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shakran · 05-15-2009, 07:53 AM

The banks do not tell you about these policies when you first sign up for your account. They do not tell you that the day's transactions will be stacked up in order of amount so that they can unfairly charge you more when you make a mistake. They also do not tell you that you can waive the "courtesy" of having them cover overdrafts, and they do not tell you that (at some banks) you can set things up so that if the checking overdrafts the money is automatically deducted from savings, so that the bank doesn't have to cover it and you don't have to pay an NSF fee.

This is somewhat of a sidebar, but I just had (another) long conversation with my mother, who proudly thinks that the credit card companies love her because she pays her balance in full every month, and who thinks the bank loves her because she never overdrafts and always has a $2,000 reserve in her checking account that doesn't get touched in order to cover any problems. It's difficult to get her to understand that the credit card companies and banks actually hate customers like her because they can't make money off of them. Visa is much happier if you carry a balance all the time because they get to charge you interest. Banks are much happier if you overdraft all the time because they get to take a lot of money from you.

Look at it this way. If I have $100 in my account and write a $101 check, I get charged a $35 NSF fee. that's a 350% interest rate on the temporary loan the bank gives you. that's bad enough, but let's say I have $100 and I write, in order, checks for $1, $1, $1, $1, $1, and $99. The bank restacks it so that I have 4 overdrafts of $1. So for a 4 dollar loan, the bank charges me $140. That's a 3,500% interest rate. What the bank should have done was cleared the $1 checks and overdrafted the $99 check, loaned me the $4, charged me $35, which would have been an 875% interest rate - still extortion, but much more reasonable than several thousand percent. the NSF fees, as the bank will tell you, are to cover the loan. That means that they're really interest on the loan, but they're called fees because if the bank was honest and called them interest, they'd be prosecuted for violation of usury laws.

I stand by what I said originally. People should be on top of their checking account, but a minor mistake should not allow the bank to rape them financially.

05-15-2009, 07:53 AM	#23 (permalink)
shakran Tone.	The banks do not tell you about these policies when you first sign up for your account. They do not tell you that the day's transactions will be stacked up in order of amount so that they can unfairly charge you more when you make a mistake. They also do not tell you that you can waive the "courtesy" of having them cover overdrafts, and they do not tell you that (at some banks) you can set things up so that if the checking overdrafts the money is automatically deducted from savings, so that the bank doesn't have to cover it and you don't have to pay an NSF fee. This is somewhat of a sidebar, but I just had (another) long conversation with my mother, who proudly thinks that the credit card companies love her because she pays her balance in full every month, and who thinks the bank loves her because she never overdrafts and always has a $2,000 reserve in her checking account that doesn't get touched in order to cover any problems. It's difficult to get her to understand that the credit card companies and banks actually hate customers like her because they can't make money off of them. Visa is much happier if you carry a balance all the time because they get to charge you interest. Banks are much happier if you overdraft all the time because they get to take a lot of money from you. Look at it this way. If I have $100 in my account and write a $101 check, I get charged a $35 NSF fee. that's a 350% interest rate on the temporary loan the bank gives you. that's bad enough, but let's say I have $100 and I write, in order, checks for $1, $1, $1, $1, $1, and $99. The bank restacks it so that I have 4 overdrafts of $1. So for a 4 dollar loan, the bank charges me $140. That's a 3,500% interest rate. What the bank should have done was cleared the $1 checks and overdrafted the $99 check, loaned me the $4, charged me $35, which would have been an 875% interest rate - still extortion, but much more reasonable than several thousand percent. the NSF fees, as the bank will tell you, are to cover the loan. That means that they're really interest on the loan, but they're called fees because if the bank was honest and called them interest, they'd be prosecuted for violation of usury laws. I stand by what I said originally. People should be on top of their checking account, but a minor mistake should not allow the bank to rape them financially.