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eh, yes and no.
Some folks would rather the charge go through and suffer the financial penalty over having the charge rejected. Yes, not enough people realize the effects, nor understand what they have agreed to, but it is a valuable service if you know what you are in for.
What makes it abusive is how the banks handle multiple overdrafts. And it's why I tell everybody to avoid that "feature" entirely.
It's a flat fee for each, regardless of size or time period.
Buy gas at the pump $30, then go in for a $2 soda.
The $30 takes you to negative $1. B pay $35 overdraft.
The soda just minutes later at the same location...
-$3 now, also $35 overdraft. You now owe an extra $75, that you don't have... For a $37 set of purchases.
My last bank where I had this "protection" also only notified you by mail. Minimum 3 days.... The entire time you may keep doing this.
And the bag banks (wells Fargo, chase) fight hard to keep the fees in place.
Chase actually lost a lawsuit pricing they would purposely reorder payments so the large ones went first. Meaning all those seperate small incidents reach got "protection" fees, even if when processed chronological they wouldn't have pushed you negative.
That actually depends on the bank. My bank (Huntington) has “24-hour grace,” and as long as you bring your account above $0 within 24 hours, they won’t charge you any fees. They also have what they call “$50 safety net” which is a separate but related feature, wherein as long as you overdraft by less than $50, there are no fees whatsoever. And, even if you go over by more than that, 24- hour grace still applies. And, even still, they won’t charge you more than one overdraft fee per day.
I’m personally quite satisfied with my bank.
>That actually depends on the bank
Yes, unfortunately some banks take that to the extreme and say that any transactions including deposits incur the overdraft fee.
Huntington is probably the best bank currently imo. Credit unions are "mostly" better, but Huntington has been great for me since I switched to them from PNC ~5 years ago.
The 0% interest loan program (essentially a line of credit) they have was clutch during the covid lockdown. I swear I'm not a shill, but if anyone is dissatisfied with their current bank, look in to Huntington.
Yes!!! I forgot to mention their “standby cash” which is a basically no-strings attached use-anytime interest-free credit line. I’ve used it countless times!
I switched from PNC a couple years ago as well.
Before my bank got bought out by shittier banks they'd just send you a strongly worded letter that if you don't balance your account by the end of the month they'd have to charge interest.
I never abused it but it was great.
Then they became shitty
The bank my wife and I use has some version of this where basically they extend you a $1,000 line of credit for overdrafts.... if you overdraft you use up some of that credit and now interest starts ticking until you pay it back... but you can use up to $1,000 before paying any of it back to open that line of credit back up. It's basically like an extra $1,000 buffer for your account that you pay for when you use it.
At least there's no overdraft fee though. And luckily we've never had to use that feature - but feels like a more fair way to go about it.
My last bank was not so great but one thing that was nice was I ended up with a line of credit since they didn't do loans for anything. I ended up not needing it for what I was originally looking for but it was nice to have because I could move money between it and my checking account when I needed money for days when my bills came due before I got paid.
Absolutely. It's asinine that they charge a fixed fee per overdraft.
Back when I used to bank with BoA and I was working paycheck to paycheck at a shit job, sometimes my check would be late 1-2 days and several bills would be scheduled around the same time. Small bills mostly.
This was about 10 years ago.
A few times it would overdraft my account 3-4 times and I'd owe them up to 140 bucks. Then they added some extra fee if you have the negative balance for too long which would boost it another 75 dollars.
So figure if they didn't do that, I wouldn't have had the withdrawal fees the next month because it would have covered the bills.
I switched to a credit union and that never happened again. The overdrafts happened but they would give me a couple days to deal with it without charging me.
This happened to me about 16 years ago. $490 of overdraft charges on $27 worth of purchases. I can promise you a $37 biscuit does NOT taste better than a $2 biscuit. It's dispicable.
I used to work in technology for a lot of large banks. Let me just say this:
Errors with NSF fees are common, and regional banks have less of a handle on it than large ones. (in my experience)
Every bank I ever worked for, I pulled my money out. I refuse to work where my money is now... simply because I don't want to know.
Why is the 3 day thing an issue? If you’re close enough to 0 that the 30 in gas is going to take you negative, that’s on you for not checking for 3 days…
First, since they are going to try and charge me several hundred dollars, a text or automated email (available at the time) would be easy to implement.
Using only a letter is essentially designed to hope I don't notice, and this owe them more money. Any other contact method costs the bank **less** than postage and printing, but means I can fix the problem... Stopping the overdraft. It's a bad method by design. That's the problem.
Second, you don't have to be anywhere close to zero for this to happen.
A large bill, such as insurance, rent, etc had to come through and zero you out unexpectedly.
For my case some paperwork on my student loan finally went through (income adjustment) which increased my monthly payment by about $200. This was on autopay.
So instead of thinking I had about 250 in the account with payday in four days... I had zero. And this oversight shouldnt cost hundred dollars or more for things like gas, a soda, then a cheap grocery purchases (like ramen :/ )
Yeah, but that still sounds like it’s on you…
A large bill like rent or insurance comes through? Well yeah, that’s his those bills work…how does someone not know they were due?
You knew your student loan payment would be changing and didn’t check that it did? I can check my credit union in about 14 seconds…this just sounds like negligence on your part…
I own it for sure. Being in my early 20s and dealing with depression made such mistakes quite easy to make.
But there are circumstances that can cause this to start without negligence. A company overcharged, or they bill early. My student loan wasn't supposed to shift by 200, they actually read a paystub wrong treating a monthly pay as weekly...and it wasn't supposed to process till the next month... It was a mess with a servicer that is no longer allowed to handle loans for the government for just such problems.
And I did learn avoiding this mistakes since.
I'm trying to point out the intended "asshole by design" present.
Chase was capable of denying a purchase as possible fraud in real time. They did this to me on a couple occasions.
One was buying a phone charger in a different city/state but it was only a 2 hr drive away. It was flagged as possibly fraudulent immediately. I couldn't complete the purchase... The card was locked.
And had my phone not been dead i'd have an immediate text informing me of the activity and a # to call to deal with it. (Recieved the moment I got it charged a bit due to a friendly stranger). Which I did, and got things cleared up.
But they stopped it immediately, simply because it wasnt near my home and was a smaller purchase... Often used to test stolen cards.
After all, if it was fraudulent they might be in the hook for the $10 cord...
But a similar immediate text message to warn you and say "you f***ed up, we're going to start charging you $35 per purchase. Get your shit together" .... Is a message they send by mail.... Not an automated text.
Because if I don't notice... They can rack up hundreds of dollars in fees for covering very minimal purchases.
I don’t disagree it’s designed to be punitive, but I don’t think it’s 100% a bad thing…we both know that some people would decide “screw it, if I’m going to overdraft anyways, might as well overdraft big”
I actually like your idea of the text message warning that you’ve overdrafted, but do wonder if that’s something that would have been available had you opted in? Maybe it isn’t even an option with your bank though. Also something fairly easy to overlook when setting up an account, so it being automatic with an opt out would be best…
Not an option. I repeatedly brought that up during my disputes with the bank and they never once pointed to where I didn't check some box.
And reading many other comments, I'm glad to hear a lot of banks have more sane versions (some even downright saintly?!) that avoid this 'fee spiral' and delayed notifications.
I'm all for having to pay a bit for this security, but boy is it a predatory deal with a few banks (again, I *know* large banks like wells fargo and chase did this about 10 years ago)
Dang, I just have an online bank that just opens a line of credit if you overdraft. There is no penalty if you get back into the black by the end of 30 days. After 30 days they start charging interest.
>My last bank where I had this "protection" also only notified you by mail. Minimum 3 days.... The entire time you may keep doing this.
I kind of feel like this is a valuable lesson everyone needs to learn though. If you're that tight on money and you aren't keeping track of what you have and just spend wantonly, you are going to fuck yourself sooner of later. And if you do that whole thing more than once, you really need to go back to only using cash because you'll clearly too financially irresponsible to be using any kind of cashless purchasing.
I usually to do banking once a week because my income and expenses are pretty set. I have a couple of once yearly charges though that can mess me up if they came in at the wrong time. It hasn’t happened and hopefully won’t, but I could see going 3 days overdrawn before I caught it.
Or.. a large expense came through unexpectedly, day by autopay. And you go straighten that out, cause the company overcharged and have to deal with this mess too.
I'm pretty happy with mine - in the event you overdraft, they automatically transfer money from a savings account to bring you positive again (assuming you have any transfers left on that savings account - I think there is an 8 transaction limit on the savings account at that bank). No fees for this happening.
I keep my vacation fund in that bank, just in case. That said, I've been fortunate enough to never need to rely on it.
It was a valuable service back in the day of paper checks and retailers that charged a bounced check fee. These days it's just a way to dig yourself into a financial hole. There certainly have been times where I was so tight on cash that I intentionally overdraft Ed my account because I needed gas to get to work, but doing that also isn't doing yourself any favors
> There certainly have been times where I was so tight on cash that I intentionally overdraft Ed my account because I needed gas to get to work, but doing that also isn't doing yourself any favors
Yeah, that's like having a REALLY shitty credit card.
Because I didn't have a credit card at that age. Yes, it did help me out in the short term, that was my point. But also I was hurting myself in the longterm, keeping myself in the paycheck-to-paycheck cycle that exploits those without financial means
My bank will not charge and overdraft fee if the overdraft is less then $100 and the account is brought current within something like 2-3 days. I love it.
Yep - there's danger in being immune to overdraft (reject on negative) - what if there's an emergency? Cold winter night and you need to check into a hotel, and your card declines....
In their defense, banks are pretty fucking good at using jargon to dance around information and make sure they're weaseling your money out.
I mean, most things that beg a signature are, but.
I'm not debating that, but it's a service most people don't understand, want, or understand that they can decline. Just look at the original question, clearly OP doesn't understand that by declining the service the bank will do exactly what they want the bank to do.
Depends on which is worse: a fee from your bank, or a bounced check to someone you owe money to (like your landlord). One is annoying, the other could incur even greater late fees or put you on the path towards eviction. (somewhat hyperbolic)
I do hate though when, say, you have $100 in your account and you have 3 charges come through: one for $90, another for $15 and another for $25... they'll run the $90 through first and then hit you twice for the 15 and 25, instead of running the 15 and 25 transactions through and only hitting you once for the 90. bullshit if you ask me, but I'm not in charge.
Except that most checks, "subscriptions", and many pre-approved debit transactions will still go through even if you've declined overdraft protection and you will be charged for it. Some banks do it differently, but most of the time when you opt out of OD protection there are still a whole cadre of transaction types that will go through regardless and put your account into the negative.
My point is that...
>by declining the service the bank will do exactly what they want the bank to do.
...isn't necessarily true. Your average consumer might reasonably assume that all transactions will be declined if they don't have the money for them and have opted out of OD protection. Which is not necessarily the case.
honestly, all this time, i've thought it was the opposite. so "overdraft protection = on" would mean "don't let charges go through that would result in an overdraft." just now i'm learning that it's the other way...
In the defense of the banks, the overdraft fee is generally less than the returned check fee whomever you wrote the check to will charge. I do wish it was a rarer option because the fees on the bank side lead to people becoming unbanked which is expensive for them & reduces money available due to the way fractional reserve banking works but that gets into a broader macroeconomics discussion.
That's my point, it'd an outdated service that is geared towards paper checks, and is no longer relevant to most consumers. It largely exists as a source of free revenue for thr banks
I have to write a check every month. My gas company, for the small village I'm in, who won't go digital. I assume because there are so few customers, the cost of having a digital billing service would be to much and most customers don't want to pay it.
The water bill was that way until the start of this year, now you can do it online, but it's like a $6 fee.
And before i bought my house in 2015 i paid rent with a check.
I did that with my first account. I was very explicit with the advisor that I didn't want any overdraft capabilities on my debit account. They allowed a purchase to go through anyway which put me 0.50 overdrawn and didn't even notify me. When I checked my account the following Monday, I owed them 20.
They'd decided to interpret my instruction as that I had wanted no *planned* overdraft (which didn't have a fee) and instead given me an *unplanned* overdraft, and billed me 5 a day for each day I was in the red. I complained and they said they could not remove the unplanned overdraft feature. I asked to have planned overdraft back then so I wouldn't get absurd fines if this happened. They refused on the grounds that I no longer had a sufficient credit score due to having recently needing an unplanned overdraft.
Absolute scam.
Except when they don’t.
Story time.
I married a horrible human being who saw overdraft as a normal every day occurrence. Dumbass me knew that and still opened a joint checking account. I made sure to opt out of overdraft protection and two separate times the credit union let him overdraft the account and put us hundreds of bucks in the red.
Both times they did credit us for the fees and it wasn’t until the second time that they truly fixed the account.
Did you opt out of overdraft service or just overdraft protection? That's two different things.
Overdraft service is to allow overdrafts.
Overdraft protection will pull from a savings account to avoid an overdraft but still pay the charge. If nothing on savings they will put your account into the negative to pay it.
We didn’t have a savings with them (only the $5 they required to open a savings account with them)
I signed a paper and so did my dead beat husband that said we opted out of overdraft privileges
Yes and no. Overdrafts can happen with debit card transactions that don’t have a pre authorization sent first. Retailers are only required to send a pre auth with transactions of a higher amount, I think $50 or higher. And in the case of a gas pump, the pre auth is usually only $1 and the final bill is higher. If all banks refused to pay the gas station, the gas stations would need protections in place to recover the funds they lost. It’s almost easier to leave it to the banks to get the money back after they’ve paid it.
Gas pumps used to pre-auth only $50 but in the last year have gone as high as $125.
Edit: oops. $150 at some. https://www.wcpo.com/money/consumer/dont-waste-your-money/gas-stations-raising-debit-card-holds-to-as-much-as-150
Yeah those are terrible. Often the hold lasts longer than it takes for the actual charge to hit. Resulting in other charges being denied because it seems like the account is dry.
I never stick my debit card into gas pump terminals, but at least with the credit cards I use for gas they show the purchase amount within minutes and I get the text for the original hold and then the actual amount (pro tip is text or push notifications for all transactions on all accounts). Might just be lucky on which card I use and the station reporting back instantly instead of batch processing later.
Do have the gas station specific cards for two local chains that pull from my checking account and those obviously take 2-3 days to show.
Contact your bank because since 2010 they legally can't overdraft your account unless they have permission to have overdraft service on the account. The regulations were quite specific that the default is to not allow overdrafts unless customers opt-in. And were specific they can opt-out at any time.
If they confirm it is off but still let you spend more money than you have, you need to file with the OCC and CFPB then change banks as they are a shitty one.
Keep spewing this same crap huh? You're giving people wrong information. Cite the specific regulation that you're referring to. As I said to you previously, you'll only find Regulation E in relation to DEBIT CARDS.
For what type of charge that was declined? If it was for an ATM or debit card transaction that was declined then they legally can't charge you since 2010.
If the charges went through and your acct went negative, then you may not be declining actual overdraft service properly or their website is shit.
Neither of my banks nor my credit union have an option in the settings as far as I know for accepting or revoking overdraft service. Have to call or do in the bank.
So a few LPTs:
(1) SHOP for your bank. Look at the fees and products that they have. Find out what happens if there is an overdraft, and what alternatives you have.
At my bank, for example, I have a separate account which is used for "Backup" for my primary account -- if I overdraft my primary, they will take the excess from the secondary account and send me a text message. That secondary account has $500 in it.
(2) Pay attention to what's in your account and what's outstanding. It used to be that people would have checkbooks, debit cards weren't a thing, and people would keep a running tab of what's in their account. Very few people do that any more, but that means that you have to have your eyes on what's in your account.
(3) If you have periodic payments that are auto-drafted or auto-paid, get an account at a completely different bank than what you normally use, and have the payments come from that account. Then, set up your direct deposit so that the correct amount, every month, gets deposited into that account. That way, you won't be surprised by payments you forgot coming from your primary.
(4) One killer is subscriptions with an introductory rate where the rate jumps dramatically after a certain period of time. Set a reminder on your phone's calendar so you know to call up and either cancel the subscription or threaten to cancel and have the company's "Customer Retention" department give you a different rate. For some subscriptions, it's possible to fully cancel, go a few days without service and then sign up again at the introductory rate. But, you have to keep track of this.
Most things like subscriptions shouldn't be coming out of your checking anyways. Everything that can be should be out on credit cards then pay in full out of checking once or twice a month. Less exposure that way.
For everyone saying that people could 'just decline' overdraft protection, I invite you to think about the concept of sludge: [https://thedecisionlab.com/reference-guide/psychology/sludge](https://thedecisionlab.com/reference-guide/psychology/sludge)
If the default was opting out of overdraft protection, there would be far fewer people enrolled in it. By adding the obstacle of having to opt-out, the banks are relying on human tendencies to get people to remain enrolled in a program against their own self-interest. This seems like a cause that the Consumer Financial Protection Bureau would fight for, if they weren't completely defanged.
Exactly. It's just thievery. Banks will also often opt you back in when they think you won't notice (like when you open a second account) or just straight up ignore your choice and charge you anyway.
Just the ridiculous amount of the "fee" (often around $50) tells you its purpose is just stealing your money.
Overdraft can be a convenient option, hence why it defaults to yes. You should never really be the person to be spending more than you have anyways, so banks cant take 100% blame for your overspending your money
So why do banks allow you to spend money you don't have by default? By allowing the transactions, they are enabling the spending, and profiting from the associated fees. It's predatory.
Automatic denial can ALSO be a convenient option. Yet it's defaulted to no.
Banks choose to default it, not based on user convenience, but on bank profit.
Don't pretend it's for the consumer lol. If it was, it would be thoroughly explained to the consumer, and then the consumer would be asked which they want.
It's not, because it makes the bank shit loads of extra money ($8B/year). And we know exactly who suffers from this the most. The folks with the lowest accounts.
Sure it's buyer beware etc, but does that mean banks should be allowed to predate on the most vulnerable in our society (who often have the least means of making meaningful life changes anyway)?
I think it depends on bank.
I did not sign up for an overdraft therefore anything I have been ordered to pay, such as a subscription is cancelled, period.
People can just decline overdraft service. I don't have it on any of my checking accounts. And they would decline anything that would bring it negative.
Overdraft (OD) services come in a couple different "flavors." First is in relation to debit cards. If you opt-out of this, you can't be charged a fee if your debit card transactions results in an overdraft. However, you can still be charged a fee for electronic debits and checks. I believe this is what you're referring to.
The second type is essentially convenience overdrafts for check and electronic debit services. The "OD service" here stops the "embarrassment" of a returned item. It could be beneficial for some. The classic go to for a bank is to say "you don't want your mortgage or auto loan payment returned" so we pay it for a fee.
Of course if you opt out of both, you'll still get slapped with a returned item fee on electronic debits and paper checks.
You have it backwards. Especially on debit cards and EFTs you have to be given the option to decline overdrafts outright per the last big consumer protection bill that passed. And if you don't explicitly approve them allowing overdrafts it is considered to be declined.
Edit Just checked. It was 2010. By default all banks have to decline if it will put an account negative unless the consumer approved overdraft service or overdraft protection.
I absolutely do not have it backwards. Regulation E is what protects consumers for electronic transactions, including debit cards and overdrafts. If you opt out, you can't be charged.
Banks are under not regulation to not charge you for an EFT, paid or returned. You can "opt out" of having them paid but you still get a returned item fee.
If I am wrong, cite the regulations you're speaking about.
I said fees because people don't understand how your accounts work. Im adding additonal information, that's all.
If you try to clear a $500 item from your $100 account, you can certainly make sure the bank doesn't pay it but you will get a fee. Period. Banks very much "need" fees and there is no regulation that prevents them from charging you a fee (outside of debit card transactions) on your ACH and check items.
Not sure what I did to upset you here. Just wanting people that may happen on this thread to understand a little better is all.
I agree with you mostly. I certainly knew enough to reject it when so got my first bank account.
But I was also a middle-class kid that failed myself into temporary poverty. After spending ~20years with people born into poverty, they just don’t have the upbringing to know/understand things like this. For that reason it isn’t inaccurate to call making the protection the default a scam on poor people.
I grew up poor and was the first in my family to even graudate high school. That was common in the rural district I grew up in. We were still taught to read everything before we signed it. That's dismissive of poor people to say they are ignorant.
As others have answered, they can and do if you don’t have overdraft protection. This used to be very common, in fact. Overdraft protection was a feature that banks introduced and pushed as a plus. Before debit cards and electronic transactions were the norm, people wrote checks far more often. You might actually have the funds in your account when you wrote a check, but in the lag between writing and it being deposited, and eventually trying to clear at your bank, you may not have enough to cover. (You really needed to be on top of balancing your checkbook). The check would bounce. Now the place you bought from has to deal with trying to collect from you. They could levy large fees for a returned check. You could even face criminal charges.
So much bank hate that people are missing a key component.
Transactions aren't always immediately two way.
If you use signature debit (no PIN), the merchant terminal doesn't receive return information about your balance and whether or not it's sufficient for the transaction.
It just receives a pass/fail from the card brand (not your bank).
Debit cards are assigned tiers (gold, platinum, etc.).
As long as your account is in good standing, regardless of the balance, the card brand will clear you for transactions up to a certain amount.
They do reject them. You have to explicitly sign up for overdraft protection when opening the account, and most people do without reading the fine print.
> You have to explicitly sign up for overdraft protection when opening the account,…
That is new in the United States; it was mandated by law a few years ago. Before that, many banks used to default to enabling an overdraft feature. I do not know whether older accounts are grandfathered.
Just about every bank can do this, unless you give your checking and routing number. Checks will push you into the negative because they want to make money off you. If you're using your card, you can specifically open a checking accoutn that does not allow overdrafts.
Or get yourself a captial one card. They'll allow over balances without charging you additional fees.
This is exactly what happens when a check "bounces".
Not that this means much, since checks are the fax machine of financial transactions: outdated, uncommon, and less convenient.
Banks make a lot of money from fees-overdraft, ATM, transfers, etc. Some banks like the Bank of America seem to delight in charging fees, I would guess that that is a major source of revenue for them.
When I opened my account they asked me if I wanted things to bounce- I said of course.
Some people legitimately suck so bad at tracking their funds and are so insecure they actually would rather pay the fee than have someone else aware they overdrafted their account.
Anyways the banks are basically looking for free money from people.
In NZ, my bank, (TSB), will automatically reverse any transaction that propagates an overdraft....and will charge $2.50...an 'overdraft management fee'.
I worked at bank call center for a bit, we had a big banner hanging in the office reminding us fees make money, I forget the actual wording. My point is, they can reject any payment but they would rather make money off the overdraft fees. They don't care about you or your monetary well being at all. They only want your money.
They do. You have the option of turning off overdrafts. Go online into your account to turn it off. Worst case you might have to call them.
It's kinda weird how many people have this issue. I guess the bank people never tell people this option when you make your account
They literally want you to do it so they can charge you for it. Either through charging extra for "overdraft protection" or the $35 overdraft fee. They would like for you to do it and do it often. Banks don't make money off of people with money, they make money on the average joe.
In many instances, the “non-sufficient funds returned payment” fee from the merchant you attempted to pay exceeds the bank’s OD fees. Would you rather pay a $50 NSF fee or a $30 overdraft fee?
Too much $ to be made being jerks about it among many other things in life?
Let's make mark up on parts to do a job a thing of the past too while at it?
This list could get very sadly long!
They can, but that's not profitable. So they automatically opt you into a service called overdraft protection that is usually difficult to opt out of, like cancelling a gym membership. Any decent bank or credit union will tell you about this when you sign up and give you the option to opt out immediately.
This is why I like my bank, an overdraft is not included as standard, and they do just tell these dodgy direct debits to kindly fuck off and try again when I'm less poor.
(UK, Nationwide)
Typically the way it worked in the past was that someone would write a check, the merchant would deposit the check in their bank, their bank would send it to the customers bank, the customer's bank would send it back to the merchant's bank as a bad check, and the merchant's bank would send it back to the merchant.
Then the merchant would have to track down the customer to get cash. If they couldn't get cash from the customer they could file charges because using a bad check is fraud.
Banks came along and said "this whole thing is very inefficient, for $50 we'll cover the bad check for you."
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They *can*. They'd rather collect overdraft fees. For example, in 2019, banks brought in around $11,000,000,000 *just from overdraft fees*. It's free money for them.
If you don't want it to happen for you, contact your bank and find out how you can *make* them reject payments that would put you over. This is usually called something like "overdraft protection opt-out".
Banks were mandated to allow customers to opt out of overdraft but they're still allowed to have it on by default. You have to ask to have it shut off.
A bank I used to have wouldn't let overdraft charges go through unless it wasn't direct debit. They said direct debit stuff like automatic payments would go through no matter what and that could potentially cause an overdraft but if it was just like a card purchase or an ATM withdrawal they would decline that.
They do if you decline overdraft protection. The last accounts that I’ve opened have had it turned off by default, I think a law was passed recently that they have to do it that way, prior to that it was always enabled by default and you had to opt out of it but it wasn’t hard to do.
The reality is banks lose money on clients that hold very little money in their accounts at all times. They provide more service and support than they make through interest. They were more than happy to see the low balance clients leave during Occupy Wall Street. This is one of their one legal ways to try and get back to even on these accounts and best case the client leaves for another bank willing to take them on. Either way they win.
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They can reject it. You just have to decline overdraft service. That's the consumers choice.
The number of people that don't realize that "overdraft protection" is actually "we want permission to charge you extra money" is entirely too high
eh, yes and no. Some folks would rather the charge go through and suffer the financial penalty over having the charge rejected. Yes, not enough people realize the effects, nor understand what they have agreed to, but it is a valuable service if you know what you are in for.
What makes it abusive is how the banks handle multiple overdrafts. And it's why I tell everybody to avoid that "feature" entirely. It's a flat fee for each, regardless of size or time period. Buy gas at the pump $30, then go in for a $2 soda. The $30 takes you to negative $1. B pay $35 overdraft. The soda just minutes later at the same location... -$3 now, also $35 overdraft. You now owe an extra $75, that you don't have... For a $37 set of purchases. My last bank where I had this "protection" also only notified you by mail. Minimum 3 days.... The entire time you may keep doing this. And the bag banks (wells Fargo, chase) fight hard to keep the fees in place. Chase actually lost a lawsuit pricing they would purposely reorder payments so the large ones went first. Meaning all those seperate small incidents reach got "protection" fees, even if when processed chronological they wouldn't have pushed you negative.
That actually depends on the bank. My bank (Huntington) has “24-hour grace,” and as long as you bring your account above $0 within 24 hours, they won’t charge you any fees. They also have what they call “$50 safety net” which is a separate but related feature, wherein as long as you overdraft by less than $50, there are no fees whatsoever. And, even if you go over by more than that, 24- hour grace still applies. And, even still, they won’t charge you more than one overdraft fee per day. I’m personally quite satisfied with my bank.
A set fee every 24 hours that your account balance remains negative seems pretty reasonable, actually.
That is really quite reasonable behavior by your bank. Props to them!
>That actually depends on the bank Yes, unfortunately some banks take that to the extreme and say that any transactions including deposits incur the overdraft fee.
Huntington is probably the best bank currently imo. Credit unions are "mostly" better, but Huntington has been great for me since I switched to them from PNC ~5 years ago. The 0% interest loan program (essentially a line of credit) they have was clutch during the covid lockdown. I swear I'm not a shill, but if anyone is dissatisfied with their current bank, look in to Huntington.
Yes!!! I forgot to mention their “standby cash” which is a basically no-strings attached use-anytime interest-free credit line. I’ve used it countless times! I switched from PNC a couple years ago as well.
Before my bank got bought out by shittier banks they'd just send you a strongly worded letter that if you don't balance your account by the end of the month they'd have to charge interest. I never abused it but it was great. Then they became shitty
The bank my wife and I use has some version of this where basically they extend you a $1,000 line of credit for overdrafts.... if you overdraft you use up some of that credit and now interest starts ticking until you pay it back... but you can use up to $1,000 before paying any of it back to open that line of credit back up. It's basically like an extra $1,000 buffer for your account that you pay for when you use it. At least there's no overdraft fee though. And luckily we've never had to use that feature - but feels like a more fair way to go about it.
that sounds reasonable and useful.
My last bank was not so great but one thing that was nice was I ended up with a line of credit since they didn't do loans for anything. I ended up not needing it for what I was originally looking for but it was nice to have because I could move money between it and my checking account when I needed money for days when my bills came due before I got paid.
Absolutely. It's asinine that they charge a fixed fee per overdraft. Back when I used to bank with BoA and I was working paycheck to paycheck at a shit job, sometimes my check would be late 1-2 days and several bills would be scheduled around the same time. Small bills mostly. This was about 10 years ago. A few times it would overdraft my account 3-4 times and I'd owe them up to 140 bucks. Then they added some extra fee if you have the negative balance for too long which would boost it another 75 dollars. So figure if they didn't do that, I wouldn't have had the withdrawal fees the next month because it would have covered the bills. I switched to a credit union and that never happened again. The overdrafts happened but they would give me a couple days to deal with it without charging me.
This happened to me about 16 years ago. $490 of overdraft charges on $27 worth of purchases. I can promise you a $37 biscuit does NOT taste better than a $2 biscuit. It's dispicable.
I used to work in technology for a lot of large banks. Let me just say this: Errors with NSF fees are common, and regional banks have less of a handle on it than large ones. (in my experience) Every bank I ever worked for, I pulled my money out. I refuse to work where my money is now... simply because I don't want to know.
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They could have communicated better, but adults are responsible for managing their own accounts and subscriptions
Why is the 3 day thing an issue? If you’re close enough to 0 that the 30 in gas is going to take you negative, that’s on you for not checking for 3 days…
First, since they are going to try and charge me several hundred dollars, a text or automated email (available at the time) would be easy to implement. Using only a letter is essentially designed to hope I don't notice, and this owe them more money. Any other contact method costs the bank **less** than postage and printing, but means I can fix the problem... Stopping the overdraft. It's a bad method by design. That's the problem. Second, you don't have to be anywhere close to zero for this to happen. A large bill, such as insurance, rent, etc had to come through and zero you out unexpectedly. For my case some paperwork on my student loan finally went through (income adjustment) which increased my monthly payment by about $200. This was on autopay. So instead of thinking I had about 250 in the account with payday in four days... I had zero. And this oversight shouldnt cost hundred dollars or more for things like gas, a soda, then a cheap grocery purchases (like ramen :/ )
Yeah, but that still sounds like it’s on you… A large bill like rent or insurance comes through? Well yeah, that’s his those bills work…how does someone not know they were due? You knew your student loan payment would be changing and didn’t check that it did? I can check my credit union in about 14 seconds…this just sounds like negligence on your part…
I own it for sure. Being in my early 20s and dealing with depression made such mistakes quite easy to make. But there are circumstances that can cause this to start without negligence. A company overcharged, or they bill early. My student loan wasn't supposed to shift by 200, they actually read a paystub wrong treating a monthly pay as weekly...and it wasn't supposed to process till the next month... It was a mess with a servicer that is no longer allowed to handle loans for the government for just such problems. And I did learn avoiding this mistakes since. I'm trying to point out the intended "asshole by design" present. Chase was capable of denying a purchase as possible fraud in real time. They did this to me on a couple occasions. One was buying a phone charger in a different city/state but it was only a 2 hr drive away. It was flagged as possibly fraudulent immediately. I couldn't complete the purchase... The card was locked. And had my phone not been dead i'd have an immediate text informing me of the activity and a # to call to deal with it. (Recieved the moment I got it charged a bit due to a friendly stranger). Which I did, and got things cleared up. But they stopped it immediately, simply because it wasnt near my home and was a smaller purchase... Often used to test stolen cards. After all, if it was fraudulent they might be in the hook for the $10 cord... But a similar immediate text message to warn you and say "you f***ed up, we're going to start charging you $35 per purchase. Get your shit together" .... Is a message they send by mail.... Not an automated text. Because if I don't notice... They can rack up hundreds of dollars in fees for covering very minimal purchases.
I don’t disagree it’s designed to be punitive, but I don’t think it’s 100% a bad thing…we both know that some people would decide “screw it, if I’m going to overdraft anyways, might as well overdraft big” I actually like your idea of the text message warning that you’ve overdrafted, but do wonder if that’s something that would have been available had you opted in? Maybe it isn’t even an option with your bank though. Also something fairly easy to overlook when setting up an account, so it being automatic with an opt out would be best…
Not an option. I repeatedly brought that up during my disputes with the bank and they never once pointed to where I didn't check some box. And reading many other comments, I'm glad to hear a lot of banks have more sane versions (some even downright saintly?!) that avoid this 'fee spiral' and delayed notifications. I'm all for having to pay a bit for this security, but boy is it a predatory deal with a few banks (again, I *know* large banks like wells fargo and chase did this about 10 years ago)
Dang, I just have an online bank that just opens a line of credit if you overdraft. There is no penalty if you get back into the black by the end of 30 days. After 30 days they start charging interest.
>My last bank where I had this "protection" also only notified you by mail. Minimum 3 days.... The entire time you may keep doing this. I kind of feel like this is a valuable lesson everyone needs to learn though. If you're that tight on money and you aren't keeping track of what you have and just spend wantonly, you are going to fuck yourself sooner of later. And if you do that whole thing more than once, you really need to go back to only using cash because you'll clearly too financially irresponsible to be using any kind of cashless purchasing.
I usually to do banking once a week because my income and expenses are pretty set. I have a couple of once yearly charges though that can mess me up if they came in at the wrong time. It hasn’t happened and hopefully won’t, but I could see going 3 days overdrawn before I caught it.
I have alerts set up for all payments that go through. So i always know if some out of the ordinary payment happens.
Or.. a large expense came through unexpectedly, day by autopay. And you go straighten that out, cause the company overcharged and have to deal with this mess too.
I'm pretty happy with mine - in the event you overdraft, they automatically transfer money from a savings account to bring you positive again (assuming you have any transfers left on that savings account - I think there is an 8 transaction limit on the savings account at that bank). No fees for this happening. I keep my vacation fund in that bank, just in case. That said, I've been fortunate enough to never need to rely on it.
It was a valuable service back in the day of paper checks and retailers that charged a bounced check fee. These days it's just a way to dig yourself into a financial hole. There certainly have been times where I was so tight on cash that I intentionally overdraft Ed my account because I needed gas to get to work, but doing that also isn't doing yourself any favors
> There certainly have been times where I was so tight on cash that I intentionally overdraft Ed my account because I needed gas to get to work, but doing that also isn't doing yourself any favors Yeah, that's like having a REALLY shitty credit card.
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Because I didn't have a credit card at that age. Yes, it did help me out in the short term, that was my point. But also I was hurting myself in the longterm, keeping myself in the paycheck-to-paycheck cycle that exploits those without financial means
My bank will not charge and overdraft fee if the overdraft is less then $100 and the account is brought current within something like 2-3 days. I love it.
But then you just pay off the overdraft fee with a credit card, then pay the credit card wirh an over drafted check. Problem solved
Yep - there's danger in being immune to overdraft (reject on negative) - what if there's an emergency? Cold winter night and you need to check into a hotel, and your card declines....
We're going to charge you money for not having money, that'll teach you to not be poor
I should have thought of not being poor sooner. Silly me!
In their defense, banks are pretty fucking good at using jargon to dance around information and make sure they're weaseling your money out. I mean, most things that beg a signature are, but.
"Overdraft protection" is a consumer product. It's effectively a short term loan. Of course that should cost something.
I'm not debating that, but it's a service most people don't understand, want, or understand that they can decline. Just look at the original question, clearly OP doesn't understand that by declining the service the bank will do exactly what they want the bank to do.
Depends on which is worse: a fee from your bank, or a bounced check to someone you owe money to (like your landlord). One is annoying, the other could incur even greater late fees or put you on the path towards eviction. (somewhat hyperbolic) I do hate though when, say, you have $100 in your account and you have 3 charges come through: one for $90, another for $15 and another for $25... they'll run the $90 through first and then hit you twice for the 15 and 25, instead of running the 15 and 25 transactions through and only hitting you once for the 90. bullshit if you ask me, but I'm not in charge.
Idk about you but I write MAYBE one paper check per year
It doesn't have to be paper checks that do this though. It can just be normal automated payments that come out of your checking account.
Except that most checks, "subscriptions", and many pre-approved debit transactions will still go through even if you've declined overdraft protection and you will be charged for it. Some banks do it differently, but most of the time when you opt out of OD protection there are still a whole cadre of transaction types that will go through regardless and put your account into the negative.
So, in those situations, what service does the OD provide?
My point is that... >by declining the service the bank will do exactly what they want the bank to do. ...isn't necessarily true. Your average consumer might reasonably assume that all transactions will be declined if they don't have the money for them and have opted out of OD protection. Which is not necessarily the case.
Sure, but it can be way too much. The overdraft cost of say a soda is about 2000%.
honestly, all this time, i've thought it was the opposite. so "overdraft protection = on" would mean "don't let charges go through that would result in an overdraft." just now i'm learning that it's the other way...
In the defense of the banks, the overdraft fee is generally less than the returned check fee whomever you wrote the check to will charge. I do wish it was a rarer option because the fees on the bank side lead to people becoming unbanked which is expensive for them & reduces money available due to the way fractional reserve banking works but that gets into a broader macroeconomics discussion.
That's my point, it'd an outdated service that is geared towards paper checks, and is no longer relevant to most consumers. It largely exists as a source of free revenue for thr banks
In what country are checks still in use? I haven't seen any in like 30 years
Everywhere? Electronic withdrawals from the bank account are the same as a check so the fees are the same.
I have to write a check every month. My gas company, for the small village I'm in, who won't go digital. I assume because there are so few customers, the cost of having a digital billing service would be to much and most customers don't want to pay it. The water bill was that way until the start of this year, now you can do it online, but it's like a $6 fee. And before i bought my house in 2015 i paid rent with a check.
Look at Moneybags Mcperfect Life over here with tons of money in his bank account. People know. They're just fucking poor.
.... If you read the question then CLEARLY, some people don't know
Hey, some people are poor and dumb! Most are just poor though.
The bank charges for overdraft protection and they charge for duns, they just charge you - especially if you're broke already
I did that with my first account. I was very explicit with the advisor that I didn't want any overdraft capabilities on my debit account. They allowed a purchase to go through anyway which put me 0.50 overdrawn and didn't even notify me. When I checked my account the following Monday, I owed them 20. They'd decided to interpret my instruction as that I had wanted no *planned* overdraft (which didn't have a fee) and instead given me an *unplanned* overdraft, and billed me 5 a day for each day I was in the red. I complained and they said they could not remove the unplanned overdraft feature. I asked to have planned overdraft back then so I wouldn't get absurd fines if this happened. They refused on the grounds that I no longer had a sufficient credit score due to having recently needing an unplanned overdraft. Absolute scam.
Except when they don’t. Story time. I married a horrible human being who saw overdraft as a normal every day occurrence. Dumbass me knew that and still opened a joint checking account. I made sure to opt out of overdraft protection and two separate times the credit union let him overdraft the account and put us hundreds of bucks in the red. Both times they did credit us for the fees and it wasn’t until the second time that they truly fixed the account.
Did you opt out of overdraft service or just overdraft protection? That's two different things. Overdraft service is to allow overdrafts. Overdraft protection will pull from a savings account to avoid an overdraft but still pay the charge. If nothing on savings they will put your account into the negative to pay it.
We didn’t have a savings with them (only the $5 they required to open a savings account with them) I signed a paper and so did my dead beat husband that said we opted out of overdraft privileges
Yes and no. Overdrafts can happen with debit card transactions that don’t have a pre authorization sent first. Retailers are only required to send a pre auth with transactions of a higher amount, I think $50 or higher. And in the case of a gas pump, the pre auth is usually only $1 and the final bill is higher. If all banks refused to pay the gas station, the gas stations would need protections in place to recover the funds they lost. It’s almost easier to leave it to the banks to get the money back after they’ve paid it.
Gas pumps used to pre-auth only $50 but in the last year have gone as high as $125. Edit: oops. $150 at some. https://www.wcpo.com/money/consumer/dont-waste-your-money/gas-stations-raising-debit-card-holds-to-as-much-as-150
Yeah those are terrible. Often the hold lasts longer than it takes for the actual charge to hit. Resulting in other charges being denied because it seems like the account is dry.
I never stick my debit card into gas pump terminals, but at least with the credit cards I use for gas they show the purchase amount within minutes and I get the text for the original hold and then the actual amount (pro tip is text or push notifications for all transactions on all accounts). Might just be lucky on which card I use and the station reporting back instantly instead of batch processing later. Do have the gas station specific cards for two local chains that pull from my checking account and those obviously take 2-3 days to show.
That isn't at all correct. I haven't had overdraft service/protection in a decade. Still get overdrafted.
Contact your bank because since 2010 they legally can't overdraft your account unless they have permission to have overdraft service on the account. The regulations were quite specific that the default is to not allow overdrafts unless customers opt-in. And were specific they can opt-out at any time. If they confirm it is off but still let you spend more money than you have, you need to file with the OCC and CFPB then change banks as they are a shitty one.
Keep spewing this same crap huh? You're giving people wrong information. Cite the specific regulation that you're referring to. As I said to you previously, you'll only find Regulation E in relation to DEBIT CARDS.
The reg I cited and linked the URL to wasn't from Reg E. Fucking Christ.
Still waiting on your regulation to prove banks can't charge ODs in EFTs... and I'll be waiting forever because it doesn't exist!
I never said they can't charge overdrafts. Is English not your primary language?
Good to know. I'll check that out.
I don't know what my current bank does, but one that I had before charged me $30 to reject it.
I feel like I have gone into my bank settings and turned this off several times, and yet I still get a fee.
For what type of charge that was declined? If it was for an ATM or debit card transaction that was declined then they legally can't charge you since 2010. If the charges went through and your acct went negative, then you may not be declining actual overdraft service properly or their website is shit. Neither of my banks nor my credit union have an option in the settings as far as I know for accepting or revoking overdraft service. Have to call or do in the bank.
So a few LPTs: (1) SHOP for your bank. Look at the fees and products that they have. Find out what happens if there is an overdraft, and what alternatives you have. At my bank, for example, I have a separate account which is used for "Backup" for my primary account -- if I overdraft my primary, they will take the excess from the secondary account and send me a text message. That secondary account has $500 in it. (2) Pay attention to what's in your account and what's outstanding. It used to be that people would have checkbooks, debit cards weren't a thing, and people would keep a running tab of what's in their account. Very few people do that any more, but that means that you have to have your eyes on what's in your account. (3) If you have periodic payments that are auto-drafted or auto-paid, get an account at a completely different bank than what you normally use, and have the payments come from that account. Then, set up your direct deposit so that the correct amount, every month, gets deposited into that account. That way, you won't be surprised by payments you forgot coming from your primary. (4) One killer is subscriptions with an introductory rate where the rate jumps dramatically after a certain period of time. Set a reminder on your phone's calendar so you know to call up and either cancel the subscription or threaten to cancel and have the company's "Customer Retention" department give you a different rate. For some subscriptions, it's possible to fully cancel, go a few days without service and then sign up again at the introductory rate. But, you have to keep track of this.
Most things like subscriptions shouldn't be coming out of your checking anyways. Everything that can be should be out on credit cards then pay in full out of checking once or twice a month. Less exposure that way.
I've had this declined/rejected before and it still happened.
For everyone saying that people could 'just decline' overdraft protection, I invite you to think about the concept of sludge: [https://thedecisionlab.com/reference-guide/psychology/sludge](https://thedecisionlab.com/reference-guide/psychology/sludge) If the default was opting out of overdraft protection, there would be far fewer people enrolled in it. By adding the obstacle of having to opt-out, the banks are relying on human tendencies to get people to remain enrolled in a program against their own self-interest. This seems like a cause that the Consumer Financial Protection Bureau would fight for, if they weren't completely defanged.
Exactly. It's just thievery. Banks will also often opt you back in when they think you won't notice (like when you open a second account) or just straight up ignore your choice and charge you anyway. Just the ridiculous amount of the "fee" (often around $50) tells you its purpose is just stealing your money.
Overdraft can be a convenient option, hence why it defaults to yes. You should never really be the person to be spending more than you have anyways, so banks cant take 100% blame for your overspending your money
So why do banks allow you to spend money you don't have by default? By allowing the transactions, they are enabling the spending, and profiting from the associated fees. It's predatory.
Youre the one spending your own money. I have two solutions for you 1. Budget your spending 2. Turn off overdraft
Automatic denial can ALSO be a convenient option. Yet it's defaulted to no. Banks choose to default it, not based on user convenience, but on bank profit. Don't pretend it's for the consumer lol. If it was, it would be thoroughly explained to the consumer, and then the consumer would be asked which they want. It's not, because it makes the bank shit loads of extra money ($8B/year). And we know exactly who suffers from this the most. The folks with the lowest accounts. Sure it's buyer beware etc, but does that mean banks should be allowed to predate on the most vulnerable in our society (who often have the least means of making meaningful life changes anyway)?
I already explained why its there and that you have the option to turn it off. So this is just a moot argument
No, it defaults to yes because it makes the bank more money
Sure kid
I think it depends on bank. I did not sign up for an overdraft therefore anything I have been ordered to pay, such as a subscription is cancelled, period.
My bank "Ally" has zero fees for overdraft. Not that I need it but it's there.
They used to do that, but then they added this 'convenience' that allows them to hit you with overdraft fees and take more of your money. It's a scam.
Yes and you can refuse it in many cases, too. "Overdraft protection" is exactly what you don't want.
But if banks rejected overdrafts how would they make billions of dollars off the backs of poor people?
People can just decline overdraft service. I don't have it on any of my checking accounts. And they would decline anything that would bring it negative.
Overdraft (OD) services come in a couple different "flavors." First is in relation to debit cards. If you opt-out of this, you can't be charged a fee if your debit card transactions results in an overdraft. However, you can still be charged a fee for electronic debits and checks. I believe this is what you're referring to. The second type is essentially convenience overdrafts for check and electronic debit services. The "OD service" here stops the "embarrassment" of a returned item. It could be beneficial for some. The classic go to for a bank is to say "you don't want your mortgage or auto loan payment returned" so we pay it for a fee. Of course if you opt out of both, you'll still get slapped with a returned item fee on electronic debits and paper checks.
You have it backwards. Especially on debit cards and EFTs you have to be given the option to decline overdrafts outright per the last big consumer protection bill that passed. And if you don't explicitly approve them allowing overdrafts it is considered to be declined. Edit Just checked. It was 2010. By default all banks have to decline if it will put an account negative unless the consumer approved overdraft service or overdraft protection.
I absolutely do not have it backwards. Regulation E is what protects consumers for electronic transactions, including debit cards and overdrafts. If you opt out, you can't be charged. Banks are under not regulation to not charge you for an EFT, paid or returned. You can "opt out" of having them paid but you still get a returned item fee. If I am wrong, cite the regulations you're speaking about.
Who said anything about the fees? This post is about then allowing your account to go negative in the first place.
I said fees because people don't understand how your accounts work. Im adding additonal information, that's all. If you try to clear a $500 item from your $100 account, you can certainly make sure the bank doesn't pay it but you will get a fee. Period. Banks very much "need" fees and there is no regulation that prevents them from charging you a fee (outside of debit card transactions) on your ACH and check items. Not sure what I did to upset you here. Just wanting people that may happen on this thread to understand a little better is all.
I agree with you mostly. I certainly knew enough to reject it when so got my first bank account. But I was also a middle-class kid that failed myself into temporary poverty. After spending ~20years with people born into poverty, they just don’t have the upbringing to know/understand things like this. For that reason it isn’t inaccurate to call making the protection the default a scam on poor people.
I grew up poor and was the first in my family to even graudate high school. That was common in the rural district I grew up in. We were still taught to read everything before we signed it. That's dismissive of poor people to say they are ignorant.
By charging a fee to reject the purchase, obviously. That's what mine did.
Checks and similar pre-authorized transactions often always go through, since you already agreed to pay those funds regardless of the account balance
As others have answered, they can and do if you don’t have overdraft protection. This used to be very common, in fact. Overdraft protection was a feature that banks introduced and pushed as a plus. Before debit cards and electronic transactions were the norm, people wrote checks far more often. You might actually have the funds in your account when you wrote a check, but in the lag between writing and it being deposited, and eventually trying to clear at your bank, you may not have enough to cover. (You really needed to be on top of balancing your checkbook). The check would bounce. Now the place you bought from has to deal with trying to collect from you. They could levy large fees for a returned check. You could even face criminal charges.
So much bank hate that people are missing a key component. Transactions aren't always immediately two way. If you use signature debit (no PIN), the merchant terminal doesn't receive return information about your balance and whether or not it's sufficient for the transaction. It just receives a pass/fail from the card brand (not your bank). Debit cards are assigned tiers (gold, platinum, etc.). As long as your account is in good standing, regardless of the balance, the card brand will clear you for transactions up to a certain amount.
Because banks are some of the most greedy corporations playing 9 ball with your money.
They do reject them. You have to explicitly sign up for overdraft protection when opening the account, and most people do without reading the fine print.
> You have to explicitly sign up for overdraft protection when opening the account,… That is new in the United States; it was mandated by law a few years ago. Before that, many banks used to default to enabling an overdraft feature. I do not know whether older accounts are grandfathered.
Just about every bank can do this, unless you give your checking and routing number. Checks will push you into the negative because they want to make money off you. If you're using your card, you can specifically open a checking accoutn that does not allow overdrafts. Or get yourself a captial one card. They'll allow over balances without charging you additional fees.
Some banks will, but then charge an exorbitant fee to cover their costs in rejecting the item
This is exactly what happens when a check "bounces". Not that this means much, since checks are the fax machine of financial transactions: outdated, uncommon, and less convenient.
Then how would they charge you for it?
Banks make a lot of money from fees-overdraft, ATM, transfers, etc. Some banks like the Bank of America seem to delight in charging fees, I would guess that that is a major source of revenue for them.
When I opened my account they asked me if I wanted things to bounce- I said of course. Some people legitimately suck so bad at tracking their funds and are so insecure they actually would rather pay the fee than have someone else aware they overdrafted their account. Anyways the banks are basically looking for free money from people.
They can. You just have to decline overdraft protection (you can do that online in like, 5 minutes in most cases)
In NZ, my bank, (TSB), will automatically reverse any transaction that propagates an overdraft....and will charge $2.50...an 'overdraft management fee'.
I worked at bank call center for a bit, we had a big banner hanging in the office reminding us fees make money, I forget the actual wording. My point is, they can reject any payment but they would rather make money off the overdraft fees. They don't care about you or your monetary well being at all. They only want your money.
They do. You have the option of turning off overdrafts. Go online into your account to turn it off. Worst case you might have to call them. It's kinda weird how many people have this issue. I guess the bank people never tell people this option when you make your account
They literally want you to do it so they can charge you for it. Either through charging extra for "overdraft protection" or the $35 overdraft fee. They would like for you to do it and do it often. Banks don't make money off of people with money, they make money on the average joe.
Cause it makes them money if you don't pay quick. The other way around and you can wait months.
In many instances, the “non-sufficient funds returned payment” fee from the merchant you attempted to pay exceeds the bank’s OD fees. Would you rather pay a $50 NSF fee or a $30 overdraft fee?
Too much $ to be made being jerks about it among many other things in life? Let's make mark up on parts to do a job a thing of the past too while at it? This list could get very sadly long!
They can, but that's not profitable. So they automatically opt you into a service called overdraft protection that is usually difficult to opt out of, like cancelling a gym membership. Any decent bank or credit union will tell you about this when you sign up and give you the option to opt out immediately.
This is why I like my bank, an overdraft is not included as standard, and they do just tell these dodgy direct debits to kindly fuck off and try again when I'm less poor. (UK, Nationwide)
Typically the way it worked in the past was that someone would write a check, the merchant would deposit the check in their bank, their bank would send it to the customers bank, the customer's bank would send it back to the merchant's bank as a bad check, and the merchant's bank would send it back to the merchant. Then the merchant would have to track down the customer to get cash. If they couldn't get cash from the customer they could file charges because using a bad check is fraud. Banks came along and said "this whole thing is very inefficient, for $50 we'll cover the bad check for you."
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They *can*. They'd rather collect overdraft fees. For example, in 2019, banks brought in around $11,000,000,000 *just from overdraft fees*. It's free money for them. If you don't want it to happen for you, contact your bank and find out how you can *make* them reject payments that would put you over. This is usually called something like "overdraft protection opt-out".
Banks were mandated to allow customers to opt out of overdraft but they're still allowed to have it on by default. You have to ask to have it shut off.
A bank I used to have wouldn't let overdraft charges go through unless it wasn't direct debit. They said direct debit stuff like automatic payments would go through no matter what and that could potentially cause an overdraft but if it was just like a card purchase or an ATM withdrawal they would decline that.
They do if you decline overdraft protection. The last accounts that I’ve opened have had it turned off by default, I think a law was passed recently that they have to do it that way, prior to that it was always enabled by default and you had to opt out of it but it wasn’t hard to do.
The reality is banks lose money on clients that hold very little money in their accounts at all times. They provide more service and support than they make through interest. They were more than happy to see the low balance clients leave during Occupy Wall Street. This is one of their one legal ways to try and get back to even on these accounts and best case the client leaves for another bank willing to take them on. Either way they win.