this post was submitted on 23 Oct 2023
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How do you overdraw? Shouldn't the payment just not go through if you don't have enough money?
Oh you'd think. I honestly don't understand what the criteria for it is. It just seems completely fucking arbitrary.
The worst thing is when you try to buy something online and don't have enough so your bank charges you an NSF (Non-Sufficient Funds) fee. Literally charging you money for not having enough money. That brings me down into the negative and suddenly I'm overdraft so what do they do? Charge me a fucking overdraft fee.
Fuck you Tangerine. A total of $80 in charges. Why? Because I only had $33.65 in the bank and the PS4 game I was trying to buy was $33.85. I messed up the math and thought I had enough. But yeah. I couldn't afford a $34 game so surely I can afford $80. Pricks.
And it’s also a “feature” when a bank is like “hey bro, I know you don’t have enough money to cover all these checks/charges that just came through, so I’ll cash the biggest first, then charge $35/each fir all the others even if they were first”
It's a "feature". Banks are like "hey bro, I know she don't have any money. We'll get you this time. But you're going to have to pay $35 for it. I could just not allow The purchase to go through but I know you really really want whatever you're about to purchase. So just go ahead and buy it and pay that $35 fee. No big deal." I know that some banks you can have them turn off overdraft protection so it'll just fail the transaction but usually overdraft protection is on by default.
I've actually tried to have the bank, on multiple occasions, cut me off when my balance hit zero.
They refused. But I can link it to my savings so they can charge me $5 to transfer $100 from my savings to prevent the $35 overdraft fee. No, they won't alert you when they are transferring it. Yes, they will keep perform multiple transfers until you deposit more money / your savings runs out.
I know the banks need to make money, but aren't there any legitimate ways they could do so without screwing people over in the process.
Yeah, that pisses me off. As part of getting my kids started on you’d financial habits, they really needed to not afford what they can not afford (especially while they’re at home so there’s no real consequences)
Oh there are. They make so much money before they extort their customers. You see, banks make their money by investing the cash that's deposited in them. They don't have to have liquid cash available for all of the funds for every single customer. They just have to have enough to cover their average daily withdrawal amount bank wide, which is a fraction of their total value.
The rest of their money goes into avenues specialized in making money off of money, eg., investing.
On top of that, banks are typically insured for money that they may not have, just incase they reach the limit of what they need vs what they have on hand. For amounts large enough per customer, that's a government insurance called FDIC.
So yes, they do have a legitimate way to make money, and it's the same way that banks have made money since the very first bank came into existence. They invest. But you know, capitalism demands that they ever increase they're profit margin. So not only are they making money by investing huge, unfathomable amounts of money and making the interest back, but they also have to squeeze their customers like ripe lemons to appease their own investors.
At most banks the ability to overdraw when you swipe your debit card is allowed on an opt-in basis. At many banks the default option is to allow the customer to overdraw with their debit card. At most banks the language around being allowed to overdraw in your account contract is intentionally confusing. You can usually change this selection online or in you bank app, but if you're confused call the help line on the back of your card. I don't advise going in to a branch, as the branch bankers are the ones with the incentive to get your money, the call centers actually don't care as much since the credit goes to the branches performance metrics.
At ALL banks certain payments will always be able to overdraw your account REGARDLESS of your opt-in/out selection. These are recurring payments for things like gym memberships or Netflix, paper checks, and many other forms of ACH payment.
An important note: this specifically affects checking/savings accounts and their DEBIT cards. CREDIT cards are different.
Source: Used to work in a bank branch and had to work my ass off every time I opened an account to ensure that people were aware of how and when they could overdraw bc banks want to steal your money and that's not cool.
Well, you see, you've opted-in to a service where, to save you the embarrassment of not being able to pay for something, the bank charges you $35. I'm sure it's in the fine print somewhere. /s
TBH, though, my bank lets me opt-out of it. They also let me tie in my savings account, so if I would overdraw my checking account instead they move money from savings and send me a note.
opt-out is bs. all things should be opt in if they are not gratis.
I'm not gonna defend banks very often, but in fairness, it's opt-out because most people prefer a $35 fee to having a payment rejected. There's multiple reasons for that:
Now to put on my "but fuck banks" hat:
The REAL problem, IMO, is that the fee amounts to usury and should be regulated like any other debt. In most cases, your overdraft is equivalent to thousands of percent interest on the overdraft amount. Some "more honest" banks will limit your fee to the total amount overdrawn, making only 100% in fees (still over 36,000% effective APR if it's all reconciled the next day). A few banks have come up with "small overdraft forgiveness" where they'll just bloody not charge you a $35 fee over a dollar or two (like the guy in another thread has). But the DDA/overdraft market is so badly regulated, they can basically do whatever they want and then can collude to keep you from opening a bank account with another bank.
I don’t know if that’s really true anymore. It certainly used to be true that this was a service when the fees were rare and consequences serious but this is another case of enshittification where the fees became a profit center so banks changed policies to charge more of them
That I'm on board with. I worked IT at a company that processed overdraft debt and it was a breeze because the Banks have disgusting amounts of leverage against the poor customer.
But I also think this is a case of "we don't care about the poor people, even enough to come up with ideas to hurt them". They came up with this process that works well for middle-class and provides reliable profits, and they won't actually look into the fact that it fucks with poor people because they don't care. A few banks were giving my previous employer up 40% of their overdraft revenue to collection companies for years without a second thought. It's not a lot of money for them, but it's profits and they don't care to change what makes money. And for most lower-middle-class folks, a rare fee because a bill doesn't quite overlap with a paycheck is "better than being SOL"
as long as they don't charge a fee every time that 'overdraw protection' is triggered like some banks.
Oh, they don't charge me anything to cover my overdraft with my own money. It's kinda nice. edit: it's also a privilege that I have enough savings that this is practical for me.