The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest effort by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.
The change could potentially eliminate billions of dollars in fee revenue for the nation’s biggest banks, which were gearing up for a battle even before Wednesday’s announcement. Exactly how much revenue depends on which version of the new regulation is adopted.
Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started as a courtesy offered to some customers when paper checks used to take days to clear, but proliferated thanks to the growing popularity of debit cards.
It’s actually worse than just debits before credits. It’s debits in reverse order of amount, then credits. So if you get your paycheck deposited in the morning, stop for gas, pick up a coffee, go shopping, go home and pay your utility bills and rent, they can order it so the rent goes through first, then the bills, shopping, gas and coffee all trigger separate overdrafts, then the paycheck is added last, stealing hundreds of dollars from you when you didn’t spend a cent you didn’t have.
Pretty sure banks already got smacked for this and structuring transactions to maximize fees is illegal now.
Okay, yes, but counterpoint from my conservative relatives “Why were you simply not more responsible? I never have this problem.”
Probably because they have enough money in their account to always have padding. People who live pay check to pay check don’t have that luxury.
Yep. Around 2014 I was absolutely ruined by exactly this, and ended up having to drop out of college about it. Never did finish my degree. Over about half a year trying to get my finances back in order while being slammed with overdraft fee after overdraft fee after overdraft fee, I ended up “”““owing””“” Suntrust Bank something to the tune of like $1200 that they pulled out of their asses by reordering items. Meanwhile I’m overdrafting my account by $8 to get some ramen packs that I could eat for the next 2 weeks, knowing damn well this $8 case of maruchan ramen is going to end up costing me $43 after the overdraft fee. Legitimately the closest I’ve ever been to just killing myself to escape the grind.
They’re fucking lucky that all I did was settle up and close my account the following year, because they deserve arson, and I know some people that would have been more tempted to that than I was.
