Charging People For Not Having Enough Money Is Big Business (CLIP)


By not warning customers that they’re close to running out of money, and just letting them run out of money, banks are making a lot of money — charging people for not having enough money.

The New York Times reports that “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. In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.”

The Times tells the sad story of one Peter Means:

When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully.

So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks — and a $34 fee. He got the $6.50 student discount at the movie theatre — but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws — and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity.

Banks call this “overdraft protection.” The Federal Reserve is considering requiring banks make it an opt-in only product.

Here’s comedian Louis CK take on the whole business. It’s a must watch, so do:

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