In 2020 banks charged $30,000,000,000 in fees. That’s 30 BILLION dollars! By comparison all Hollywood movies make about $11 billion total!
So, for every dollar Americans spent on going to the movies, they spent three on account fees, over draft fees etc.
Banks answer to their share holders. Share holders like money, so banks charge fees.
Bank is a four-letter word.
Do something about the problem. Take away their ability to steal money from people that don’t have it.
Switch to a credit union. Lower or zero fees. Credit unions answer to their members, I.e. account holders.
“four letter word” is an euphemism for implying something is profanity, akin to words like shit or fuck.
And example would be the fantastic CAKE song, Friend Is a Four Letter Word
If you like that, you’re going to love the next bit:
- Banks create their own money when they make loans.
Surely, I must be ill informed, right?! Nope. Here’s a paper from none other than the Bank Of England: Money Creation In The Modern Economy.
Having a Banking License is like having your very own digital “money printing machine”: they can’t actually print currency (notes and coins) but since most modern money is only 0s and 1s in computers (specifically, amount values associated with client accounts) they can create money like that - basically credit X money to a client account when they loan money and at the same time debit X money from a special account which needs not have that money - and do it again and again untill they hit the certain reserve criteria.
Yes, at the end of the loan period all this gets (or will have during the life of the loan) unwound - the customer pays the principal of the loan, so the bank debits X money from the client account and credits X money to that special account, so everything is properly back to zeros in accounting terms on that special account - all of which would’ve been as if nothing happenned but … the bank gets interest and keeps.
That’s right, banks get paid interest on money that has never existed, and that interest does have to be created as wealth by the broader Economy, which has massive implications in terms of just how big a share of the wealth produced by the whole Economy banks capture because they can create money out of thin air.
It’s not by chance that in the last 2 decades banks have pushed really hard for people to pay everything by card: as long as the money stays digital banks can make money like this to their heart’s content (limited only by the reserve criteria) without having to procure notes and coins.
It’s also not by chance that in the last 2 decades banks have also pushed really hard for people and companies to become ever more indebted, for the obvious reason that the more money banks create out of thin air as loans the more interest they receive from those loans of made up money.
As for reserve criteria, banks need to have a certain fraction of all the money the loaned out as reserve but last I checked those details (at the time MIFid 3 came out) the so-called “sophisticated banks” with advanced financial modeling tools had the possibility to go as low as 2% - which means 98% of the money they loan is created by them out of thin air.
In practice and if I remember it correctly, around 94% if all money in circulation is created this way.
I actually had more fees when with a credit union. Iirc they wanted $3 to issue a cashier’s check - the bank I was with charged $5 for a cashier’s check… after you had used the free one they allowed each month.
The bank also honored my request to decline charges that would overdraft my account. They don’t charge for declining these charges. The credit union ignored my choice on that and charged overdraft fees without any notification to me that my checking account was negative (I had money that was in a savings account linked to the checking, I had just forgotten to transfer after getting paid). So I think ymmv for the quality of banks and credit unions.
“We’ve overleveraged ourselves giving out loans that we can’t fully back, so here’s a contribution fee to ensure that we don’t collapse.”
-A completely legal financial institution
No worries bro. If things get rough for ya the government will just bail you out on behalf of taxpayers. You are all good. Thanks for the fee chap.
I have a good friend with severe ADHD. She was in big trouble because of this and about to get evicted and lose her car because of dumb decisions. I took over her finances completely to get her out of the hole. She was racking up more than $500 of overdraft fees per month, had taken out a usurious car title loan, and had a ridiculous amount of credit card debt. It’s been 20 years, and to this day she is not allowed to have a credit card. We have tried to set up her life so this doesn’t happen again, but the banks keep trying to do her a favor by “allowing” her to overdraw her account, despite instructions not to do so. Life is hell for those with executive dysfunction, and the banks take full advantage of their weakness.
despite instructions not to do so
Careful with the “overdraft protection” wording. You want it disabled, not enabled.
Yeah, I learned the hard way that I had to specifically ask the bank to just deny a charge instead of allowing it and then charging me a daily fee. What a fucking racket
I had it turned onto my account before, and I went in a told the manager if it gets turned back on, I’m coming back.
He asked if that was a veiled threat, and I calmly said, does it need to be for it to turned it off permanently? He responded, no and promptly said it will never turned back on.
It’s unfortunate that sometimes they force you to be pushy to a party that is only doing a job for under half the states average to buy a home. I’m not a violent person, but I also don’t like wait until there’s a problem to be jerked around for months.
I swear that they will use any and everything to revive overdraft protection. I’ve gone in person, I’ve gone in person and gave them a signed and dated document I’ve also deposited a signed and dated document while making a check/cash deposit. It’s a 50/50 chance that if I call tomorrow, I will have overdraft protection. This really is something I recommend customers check on a regular basis.
I wasn’t quite that bad when I was younger, but I did ban myself from credit cards after a certain point of wrecking my life. It has been a few years since my life fell apart, but it has literally been just the last few months that my credit has finally recovered after being unable to pay my student loans for a while due to circumstances out of my control, being bad with money due to untreated ADHD, and general I fucked up.
The thing that helps me the most is paying all of my bills from my Bank app (“Bill Pay”). This way I can see the dates, setup any automated payments, and in a lot of cases receive the actual statement in the app. Having to go to a bunch of websites is stressful and if I have to mail it myself, I am screwed. Having one app/website is a lot easier to handle. I am not perfect, but my wonderful landlord only has to remind me once in a while if I forget instead of all the time. I am exceedingly lucky right now to have my finances under control where I can comfortably schedule my rent to be paid automatically without me having to worry about payday and such. It took forever to get there.
You are a wonderful person to try and help your friend. I would have loved to have someone like that in my life a decade ago, but I somehow made it anyways. Trying to get my shit together is a huge struggle and I really feel for her.
The final nail in the coffin for me was when Bank of America not only charged an overdraft fee for each insufficient charge, they arranged the order highest to lowest coming out that day to maximize the potential fees.
My credit union will also charge a fee for an overdraft. One penny if I can get money in that day to cover it, and they give me a warning so I can do just that.
I feel like there was also a plan in place that they make a nice stack against your account on a Friday. You wouldn’t be able to do anything to prevent it happening after hours. I may be mistaken but it was hard to keep up with how shady Wells Fargo was in the early ninties.
Get an account at a bank that charges interest for negative balances instead of fees. It’s the European banking model. Plenty of smaller US banks do this. Also, STOP BUYING STUFF WITH A DEBIT CARD!!!
There are also plenty of US banks that just don’t charge overdraft fees anymore.
My credit union simply declines debit card transactions if they’re over the available balance. I’m kind of stunned to learn this apparently isn’t common, to the point people feel they need to outright avoid using debit cards?
For other transactions that may overdraw (automatic withdrawals, ACH, etc) we have the option to pull from savings. If the overdraft is under $10 or so, they don’t charge anything. If they do charge the $35 dollar overdraft fee, you can call and they’ll waive it when you deposit the overdrafted amount (within a reasonable amount of time).
I’ve been with my credit union since mom helped open my account when I was a teenager. I’m so frequently flabbergasted to hear about some of the things people put up with from their banks.
Isnt charging interest the same as a fee though? Also, why stop buying with a debit card? Are you advising credit cards are a better choice?
No because 12%(?) interest on overdrawing your account by $1 is a lot less than a $35 flat fee. If you overdraw your account you’re basically asking for a loan for the negative balance. It makes more sense to charge like you would for a loan.
I had a bank with “overdraft protection” before. It was basically a $500 line of credit that was activated if you overdrew. The interest rate was terrible, though.
Credit cards are definitely better than debit cards if you can manage your spending well. The biggest reason for me is that credit cards offer better fraud protection. Say your debit card gets stolen, they can clean out your entire bank account and suddenly you have no money. It will take time for the bank to reverse these charges, meanwhile you have no way to buy necessities. With credit it’s not your money and the credit card companies are insured and deal with this stuff daily. You also still have money in your bank account for necessities.
You absolutely have to be careful with credit though, especially if you aren’t good at budgeting. It’s not free money and will charge interest if not paid off each month, but if you can use it responsibly you can take advantage of the perks, like cash back, points and whatever else they offer.
What I personally do is only use credit cards, I have certain ones that offer the best perks for certain purchases and pay them off in full every month at minimum. You can set them up to be very similar to a debit card and monitor your spending so you don’t build up too much debt. It boils down to whether or not you can trust yourself to be vigilant in sticking to a budget.
What I do to make sure I’m staying in budget is pay the cards off every week. Gives time for transactions to post and ensures the card never holds a higher balance than I can pay off before interest is added.
I’ve gotten automatic credit line increases over the years, so the amount I can charge is roughly 4x the max I ever have in the bank, but the weekly payoff strategy makes it basically the same as using debit, except with cash back perks.
This is the way. Get a couple good rewards cards, but treat them like a debit card. Don’t spend money you don’t have unless it’s an emergency, and always pay off your balance before the billing cycle ends. You’ll pay no interest and earn points for travel, statement credits, and more.
Start with a flat rewards card like the Wells Fargo Active Cash card. No annual fee and 2% back on all purchases, and if you pay your mobile phone bill with it, you get $600 towards replacing a broken or stole phone.
Once you’ve built credit, check out cards like Chase Sapphire Reserved which gives 3% on travel and restaurants/bars, and points are 1.5x when you book travel through Chase, so a $300 flight only costs $200 worth of points. The Amex Blue Cash Preferred gives 6% at supermarkets and on streaming services, and 3% at gas stations, and they often do promos with up to 10% cash back. As long as you pay your cards off every month and don’t get hit with interest, it’s free money just for buying the same things you always do.
It’s not really a fee though - it’s just fairly applying the interest rate. It sounds very fair to me - you disadvantage them no more than you help them if they were on the other size of 0.
But more importantly, a fee is an arbitrary amount of money charged. It might be linked to costs you incurred for the other party, they might be making a profit or a loss on the exchange - at the end of the day it’s just an arbitrary amount of money
Feel like Im missing something, here.
If I try to pay with my debit card and there’s not enough in my account to cover the transaction, it gets declined.
Moreover, most times I’ve ever been overdrawn have not been due to a debit card, but a check or bank withdrawal or whatever for a bill or something.
When the payment is done via a network such as VISA or Mastercard (which in some countries such as the UK which do not have their own card payment networks are the only networks for both Credit and Debit cards), the payment might be made without checking if the account linked to the card has enough to cover it (even for cardholder present payments, i.e. you’re paying yourself at the machine with the physical card, not using the card numbers), and if you have not arranged with the bank to have overdrafts authorized in that account there will be an “unarranged overdraft” and some banks charge you a lot for it, in some case even do it per day the account is in overdraft.
In countries with their own card payment networks, the network only does debit payments and as part of the protocol the system first checks the account to see if it can cover that payment and only then accepts (or denies) the payment.
The issue is theft. In the US a debit card transaction dispute takes months to resolve and you may not get all your money back. So when your card number is stolen and used, you’re out a lot of money for months and some you never get back. CC disputes are reversed in the card holder’s favor immediately.
Yeah, caution with this advice depending on the kind of person you are. For many issues with CC debit can be far worse than occasional overdraft fees (which are pretty messed up most of the time, agree avoid banks that’s are harsh on this). Debit card use keeps real time tabs on how your actual available resources and can help with fiscal responsibility for some. If you keep in top of cc payments and consistently avoid debt, agree that’s the way to go, but easier said than done for many.
Debit card > credit card. You want to know how much money you have when you spend it and not realize later, that you didn’t have the money so now you are indebted to the CC company.
debit cards usually lack the buyer protection that credit cards offer. just treat your credit cards like an old-school charge card that got paid off every month
yeah cc are the best but you need to treat them like its a debit card. I actualy have to call regularly to get my maximums lowered. They love to set them real high but I don’t want them larger than what I earn in a month which is still to high given its not like I could spend that whole amount given the stuff that you have to pay every month not on cc and I have more than one. You definately cannot charge till you get rejected from hitting the limit.
While I agree with you on the second point, I don’t believe debit cards are better than credit cards for several reasons. The main one is that credit cards offer better fraud protection. Say your debit card gets stolen, they can clean out your entire bank account and suddenly you have no money. It will take time for the bank to reverse these charges, meanwhile you have no way to buy necessities. With credit it’s not your money and the credit card companies are insured and deal with this stuff daily. You also still have money in your bank account.
You absolutely have to be careful with credit though, especially if you aren’t good at budgeting. It’s not free money, but if you can use it responsibly you can take advantage of the credit card perks, like cash back.
Debit cards can be frozen and charges can be reversed. I’ve done this before. You’re just advertising for credit card companies at this point. I don’t wanna have to pay interest on my purchases, thanks.
What’s the issue with a debit card again? Are you saying that we should be using credit cards, or physical currency?
If your card number is stolen the bank will take months if at all reversing the charges. It’s also easy to distinguish a debit from a credit card. When the thief figures out it’s a debit card, they drain every possible penny right away. They can use it for cash back so the payout is faster and easier. Meanwhile your account is overdrafting and you can’t pay your bills for months.
Compare that to a stolen credit card… You just tell the bank which charges are fraud and they reverse them all immediately without question.
Use credit cards or cash. Leave the debit card at home locked away for the rare atm run or just destroy it.
Are there any systems I (pun unintended) buy into when using a credit card over a debit card?
I’m still agreeing to a bank, for instance, when credit unions are an alternative.
Apologies for the naivete. Seems like my education failed me here.
That last sentence has been the only thing going through my head as I read this post/comments.
I haven’t had an overdraft in like… Idk over a decade. As much as the banks suck for doing this, it’s really easily avoidable with a CC.
Then again I know some people who cannot use CCs cuz they can’t control their spending and will literally impulse buy themselves into debt.
But it’s not that easy. I also have not had an overdraft fee in decades, because I am financially stable and can afford it. However I also remember more desperate times when I paid so much in fees and still don’t think there was a better approach.
Credit unions generally have lower fees but they still have some, and many require a good credit score to join. Works for me, now.
Some banks/credit unions now let you chose to have a transaction you couldn’t afford rejected rather than charge a fee. It’s a crime that this wasn’t always the case
Some banks now process checks in the order received, rather than an order which maximizes the number of fees they can charge, should some of them overdraft. It is also a crime that this wasn’t always the case
It comes down to being avoidable if you have money and self control.
For some in cases where money is tight, a random charge can wreck a budget and have major knock-on effects.
In other cases, people may not have the knowledge or self-control to operate in a system where you can spend money you don’t have. Worse, the current banking system doesn’t really let you know if there is a problem until it already exists because solving problems before they happen doesn’t make money.
Considering just how little most people have in reserves (in my country the average is something like €500, which is fking ridicukous IMHO), all it might take is, say, your electricity company to make a mistake on a direct debit and all of a sudden there might be hundreds of euros there less than what you expected.
(Sure, they’ll refund you the excess money they took … eventually … but they won’t refund you for any problems resulting from their “mistake”, so you’re SOLO on that).
Worse, in my own experience in the only time I had one of those (I had moved to another country, was verbally confirmed by the bank when I openned my account that such payments would bounce and yet one didn’t bounce and I got charged “unarranged overdraft” fees), even if you have another account with the banks (such as a savings account) with about 1000x what was needed to cover that amount, they won’t use any of that money and instead treat it as an overdraft and charge you for it a lot if unarranged.
PS: I ditched that bank within a week, so the £20 or whatever they made from that little stunt was a lot less than they lost, because a lot of money went through my bank accounts (some staying there for long periods until invested) in the years after that.
Debit cards in the UK generally don’t let you go overdrawn.
Like if I try to buy something and don’t have enough in my account I just get told ‘you can’t buy this’ and have to go transfer some more money to my account.
I pay a £5 monthly fee, but that gets me travel insurance, breakdown cover, mobile phone cover and a bunch of other benefits that I haven’t had to use yet.
I could opt out of that £5 fee and not pay anything at all for my banking. I find all the fees you end up with in the US a little bit insane.
Not really: I once went overdrawn on a Debit card in the UK (because the country doesn’t really have its own payments network and uses others such as VISA, which was the one for my card) even though I had verbally agreed with them it would never happen and any such payments would just bounce (as I was used to the banking cards in my home country of Portugal which use a local banking network were no unarranged overdrafts can happen, as it’s designed from the ground up as a debit-only network for in person payments), it was an in person payment and I had more than enough money in my savings account.
They charged me £20 for it (if I remember it correctly). I was pissed off enough that I closed my accounts with them and moved banks.
Mind you, this was over 15 years ago.
Considering the amounts that passed through my accounts (and often stayed they for a good while) after that while I lived in the UK, they lost a ton of money by scamming those £20 from me.
