Ah, one of my favorite topics. :-)
Overdraft fees used to be charged on checks drawn against the account. A customer would write a check to a vendor, that vendor would deposit it at his bank, his bank would demand payment from your bank. If you didn't have the funds available, your bank sent it back to his bank, his bank charged him a fee, and he'd have to come back to you. So he wouldn't accept checks at all. Overdraft protection and fees ended the problem on your end instead of with the vendor. The advent of an electronically authorized debit card transaction should have ended overdraft fees by pre-approving each transaction. Debit cards were first issued on the promise of (in part) no overdraft fees. That claim disappeared quickly - banks missed those fees, so stopped denying transactions at $0 account balance, and started denying them based at -$500 instead.
Originally Posted by YelloJeep
I could be mistaken but if you don't spend more than you have, then the things you have listed are a non-issue. Am I missing something?
As far as different names for "overdraft" who cares? They all sound like the same thing to me....
What you are missing is exploitation. If you've ever taken out a loan for any reason, you're not abiding by your own suggestion. You can argue that your loan is a separate contract all you want.
If I write a check to a merchant, they can call up my bank and ensure that funds are available. If I don't have funds available, my bank is contractually obligated to report that fact, and the merchant can decline the transaction.
Now, use a debit card. The Point of Sale terminal contacts my bank for permission, and then reports to the merchant whether my bank approves or declines that transaction. Until last year, my bank was under no obligation to decline transactions in excess of the available balance, nor could I compel them to do so. (I never found a bank that would offer such a service after 1999, even though debit cards were frequently advertised as being free of overdraft fees just a few years prior)
So, just don't let your account get that low? Good advice. About as good as the advice "Don't get raped" given to a woman forced to walk after working overtime on the night shift and missing the last bus home.
Originally Posted by YelloJeep
Did I read all contracts? probably not. Do I think it is right for them to say something about them being able to change the contract? Not really, but if there is a change I usually get a letter.
And again, I have never had a problem myself with any of these "fees".
Why is that? Oh, I don't know. Maybe I am just lucky
Oh yeah, if I am uncomfortable with a contract because it doesn't make sense or there is too much "junk" in it, then I go somewhere else or do without. (Not just with banking)
More good advice. Now you're telling that woman that since you don't work nights, she doesn't need to work nights either. But if she's going to work nights and doesn't like to get raped, she should walk home via a different route. Nice.
Every bank I've found has used several questionable accounting practices to stick it to their customers. Since you don't have a problem with these fees, you are unaware of the common banking practice of reordering transactions so that withdrawals (largest to smallest) are applied before deposits. You're unaware of the fact that banks report that your deposits have been applied to your account same day or 3 days later, but if you actually spend that money within the 7-day time frame they have between accepting the deposit and applying it, they can rewrite their books so it looks like you overdrafted.
Because you don't have a problem with this sort of fee, you're unaware that they only reorder transactions if they can charge an overdraft fee - if they can't, they show up in the order they were actually conducted.
You probably don't patronize payday lenders or pay for check cashing services either. You probably recognize that these sorts of businesses offer incredibly overpriced services, and you likely avoid them like the plague. What you probably haven't considered is that these businesses are highly regulated, due to their unfair business practices. They are limited on the interest rates they can charge. Banks were not limited this way - they could extend a line of credit by approving a withdrawal in excess of account balances, and charge interest rates (in the form of "overdraft fees") far in excess of usury limits, and in violation of a number of lending laws.
If you've never had an OD fee, you've never had a vendor punch in $700 on his POS terminal instead of $70, then charge the correct $70 and give you the correct receipt without telling you about the mistake, then reverse the mistake after you've left. Then a week later, you didn't get a notice for overdraft fees on the original $700 withdrawal, the $70 withdrawal, and every other transaction you conducted that day. You didn't have to point out the mistake to 15 different employees of the bank, only to be told repeatedly that it was your problem, and the best they could do was remove half the overdraft fees and blame the vendor for making the mistake, and you for not catching it sooner. You didn't have to argue with vendor about covering the fees incurred by his mistake, pointing the blame at my bank and me - after all, he corrected his error as soon as he discovered it.
Your method of solving the problem would have been for me to have kept at least $1200 in my checking account, minimum, to account for someone's $700 error and the $500 overdraft before banks generally stop approving transactions and I'd know there was a problem. If I'd had $1200 in my account, none of my withdrawals would have overdrafted. It's my fault that although I spent less than $500 total, I should have had at least $1200 to cover such a mistake by a vendor.
Of course, if I had been spending $120 instead of $70, I would have had the same damn problem.
Fortunately, a few of these problems were nixed a couple years ago. That they ever existed (and that banks couldn't be competitive unless they charged them) demonstrates one failure best solved by additional regulation. The industry as a whole refused to do right by its customers, so its customers got together, called themselves "government", and forced them to fix the problem. But there are a lot of other problems the industry doesn't want to fix.