Illinois Teen Learns About Bank Fees the Hard Way

[dps]

Sure, and it costs the bank essentially NOTHING to maintain those accounts. 

It does indeed cost the bank essentially nothing in variable costs to service those accounts.  Or in fact any kind of deposit account.But the bank has to find some way to cover its fixed costs too.

Earlier in this thread, minimum balance requirements and substantial service fees were justified as a means to protect banks from the (unspecified) risks associated with having customers who keep low account balances by detering people from keeping low account balances.  Now you're justifying them as a means of covering the banks' fixed costs.  These 2 justifications seem mutually exclusive--if the requirements deter people from keeping low balances, then they aren't going to provide any income, but if they are actually providing the banks with income, they aren't being effective in detering people from keeping low balance accounts.

And if a bank has smart customers who don't let their accounts go under the minimum and thereby avoid the fees, by your argument, the bank wouldn't be able to cover its fixed expenses.  This is belied by the fact that some banks don't require minimum balances nor charge high fees, yet they are able to remain in business.

Sure, and it costs the bank essentially NOTHING to maintain those accounts.

What is the basis of your assertion here?

Common sense, and the fact that the people in this thread who defend the banks' practices haven't provided any argument otherwise.  In facy, Yi, the strongest defender of minimum balance requirements and high service fees, agrees my assertion.

[Admiral Yi]

Earlier in this thread, minimum balance requirements and substantial service fees were justified as a means to protect banks from the (unspecified) risks associated with having customers who keep low account balances by detering people from keeping low account balances.  Now you're justifying them as a means of covering the banks' fixed costs.  These 2 justifications seem mutually exclusive--if the requirements deter people from keeping low balances, then they aren't going to provide any income, but if they are actually providing the banks with income, they aren't being effective in detering people from keeping low balance accounts.

What do you mean by substantial service fees?  Overdraft charges or monthly account fees?

And if a bank has smart customers who don't let their accounts go under the minimum and thereby avoid the fees, by your argument, the bank wouldn't be able to cover its fixed expenses.  This is belied by the fact that some banks don't require minimum balances nor charge high fees, yet they are able to remain in business.

Well, no.  As has been mentioned several times already, the bank generates revenue also by lending out deposits.  At some point accounts become large enough so that the interest revenue can cover the fixed and variable expenses.  Below that break even point either the bank can charge a fee or it can lose money.

The fact that some banks don't have minimum balance requirements doesn't belie that, just as the fact that some airlines don't charge for checked bags means it costs them nothing to handle and haul your bag.

Common sense, and the fact that the people in this thread who defend the banks' practices haven't provided any argument otherwise.  In facy, Yi, the strongest defender of minimum balance requirements and high service fees, agrees my assertion.

Well, no.  Not as long as banks have fixed costs.

And when did I ever defend high service fees?  Is anything above zero now a high service fee?  And zero is a reasonable fee?

[dps]

What do you mean by substantial service fees?  Overdraft charges or monthly account fees?

In this particular case, more the daily overdraft charges, and the fact that the overdraft was only created by a service fee for a low account balance in the first place.  I don't have a problem with a one-off overdraft charge when someone actually overdraws their account.

Common sense, and the fact that the people in this thread who defend the banks' practices haven't provided any argument otherwise.  In facy, Yi, the strongest defender of minimum balance requirements and high service fees, agrees my assertion.

Well, no.  Not as long as banks have fixed costs.

If you don't agree, why did you post this:

It does indeed cost the bank essentially nothing in variable costs to service those accounts.  Or in fact any kind of deposit account.But the bank has to find some way to cover its fixed costs too.

[derspiess]

Common sense, and the fact that the people in this thread who defend the banks' practices haven't provided any argument otherwise.  In facy, Yi, the strongest defender of minimum balance requirements and high service fees, agrees my assertion.

Common sense?  So you're just making assumptions.  I see at least some of the costs banks bear-- my company bills some items on an account residency basis, in addition to the 'fixed' costs which actually tend to increase as a bank grows their customer base.

Here's an estimate on the cost of opening & maintaining a checking account.  The savings account cost is going to be less, but a lot of the factors listed for checking accounts will also apply. 

http://www.aba.com/aba/documents/press/CostofCheckingAccountsJune2010.pdf


FWIW, I actually agree with those who say the branch manager (or whomever made the decision) should have just eaten the fees and try to keep the kid's business.  I just don't think the bank deserves the majority of the blame for the situation.

[mongers]

Common sense, and the fact that the people in this thread who defend the banks' practices haven't provided any argument otherwise.  In facy, Yi, the strongest defender of minimum balance requirements and high service fees, agrees my assertion.

Common sense?  So you're just making assumptions.  I see at least some of the costs banks bear-- my company bills some items on an account residency basis, in addition to the 'fixed' costs which actually tend to increase as a bank grows their customer base.

Here's an estimate on the cost of opening & maintaining a checking account.  The savings account cost is going to be less, but a lot of the factors listed for checking accounts will also apply. 

http://www.aba.com/aba/documents/press/CostofCheckingAccountsJune2010.pdf


FWIW, I actually agree with those who say the branch manager (or whomever made the decision) should have just eaten the fees and try to keep the kid's business.  I just don't think the bank deserves the majority of the blame for the situation.

I don't buy those figures, if just 100 million Americans have an average of 2 accounts each that would mean according to them, based on their lowest figure, it would cost the banking industry at least $50 billion annually in basic account maintance cost. 

[Admiral Yi]

In this particular case, more the daily overdraft charges, and the fact that the overdraft was only created by a service fee for a low account balance in the first place.  I don't have a problem with a one-off overdraft charge when someone actually overdraws their account.

I never argued for overdraft fees as a means of covering fixed costs.

Common sense, and the fact that the people in this thread who defend the banks' practices haven't provided any argument otherwise.  In facy, Yi, the strongest defender of minimum balance requirements and high service fees, agrees my assertion.

Well, no.  Not as long as banks have fixed costs.

If you don't agree, why did you post this:

It does indeed cost the bank essentially nothing in variable costs to service those accounts.  Or in fact any kind of deposit account.But the bank has to find some way to cover its fixed costs too.

I don't see the inconsistency.  Both of those posts of mine talk about overlooked fixed costs.

[Valmy]

I don't think a monthly fee on an account that drops below a minimum balance requirement is a shitty fee or horrible service.  I don't think a minimum balance requirement is shitty service.  I know exactly one person that doesn't bother balancing her check book (my mom) and she gets my dad to do it for her.  I confess I haven't surveyed a wide range of people to see if they bother balancing their check book, I just assumed everyone did.  Maybe in fact it is an incredibly onerous task that many or most people shirk, and these people are constantly paying overdraft fees.

I don't feel I can assess how reasonable any given overdraft fee is.  But it does make sense that if you're the kind of person who has no idea what their account balance is at any given time to look for a bank or credit union which does not charge a daily overdraft fee.  Or to purchase overdraft protection if that's an option.

Having to spend all my time working very hard to make sure I do not get fucked over doesn't sound like great service to me.  But maybe that is how it is to do business in Yi world: screw the customer over unless they watch me like a hawk.  And in what universe is every charge on your account a fucking check?  Yes if it was just a matter of me writing checks I would understand your: 'but it is fair and fantastic service for banks to fuck you over' message.  But e-debits could hit my account at any time.  Especially since banks think it is awesome to take days to process a deposited check (fortunately not an electonically deposited one) but debit your account immediately for a debit.  I check my balance often enough but I get paid once a month Yi.  Sometimes something may sneak through right before the month ends.  I am not crazy about the idea of having my budget busted because some asshole just decided to process the charge and not deny it.  LIKE I EXPLICITELY TELL THEM TO DO.  I mean how hard is it to remember to not debit an account that has insufficient funds?  Pretty hard it seems.  Funny how forgetting to do that always benefited the bank.

And purchasing overdraft protection?  LOL.  I am not a sucker.

Actually I am feeling pretty good about my credit union right now.  I deposited a $200.00 check late last month and stopped to make a purchase a few days later and they hadn't, you know, actually credited my account yet and instead of just taking the charge and charging me fucking overdraft fees...THEY REJECTED THE CHARGE.  Hallelujah.  Keep that up and I will stay your customer UFCU.  You would think that would be standard.  Like how if an account has a low balance I would expect it to be standard to just close the account and take the money and not start charging people hundreds of dollars, but I am not familiar with the Yi values of customer service.

[Admiral Yi]

Having to spend all my time working very hard to make sure I do not get fucked over doesn't sound like great service to me.

I don't think balancing a check book is me spending all my time working very hard to make sure I don't get fucked over, but if you do then maybe we should just disagree.  It's getting repetitive at this point.

[derspiess]

Having to spend all my time working very hard to make sure I do not get fucked over doesn't sound like great service to me.  But maybe that is how it is to do business in Yi world: screw the customer over unless they watch me like a hawk.  And in what universe is every charge on your account a fucking check?  Yes if it was just a matter of me writing checks I would understand your: 'but it is fair and fantastic service for banks to fuck you over' message.  But e-debits could hit my account at any time.  Especially since banks think it is awesome to take days to process a deposited check (fortunately not an electonically deposited one) but debit your account immediately for a debit.  I check my balance often enough but I get paid once a month Yi.  Sometimes something may sneak through right before the month ends.  I am not crazy about the idea of having my budget busted because some asshole just decided to process the charge and not deny it.  LIKE I EXPLICITELY TELL THEM TO DO.  I mean how hard is it to remember to not debit an account that has insufficient funds?  Pretty hard it seems.  Funny how forgetting to do that always benefited the bank.

The bank will debit your account when they get charged by the network for the transaction.  That's only fair-- they cannot return card transactions the same way they can with an NSF check.  They should not *authorize* purchases that would overdraw your account unless you have opted into an overdraft privilege or protection-type service. 

But occasionally certain "force posted" transactions may come through and post to your account without having been recently pre-authorized by the bank (subscription-type services will do this sometimes-- DirecTV is the worst offender from what I've seen).  Or you may have a charge that comes through and posts to your account a few days after the 2-3 day pre-authorization hold has expired (again the fault of the merchant).  Plus the gas station purchase scenario I mentioned earlier.

And purchasing overdraft protection?  LOL.  I am not a sucker.

ODP fees/interest are usually a lot lower than flat-out overdraft fees.

Actually I am feeling pretty good about my credit union right now.  I deposited a $200.00 check late last month and stopped to make a purchase a few days later and they hadn't, you know, actually credited my account yet and instead of just taking the charge and charging me fucking overdraft fees...THEY REJECTED THE CHARGE.  Hallelujah.  Keep that up and I will stay your customer UFCU.  You would think that would be standard.  Like how if an account has a low balance I would expect it to be standard to just close the account and take the money and not start charging people hundreds of dollars, but I am not familiar with the Yi values of customer service.

Awesome-- just keep in mind that credit unions can't really do any more than banks to keep certain transactions from coming through.