micdotcom:

After news broke Wednesday that five of the biggest banks in the nation were still “too big to fail,” Sen. Elizabeth Warren is once again sounding the alarm about the scourge on our system. In a Facebook post, Warren called out those who have tried to deflect the blame and pointed to a new "giant, flashing" warning sign.”

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Or that people spent 30 billion dollars they didn’t have to begin with.

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overdraft fee

overdraft fees are just another way to punish people for being poor or tight on money.

So, just in case someone doesn’t actually know, your typical overdraft fee works like this – if you have 25 dollars in your account, spend 26 dollars, the bank will process that amount but then charge you a fee of (typically) 35 dollars.

They’re also prone to doing really shady things like, if in the above situation you put in a deposit of 26 dollars to try and cover the amount, they will process the debit before the credit and you’ll still wind up in the hole. 

So this isn’t a situation where people are spending 30 billion dollars they didn’t have.  It’s a situation where people who literally don’t have the money to spare are being used as a source of profit.

I got hit like that when I was really broke I put in money then got gas but it processed the gas first but It took me a while to figure it out because the bank I was at put the overdraft fee on the savings the next month which caused an overdraft fee to go to the checking the next month which caused two overdraft fees one from the overdraft fee and one from an insufficient funds fee the next month on the savings.  This was all after getting my account set up Specifically to refuse a transaction if I didn’t have the funds in an attempt to avoid overdraft fees.

Working for Wells Fargo was the biggest eye-opener I ever had. There’s this misconception that you can set up your card to refuse a transaction if there are not enough funds on your account. What I discovered was that it’s kind of difficult to stop overdrafts. That’s because it’s not just the banks–the vendors complicate the process, too. Let me explain.

Now, you can set up your card to refuse a transaction if there isn’t enough money on it–at that particular moment in time. Vendors do not always request payment at once–they can request 5-7 days later! Here’s a reasonable example.

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Notice how the payment actually went through on the 22nd, but it says the payment was authorized a day prior? This is typical. Usually it’s processed within one business day, and you may see a pending transaction reflected in your balance. However, sometimes no pending transaction shows up–the finalized transaction will simply materialize the following day, arms flung open, crying, “WHAT NOW.” This is further complicated on weekends and holidays, when nothing is processed and it’s up to you to keep track of your funds. (Remember, weekend purchases are processed on Monday night, so you probably won’t see them until Tuesday morning!) Even better, different companies will request payment at different times. Starbucks and Subway are particularly bad about charging later rather than sooner (sometimes as late as a whole week!), whereas Wal-Mart requests payment instantaneously.

So if your account currently has $10 in it and you try to spend $25, the vendor should decline your card. Cool. But what if you have been shopping all day, and the vendors haven’t processed all of your transactions yet? Your account will look like it has $100 on it and when you swipe your card for that $25 purchase, it goes through. Then the other vendors ask for money the next day. Wham, bam, overdraft fees. You know what makes this better? When the vendor’s payment request is denied, so the vendor REPEATEDLY ASKS FOR THE FEE TO BE PAID. Usually they stop requesting after three attempts, but there are some vendors who will request far more often. So even as you’re scrambling to cover the overdraft fees you got hit with the previous day, you may get hit with MORE payment requests, which cause MORE overdraft fees.

Just as importantly, purchases involving the manual entry of your debit card number–such as online payments–won’t always decline. Yeah, even if you don’t have enough in your account! I don’t know why this is. It seems to depend on the company.

Long story short, DON’T RELY ON YOUR ONLINE BANK STATEMENT ALONE. You’re only safe if you manually keep up with your funds yourself. I highly suggest keeping a check register, which you can print out for free here, download as a free app for your iPhone, or receive for free at your bank. It definitely takes more time to log each purchase, but it’s very easy to forget how many payments you’ve actually made–and much easier on the wallet than overdraft fees.

((By the by, I wanted to add my support to the sentiment in this post–overdraft fees are absolutely horrific. One $35 charge is bad enough. Just being in the RED is bad enough. But then they stack. At Wells Fargo, they can stack 4 a day, and if the customer isn’t paying attention it’s like getting hit with an atomic bomb. The fuck does Wells Fargo need $35 per overdraft for? It pays jack-shit in interest for your savings and CDs–like one or two cents per month, no lie!–makes money hand over fist, and then hammer-kicks its poorest customers in the teeth. If you’ve ever had to sit on the phone with a person weeping bitter tears because a paycheck bounced and they got hit with $280 in fees–fees you can’t completely return due to bureaucratic red tape–let’s just say that you stop parroting the “lol well be more responsible” party line.))

Wow thanks for the info!!

there’s also how some banks are reordering your transactions largest to smallest…. which will increase your chances of overdrafing and doing so multiple times.

so let’s say you check your account and think you have $65 left. you, being responsible, put $30 in the car to fill it and $20 on groceries. But… you forgot you used an atm from another bank at some point… so your bank charges you $3 for that. oh… and you were under the daily minimum, so they charged you $5 for that (so, you really only had $57 to begin with). Then you picked up a bag of chips and soda to contribute to the food for the weekly football game with your friends…$5. You think you’re still in the black with $10 and you’re only half right. you’re in the black with $2….

but then something happens… maybe your heater breaks down. your roommate scores a cheap as hell space heater and you need to give them half on it… $30.

you’ve officially overdrafted. but you should have only done so once… with the last $30. Instead, what these banks will do is charge you $30, $30, $20, $5. So now… since you only had $57, the only one that doesn’t incur an overdraft fee is the first $30.

so now you’ve been charged $35 three times ($105) when you should have only been charged once for something out of your control. so now on top of already struggling with money, you suddenly owe the bank $105 in addition to the money you “didn’t have”, $28 ( = $3+$20+$5) and also have asshats who would rather paint you as irresponsible than consider perhaps banks may need to adjust their policies/algorithms/whatever if people are being punished for using money they actually had.

source: Yes, Banks Are Reordering Your Transactions And Charging Overdraft Fees 

Every time this post comes around I want to drink heavily.

Once upon a time, banks needed deposits from people in order to make loans. You deposited money into savings and checking accounts, and then, the banks loaned that money out, minus an amount they had to keep on hand, and this percent changes depending on current law.
But, that is not how banks make money now. They make loans, and sell the loans on Wall Street. The loans are serviced by branches of some huge financial conglomerate which may have ties to the bank. Wall Street pays them for the loans, and pays servicing fees…
And this habit of making money on fees was spread to individual depositors. The system is set up to maximize income to the bank, through fees and charges, except where the laws limit this.
So. The main control on how much money the banks can charge and when is federal regulation. Some of it is laws passed by the house and senate, and signed into law by the president, and some of the regulations are controlled by certain federal departments. Therefore it matters who is president because who they appoint to be in charge changes the way the regulations are written and enforced.
You may have noticed a change a few years ago in how credit cards had to reveal charges, how long it would take to pay off an amount, and also how long they were required to give you to pay? There was also a change in how the banks were permitted to raise interest rates and when the rates had to go back down. You may thank the democratic president for that, and the people he appointed.

Depository banks are largely also fee-based in their money structure. They exist to predate on people with fees. I could write a book about my time in a bank. I keep saying I should. Ugh.

I WISH that I could have truly known, understood and internalized this when I was younger. I HATED myself for my “irresponsibility” and “stupidity” and sincerely lost faith in myself for not being able to stay ahead of overdraft fees. I had no idea how Machiavellian the system was, how intentionally broken.

I mean, I still wouldn’t have had enough money, but I wouldn’t have hated myself.

It’s so much worse than even these posts. I wrote a response to this once. I think it’s under my posts tagged banking. Or something. I can’t stand to keep rewriting it.

I literally feel like I lost part of my soul when I was in banking.

Much worse. The bit that I wrote above is the short version of one of my rants. The rant I have to keep a lid on or go on for hours is the corporate outsourcing of responsibility one.

Lo, these many years ago, when I was out on my own for the first time and had my first paychecks going into my first bank account, I was very aware that I had to be careful with money! I didn’t have much, after all. And electronic balance checks were free! So on payday, I would check my account to make sure that my pay had been deposited, and I wouldn’t withdraw any money until it had. Like, I would check in the morning and it would say my balance was $35 or so, and then I would check in the evening and it would say my balance was several hundred, and I would say “Yay!” and withdraw $50 and go do my grocery shopping.

Then my account statement would show up and say that I had withdrawn that $50 first, and gone $15 into overdraft, and then my pay had been deposited. And they would charge me an overdraft fee. And when I went into the branch and complained, I was essentially told “lol no that is not a thing that happens, clearly you did not check and are now lying to try to get out of the fees, be more responsible in future you slack slacker!”

Yeah, I didn’t stay with that bank for long. And I was way, way more cautious with my next bank.

Dear everyone:

Credit unions. Credit unions. Credit unions. Go get yourself a fucking credit union account. You will be in much better financial shape even if you are still flat broke.