the practice itself.

Imagine you have $50 in your account at 8am.

- 9am: you buy coffee for $4, balance is now $46
- 10am: $3 for iphone app on itunes, balance now $43
- 11am: $10 for lunch, balance now $33
- 1pm: tank of gas, $60, overdraft! pay $35.

Instead the bank can decide to post the last transaction first, ensuring that the unsuspecting customer overdrafts exactly 4 times, or 35 * 4 = $140.




SwordGuy

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Re: WSJ Article on Overdraft Fees
« Reply #2 on: April 02, 2014, 01:28:14 PM »
1 incident = 1 check.

Write 10 end of month checks and bounce 7 due to the same mistake, you have 7 incidents

randymarsh

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Re: WSJ Article on Overdraft Fees
« Reply #3 on: April 02, 2014, 03:46:27 PM »
Wells Fargo used to reorganize the transactions of the day to maximize the number of overdraft fees. There was a huge lawsuit, but I can't find definitive information on whether this is still allowed or not, it seems that it's the deceptive explanations that were struck down, not the practice itself.

I don't know if the practice was made illegal, but I think many banks changed course when people starting realizing what they were doing.

I know my local bank will still process certain transactions ahead of others: http://www.consumerismcommentary.com/fifth-third-bank-changes-debit-procedure/


kittenstache

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Re: WSJ Article on Overdraft Fees
« Reply #4 on: April 02, 2014, 04:51:42 PM »
I have overdrafted a checking account only once in my life.
I was charged $14!
I called TD Bank, explained that this the first time I ever overdrafted, and could I please have my $14 back?
The $14 fee was quickly removed from my checking account  :)

.22guy

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Re: WSJ Article on Overdraft Fees
« Reply #5 on: April 02, 2014, 04:56:58 PM »
Wells Fargo used to reorganize the transactions of the day to maximize the number of overdraft fees. There was a huge lawsuit, but I can't find definitive information on whether this is still allowed or not, it seems that it's the deceptive explanations that were struck down, not the practice itself.

Imagine you have $50 in your account at 8am.

- 9am: you buy coffee for $4, balance is now $46
- 10am: $3 for iphone app on itunes, balance now $43
- 11am: $10 for lunch, balance now $33
- 1pm: tank of gas, $60, overdraft! pay $35.

Instead the bank can decide to post the last transaction first, ensuring that the unsuspecting customer overdrafts exactly 4 times, or 35 * 4 = $140.

Oooooh, that would piss me off.  I would never do business with a bank EVER again if they did something like that to me.

Zikoris

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Re: WSJ Article on Overdraft Fees
« Reply #6 on: April 02, 2014, 05:05:39 PM »
This seems like a really good reason to use credit cards rather than debit. Makes it essentially impossible for this to happen.

BigRed

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Re: WSJ Article on Overdraft Fees
« Reply #7 on: April 02, 2014, 06:24:51 PM »
Dodd-Frank made this practice illegal.  Banks have increased the fees per incident to try to make up for it.  Total overdraft revenues are down nevertheless.  They'll find other ways to extract money from their customers.  It's what they do.

simonsez

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Re: WSJ Article on Overdraft Fees
« Reply #8 on: April 03, 2014, 06:31:48 AM »
I have a friend who worked at BoA.  I was appalled when would tell me they were trained to maximize the fees by doing something similar to what others have mentioned (changing the order of charges to garner multiple fees).  The friend also warned me to never have a business checking account at the same bank I have a personal account.  Something about balance transfers that magically come out of the personal to pay the business, with an added automatic fee of course.  The friend said they would get bonuses based off the amount recouped by the checking account offsets and that many people were worse at manipulating than they were.  I mean hopefully if I was in that situation with business and personal accounts at a bank I wouldn't be late or overdrafting to begin with but that sounds pretty naive.

Winston

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Re: WSJ Article on Overdraft Fees
« Reply #9 on: April 03, 2014, 07:33:33 AM »
Earlier in the week, I received my first overdraft fee in years, due to my own stupidity (I paid a bill much earlier than usual, without realizing that other one-time debits were about to hit the account). This sort of overdraft *used to* cost $33, but WellsFargo charged me $10.50. My first thought was *whew, that's not so bad,* until it dawned on my that they just charged me $10.50 to move my own money from my savings account to my checking account >:(

exranger06

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Re: WSJ Article on Overdraft Fees
« Reply #10 on: April 03, 2014, 07:35:09 AM »
I keep roughly $3,000 in my checking account at all times. I've never overdrafted. :)

paddedhat

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Re: WSJ Article on Overdraft Fees
« Reply #11 on: April 05, 2014, 11:32:35 AM »
Oooooh, that would piss me off.  I would never do business with a bank EVER again if they did something like that to me.


Many moons ago, I was doing business with a very small, local bank and dropped my guard enough that they seized an opportunity to attempt to screw me with that scam. I had a mortgage with them, $26K in one account and ran another household checking account with a real tight balance. A miscommunication resulted in both my wife and I believing that the other had deposited our weekly paychecks. With an undernourished balance, the monthly bill checks started bouncing. The bank then decided to snail mail me a notice for each time they returned a check and removed $25 from our account. Once I received the first notice I headed down to the VP's office for a little "coming to Jesus" meeting. I asked if the $175 they stole on the first day had enough margin included for a 15 second phone call for a heads up?  "Sorry but our policy is to send a notice". I asked if he was aware that the dollar amounts were carefully arranged to bounce the maximum number of checks, and that I could of rearranged the same checks, on the same day, and left $100 in my pocket? He declined to answer. I asked if he felt any sincerely when he proclaims himself to be a contributing member of the community, at this local institution, when he clearly is engaged in screwing community members?   Once again, crickets........
    Then we covered how this deal was going to wrap. First, we are going to deposit the two missing paychecks. Next we are going to undo whatever damage was done to my finances, including any upcoming charges by those who received the NSF checks. Third we are going to remove our collective banking head from our ass, and give some thought to joining the first world and offer overdraft protection, and automatic account transferring that can prevent this from happening again. Finally, if this doesn't work for you, the $26K in my other account, and the mortgage will be at a competitor shortly.

Somehow, they seemed to find a way to work it out. Since then I have left this backwater circus, and never had a problem again.

KingCoin

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Re: WSJ Article on Overdraft Fees
« Reply #12 on: April 05, 2014, 11:04:43 PM »
Behold, the guy who uses GameStop as a "bank" to avoid overdraft fees:
http://kottke.org/14/03/the-first-national-bank-of-gamestop

It amazes me that someone could go through such amazing trouble yet lack the modicum of self-discipline that it takes to save up a small cash buffer in their checking account.