Illinois Teen Learns About Bank Fees the Hard Way

[Capetan Mihali]

I'm also not sure how clearly banks lay out their terms and conditions.  Better than the software or cell phone boilerplate, but still probably a bit obscure to the average person, especially if it's been a while since you opened the account.

The information on minimum balances and monthly fees is about as opaque as the instructions on a coin operated laundry machine.

  I've had the same credit union account for 7 years now and done a variety of things with it, but right now I have no idea what the minimum balance or monthly fee is.  Whereas I've got at least a rough idea of how to work the laundromat.

EDIT:  I don't mean it's not easy to figure out if you want to, but how present is it in the minds of generic checking account holders?

[Malthus]

In Canada at least, there exists a criminal rate of interest - that is, interest on a loan cannot total more than a certain percentage.

Short-term "payday" loan outfits got hammered by the courts in class actions for using fees and charges to effectively raise the loan rate higher than this "criminal' rate.

I dunno why the same analysis cannot apply to overdraft fees. The bank is essentially loaning you the money. Why should it be able to charge you more than the principal per day, and call it a "charge" rather than "interest"?

[Ed Anger]

Cunt Mom would take a loan with Western Sky and then complain about the interest.

http://www.westernsky.com/TermsOfUse.aspx

[Admiral Yi]

EDIT:  I don't mean it's not easy to figure out if you want to, but how present is it in the minds of generic checking account holders?

Back when I had a minimum balance requirement it loomed HUGE in my mind.  On the money I was making the monthly fee was not something I could afford to ignore.

[Malthus]

Edit: never mind, I looked at the provision and it excludes overdraft charges.

[garbon]

I'm also not sure how clearly banks lay out their terms and conditions.  Better than the software or cell phone boilerplate, but still probably a bit obscure to the average person, especially if it's been a while since you opened the account.

The information on minimum balances and monthly fees is about as opaque as the instructions on a coin operated laundry machine.

  I've had the same credit union account for 7 years now and done a variety of things with it, but right now I have no idea what the minimum balance or monthly fee is.  Whereas I've got at least a rough idea of how to work the laundromat.

EDIT:  I don't mean it's not easy to figure out if you want to, but how present is it in the minds of generic checking account holders?

Again they tell you when you get your account. My credit union doesn't have one but Bank of America and Wells Fargo sure did.

[Capetan Mihali]

Back when I had a minimum balance requirement it loomed HUGE in my mind.  On the money I was making the monthly fee was not something I could afford to ignore.

Now that I look, I don't have a minimum balance requirement, so I guess that's why I've never worried about it.  My bank has three tiers of checking accounts, and the higher two have minimums of $1000 and $10,000 with monthly fees of $10 and $25 respectively.

[Admiral Yi]

Right, and if there's no minimum balance then you forget about it.  100 quatloos says that describes Mihali's account.

p.s. You posted before I could submit but I'll put this up anyway for the decadent thrill of being right.

[Capetan Mihali]

Right, and if there's no minimum balance then you forget about it.  100 quatloos says that describes Mihali's account.

p.s. You posted before I could submit but I'll put this up anyway for the decadent thrill of being right.

When you had a minimum balance, would your bank alert you if you went under it, or just collect the fees silently?

[mongers]

None of my bank accounts have monthly fees, and as a precautionary measure I maintain overdrafts on two of them, just in case. 

[DGuller]

In Canada at least, there exists a criminal rate of interest - that is, interest on a loan cannot total more than a certain percentage.

Short-term "payday" loan outfits got hammered by the courts in class actions for using fees and charges to effectively raise the loan rate higher than this "criminal' rate.

I dunno why the same analysis cannot apply to overdraft fees. The bank is essentially loaning you the money. Why should it be able to charge you more than the principal per day, and call it a "charge" rather than "interest"?

Yeah, I thought about usury laws as well, but ultimately that's not really the wrong being done.  The wrong being done is to lay out a trap for a client, and hope he falls in it. 

I'm really dismayed that majority of posters don't have an issue with that.  Just because it takes carelessness to fall into a trap doesn't mean that it's fine for the trap to exist, or that it's even legal.  Good faith in conducting business means something.

[garbon]

Right, and if there's no minimum balance then you forget about it.  100 quatloos says that describes Mihali's account.

p.s. You posted before I could submit but I'll put this up anyway for the decadent thrill of being right.

When you had a minimum balance, would your bank alert you if you went under it, or just collect the fees silently?

Mine sends me alerts both via e-mail and written. BofA that is.

[fhdz]

I even get phonecalls from my bank to warn me if an account is running low.

That is a cool service.

[derspiess]

I don't understand the rationale for overdraft fees on debit card purchases.

Believe it or not, for most banks the main purpose is not revenue.  They'd prefer you to maintain a balance in the account and the fees are meant to hurt a little so that you'll be conditioned to make sure your account is in good standing.  In the long run, you're worth more to them if you don't overdraw your account.

Now there are a few banks that want as much fee income as they get and they don't care how they get it, but that's the minority.

Can't they just be declined at the point of sale if the balance doesn't cover it?

Yep.  But it was only fairly recently that everyone had to opt in to overdraft privilege, as sbr mentioned.

But there are other scenarios where you could potentially overdraw your account.  You could have a check post to the account before the actual settled debit card transaction posts. 

Some gas stations out there still only pre-authorize for $1 if you use the "credit" option at the pump, and the actual purchase amount may not post until a day or two later.  So you could have a $1 hold on your account for an actual purchase of $60.  If you only had, say, $10 in the account then obviously you're going to overdraw when that $60 posts.  This is supposedly being addressed by Visa & MasterCard, but these things always take a long time to fix.

I overdrafted a few times over the course of a day or two on one debit/credit card (when I had changed jobs and mixed up which account was being direct deposited to) and racked up something like $60 in fees on $7 of overdraft coverage.  Whereas I've also had a regular credit card just declined because I was a buck or two over my limit.  I'm not sure if the mechanics of debit and credit are different or what?

They work pretty much the same on the front end, but on the back end there are quite a few differences.

The other element here is that generally the people getting screwed from overdrafts and minimum balance requirements tend to be the people who suffer the most from it (almost by definition with the minimum balances)...

But you don't have to be rich to be financially responsible. 

[mongers]

In Canada at least, there exists a criminal rate of interest - that is, interest on a loan cannot total more than a certain percentage.

Short-term "payday" loan outfits got hammered by the courts in class actions for using fees and charges to effectively raise the loan rate higher than this "criminal' rate.

I dunno why the same analysis cannot apply to overdraft fees. The bank is essentially loaning you the money. Why should it be able to charge you more than the principal per day, and call it a "charge" rather than "interest"?

Yeah, I thought about usury laws as well, but ultimately that's not really the wrong being done.  The wrong being done is to lay out a trap for a client, and hope he falls in it. 

I'm really dismayed that majority of posters don't have an issue with that.  Just because it takes carelessness to fall into a trap doesn't mean that it's fine for the trap to exist, or that it's even legal.  Good faith in conducting business means something.

Which is one of the areas where the Anglo-American school of business seems to be failing in.