I’ll stop preaching soon, but this one drives me insane.
If you overdraw your account you are essentially taking a short-term, high interest loan (depending on the amount of shortage, but typically ranges from 16%-1700%). Overdraft fees are a generous source of revenue for big banks (classified as >$1billion) to the tune of about $35 billion per year.
The whole scam is hidden in fine print, driven by ignorance, and is deemed unnecessary with even a modest amount of foresight and planning.
If you’ve ever overdrawn your account like millions of Americans do every year, you’ve contributed to the “something for nothing” nonsense and have fallen prey to a minor league hustle on a major league scale. I’d rather lose my money to a game of 3 Card Monty on the 181st Subway platform than to these assholes. At least those scams are entertaining.
There are easy ways to protect your account, but some banks advertise “protection” that amounts to coverage of non-sufficient funds vs. no coverage. This doesn’t necessarily protect you from the $35 fee that automatically hits for every transaction as each bundles onto your account often drawing multiple fees. Some banks allow you to link another account as insurance. If nothing else, do this.
As you may have guessed, lower income families and young people pay for a larger portion than higher income households indicating that the people who can afford it least end up paying out roughly 60% of the annual revenue.
I stopped using a debit card as much as possible although I get paid through direct deposit (no other option of payment for me). I withdraw almost all of my money after I have paid everything I want to pay for the period and pocket the rest in cash. This is an extreme case of mostly opting out of the system while maintaining a bank account that some people may not be comfortable with.
Some people never use a debit card and use a Rewards-based credit card instead then pay the entire balance every month. I think you have to be very regimented to not get stung by this, but it’s entirely possible to game this system if you’re diligent. It’s not my style, though.
Whatever your method, this has to stop. I am tired of feeding industries that create nothing and offer nothing of value. Banking should be very boring and very solid. There is nothing wrong with capital markets when it’s done transparently and slowly, but this practice is ridiculous because it is leveraging complexity, ignorance, and short-term thinking that prevails in American culture. Enough is enough.
Here’s another good account of the game.
{ 3 comments… read them below or add one }
My parents are militant with their credit cards, using them for virtually everything then paying them off monthly, and have gone on vacations and remodeled the house with the money they get from simply beating the credit card companies at their own cynical game.
By no means revolutionaries, I salute them, however for sticking it to the credit hustle and turning the financial industry’s own greed against it.
My parents are militant with their credit cards, using them for virtually everything then paying them off monthly, and have gone on vacations and remodeled the house with the money they get from simply beating the credit card companies at their own cynical game.
By no means revolutionaries, I salute them, however for sticking it to the credit hustle and turning the financial industry’s own greed against it.
I would also like to add that if one is smart enough to Twitter, you are able to run any number of simple account software to track and project your balance on a mothly basis to avoid averdrawing your account. There is simply no excuse for anyone out there to pay these fees without some kind of extenuating circumstances. Too many people make it easy for banks to abuse them and their money through sheer laziness and irrespnsibility.
I don’t want to be too harsh. It’s certainly individual responsibility, but we live in a system purposely designed to suck up all sorts of energy. $35 seems like no big deal a few times per year, but add that up with hordes of hidden fees, taxes, and other nonsense and soon you’re being bleed dry and can’t understand why.
Suddenly, you can’t figure out why you’re going backwards and a person can get close to the edge very quickly. It’s the proverbial frog being boiled slowly.
I encourage people to starve the beast out of defiance. They’ve had enough and deserve no more.
Thanks for the comments. My parents are also very militant with their credit, and it works for them. I just don’t like swiping plastic, so avoid it whenever possible.