Main Street

Predatory Economy: Debit Card Overdraft Fees

Yet another way the banks have found to prey on people struggling in this economy:

Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances — for a price.

Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.

What does that mean, in practice? It means that you might not know you’re at your limit, and they’re not going to tell you. They’re just going to let the transaction go through without a word, and then charge you up to $35, no matter how small the transaction.

And the banks want consumers to consider this a “service.” Because, according to them, most working people would so much rather pay $35 extra than suffer the embarrassment of having their card declined. But for something they consider such a valuable service, the banks sure make this one hard to get out of: In fact, they’re fighting regulation that would require consumers to have the ability to opt out of this “service,” and are threatening that if the amount they take in in overdraft fees goes down, other fees will go up.

But that’s not all. Not content with charging extortionate fees when people legitimately overspend, the banks might game the system so you pay for three overdrafts instead of the one you should have owed:

Mr. Tornes had $195 in his account when he made two debit purchases for $8 and $13; the bank also processed a bill payment of $256.

He claims that Bank of America took his purchases out of chronological order and ran the biggest one through first. So instead of paying $35 for one overdraft fee, he was stuck with three, for a total of $105.

Once again, of course, it’s for the customer’s own good, because maybe the big bill was the most important to them. That’s what the banks say—but that argument only holds water if they’re trying to decide which charge to decline. If they’re letting them all through, all that matters to the customer is how much the overdraft charges come to.

Not enough that the finance industry and big banks sent the entire economy into crisis, they’re now apparently trying to cause working people crisis, one by one.

Tags: banks, debt, predatory economy