and why do the banks like debit cards? because typically *you* are liable for the amount up to your entire account balance if somebody steals your debit card, whereas with a credit card you are probably not liable for more than $50, i.e. the banks aren't eating anything.

These banking people are truly scum.

Essentially, they pull every last trick out of the book to make it possible for them to catch you in every possible overdraft fee. Rather than helping you stay out of trouble by warning you that you're going to go into overdraft, which they could easily do, they pretend everything's just fine -- until, of course, they sock you with a separate overdraft fee for every debit card transaction and check that comes in on an overdraft day.

Really, they ought to be locked up. They're as much frauds and scam artists as anyone selling swampland in Florida. The only difference is that they have better lobbyists and lawyers.

i agree re the exhobitant od fees, but debit cards are not the only reason: nearly every small depositor goes into od occasionally and when they discover the bank is ready to pay with no bounced check, they are usually eager to accept the charge, however usurious. personally, i think debit cards are wonderful. no interest, no keeping up with a downright criminal billing system and penalties --and the credit card people must be shaking in their boots when they look at what the future holds.

A friend of mine was recently telling me the story of how he had been automatically signed up in the fine print of a new credit card for some sort of insanely abusive overdraft protection from his bank.

Ever heard of the saying "Buyer beware"? It is the job of the consumer to read the fine print and ensure the contract is 100% what he wants. If he didn't want it he shouldn't have signed up. The contract made it clear what the terms were, and it is his fault for not reading it carefully enough before he signed up.

I recently used my debit card for a larger purchase than usual (airplane tickets via Orbitz) -- call it $AT. We checked to make sure the checking account had $AT plus enough for some other checks that were out; it did, with $1000 or so to spare. So here's what happened:

- Orbitz contacted the bank (a credit union) immediately and the bank put a hold on the account for $AT to prevent us spending it before the real charge came in.
- Some of the other checks came in.
- The bank now concluded we had less than $AT available, because of the hold. Therefore...
- When the Orbitz charge actually went through, they put part of it on the overdraft Visa account.

Got that? The hold for the airline tickets doesn't get taken off until AFTER the airline ticket money is removed. In other words, we needed to have TWICE as much money in there as our charge in case they did things in that order.

We howled and screamed and by now they've fixed everything except an 18 cent charge (interest during the howling and screaming period), but they also won't admit to any fault -- apparently this is Just What Happens. You know, ordained by god and completely beyond their control.

So much for the convenience of the debit card.

Ever heard of the saying "Buyer beware"? It is the job of the consumer to read the fine print and ensure the contract is 100% what he wants. If he didn't want it he shouldn't have signed up. The contract made it clear what the terms were, and it is his fault for not reading it carefully enough before he signed up.

Yeah, and I'm sure there are any number of scam artists who sell swampland in Florida who have their asses covered in the fine print too.

But they are frauds and scum nonetheless.

As I said, the only difference between them and the banks is that they have better lawyers and lobbyists.

My credit union covers checking overdrafts out of savings, with a $2 fee, for each day with overdrafts in it. Al's right -- let the buyer beware, which means, stay the hell away from the big banks.

I meant above:

As I said, the only difference between them and the banks is that the banks have better lawyers and lobbyists.

Why do people use debit cards? I don't get it. Just use a credit card. They're less risky, you don't have to worry about overdrafts, and you get to wait a month to pay. Plus, you can earn things like frequent flier miles.

I just don't understand why anyone would want to pay NOW when they can pay one month from now. Use your debit card at the ATM and your credit card to buy stuff. It's simple.

So: why are overdrafts up? Because use of debit cards is up, and a lot of people assume that a debit card transaction will be denied if the account has insufficient funds.

My daughter recently ended up paying about $350 for 10 cups of coffee because she made this assumption. In the end, it may have been a valuable lesson, but the fees do seem excessive and some form of quicker notification by the bank might be expected.

This is why I love my revolving credit overdraft protection that I have at my bank. I don't get the fees every time I overdraft (which is a lot, because I don't keep a lot in the bank). I hate, hate, hate carrying cash. I ALWAYS will spend it.

This contrasts to the overdraft "protection" I had at my last bank, which in addition to fees and interest, would charge me for every overdraft. The charge of course came out of the overdraft protection, which then could be charge interest on.

I once worked in banking data, our head of data for banks would not bank at one of the largest U.S. banks for the simple fact that their fee income was growing at a faster rate than their deposit income. I still won't bank at that bank.

Everyone should absolutely be totally vigilant on all their bank accounts and cards to avoid this kind of stuff.

However, I would point out, in the great race here to paint the picture of capitalist amerika going down the tubes, that the penalty a generation or two for overdrawing your checking account was actually arrest by some overzealous sheriff. So I think that some onerous interest charges may still be an improvement. Then as now there is no substitute for responsible management of your own finances.

In the end, it may have been a valuable lesson

A valuable lesson in what, exactly? That big banks are unscrupulous entities? Is that lesson worth $350?

My credit union also transfers from savings. For customers with enough services, they will make the transfer at no charge.

I have also put my main credit cards on auto pay -- generally for the full balance. Since they get to withdraw the money from my checking account, the thieves never have an excuse that the money arrived too late and never get to charge late fees. I love it.

Fees of $17.5 billion on overdrafts of $15.8 billion? That's 110% interest on what was likely debt owed for 30 days or less. And here I thought loan sharking was illegal.

However, I would point out, in the great race here to paint the picture of capitalist amerika going down the tubes, that the penalty a generation or two for overdrawing your checking account was actually arrest by some overzealous sheriff. So I think that some onerous interest charges may still be an improvement.

Yeah, and not so very long ago they had debtors' prison too. Aren't we so incredibly lucky, you know, that we aren't thrown in jail today when we owe too much?

Then as now there is no substitute for responsible management of your own finances.

Save your pompous ass lectures for your right wing friends, OK? The rest of us realize that not everyone is perfect in their vigilance, and that they shouldn't be punished by hundreds of dollars in fees should they slip up on occasion. I mean, why should someone be penalized $350 for what's probably $35 dollars in genuine overdraft?

THAT is a scam, pure and simple.

Then as now there is no substitute for responsible management of your own finances.

This represents PRECISELY the mentality that makes possible the banking scam to begin with. And of course it was precisely the mentality that made it possible to justify debtor's prison in days past.

The idea is that, because you slipped up, ANY punishment or penalty can rightly be exacted on you, however severe.

I can't think of a more quintessentially right wing attitude or axiom.

I like the way they make identity theft easy, then sell identity theft protection.

Hey, I'm laughin' it up here at y'all with my money stuffed mattress. Suckers!

Why do people use debit cards? I don't get it.

Because some people can't GET credit cards. Your snobbery is showing.

Used to be, hardly anyone wrote checks for $1, $2. Now lots of people use debit cards for such little transactions ... and if they happen when your account's overdrawn, they incur a charge of $25 to $30 a pop.

I would like to think a Democratic Congress would stop this racket, but given the monstrosity of the bankruptcy bill, it's a safe bet that the Democrats don't give a shit about poorer Americans.

banks generally are the scum of the earth. i'm waiting for mine to install parking meters in the lot. i think they've announced plans to institute a fee for paying fees.

that said, i find debit cards are useful if used with a reasonable amount of care (if i was making a large purchase, more than several hundred dollars, i use a credit card instead and play the float or write a check). the reason banks like them is that an electronic transaction is much cheaper to process than a physical one. the reason i like them for most purchases is that they remind me to stay within budget.

bounced check charges are outrageous as well — way way way more than the actual cost to the bank involved.

as i said, banks are scum.

This reminds me of my most infuriating, and ultimately most satisifying credit card dealing. It was the weekend of our wedding, and we had a million people milling around my house, and my husband had to call to activate a new card. Anyway, he was only half listening to the automated message, half talking to guests, when he realized the message had said something like "if you don't want overdraft protection, press 1" except he hadn't really been listening, and mostly they only ask you to push buttons if you actually want something, and by the time he realized his mistake, it was too late. So he immediately called customer service to say he didn't want the service. They said it wouldn't show up on his account for several weeks, so he should call back and get it removed then. He was pretty peeved at this point since it was pretty sleazy how they signed him up, and he really didn't want to be dealing with this on our freakin' wedding day, so he asked them to make a note of it and remove it whenever it did appear. They said they couldn't do this, he asked to talk to her supervisor, she said he wasn't it, he asked for the supervisor's number, and she said he didn't have a phone.

So we were sitting fuming about this on our honeymoon when we realized there was no reason we actually needed this credit card, so he called them back and cancelled his card. Asked for a reason he said "poor customer service." Suddenly they were willing and able to do anything to keep him from doing that, which just made it clear that they were lying before. Anyway, we have never had a credit card with that company again.

I never use debit cards now.

I use my American Express card for everything I can,pay at end of the month and got back $1,230 this past year.

..Marx understood that the proletariat needed the benevolent protection...meathead republican at 1:44 PM

"He . . . was forced to construct some kind of monstrous Rube Goldberg scheme to protect him from overdrafts without bankrupting him. I think it involved three linked credit cards, two checking accounts, a savings account with a permanent balance of five dollars, and a signed note from Alan Greenspan."

Er, Kevin--What sort of overdraft protection *doesn't* involve linked accounts? If you overdraw your account, you're basically taking out a loan without bothering to apply for it. I've used a really basic form of overdraft protection all my life: it's a combination of maintaining a minimum balance and keeping track of expenditures. I do this not because I've been particularly well off; in fact, maintaining this practice was far more important during my prolonged periods of penury. That's been the experience of most everyone I know of my generation; having come along at a time when credit wasn't a gusher, we learned not to depend on it. You guys sound like junkies; you think the problem is that the mean ol' banks charge you for overdrafts, but the real problem is that you think overdrafting is some sort of right. For those of us of a certain age, who maintain the quaint notion that overdrafts are embarrassments to be avoided, this isn't "liberalism"--it's just plain spoiled brat-ism.

Gee, maybe next time I buy a computer program it won't make me agree to waive all warranties and all right to sue for damages as a condition of using the program. And maybe the program vendor will explain exactly what the bugs in the program might be and exactly what rights I am waiving. And maybe Kevin Drum won't keep acting as if the tech industry were some collection of saints different from the corrupt goons in every other industry who need more government regulation. Hahahahaha!

You guys sound like junkies; you think the problem is that the mean ol' banks charge you for overdrafts, but the real problem is that you think overdrafting is some sort of right. For those of us of a certain age, who maintain the quaint notion that overdrafts are embarrassments to be avoided, this isn't "liberalism"--it's just plain spoiled brat-ism.

More flatulent moralizing instead of thinking.

I'm sure in the nineteenth century you would have been telling all us young-uns how we wouldn't complain about debtor's prison if we weren't spoiled brats who racked up debts without thinking.

And of course I'm sure you're just fine with banks charging $350 for net $30 in actual overdrafts. I mean, why shouldn't banks profit from the oversights and sloppiness of these people who should only be embarrassed? Why shouldn't they take $3500 instead? The slackers need the punishment, and the banks love the profits -- it's win-win!

Really, it's exactly people like you who make it possible for banks to rip people off.

BofA now charges me the same whether the overdraft comes out of my Savings account or my Credit line.

So...

Yeah, suck.

BTW, while they were merging with MBNA last year they gave my credit line to MBNA to take over, and the took out my overdraft protection for six+ months without warning. And then put it back without telling me, too.

So: why are overdrafts up? Because use of debit cards is up, and a lot of people assume that a debit card transaction will be denied if the account has insufficient funds.

Not true. Most debit cards are also credit cards. You are confusing a check card with a debit card. They are treated differently by banks.

And why is use of debit cards up? Because, as anyone who watches teevee knows, the banking industry has been pushing them with about the same zeal as a street corner crack merchant. —Kevin Drum

No. Debit card use is up because they are mostly, again, also credit cards and, most important, because they are convenient and only losers write checks anymore or carry all that much cash.

It takes extreme self-control for me to keep from pelting (usually) old people (typically 60+) with gum, breath mints or bad magazines while waiting in the check-out line at the grocery store when some lame-o is writing a check or scrounging for exact change.

The banking industry is, has been pushing credit cards for a couple decades now. Not the same thing at all.

JeffII:

only losers write checks anymore or carry all that much cash.
Don't know many accountants, do you?

It takes extreme self-control for me to keep from pelting (usually) old people (typically 60+) with gum, breath mints or bad magazines while waiting in the check-out line at the grocery store when some lame-o is writing a check or scrounging for exact change.
I don't know about you, but I see plenty of low income-people pay for groceries with food stamps, and most people seem to pay for small purchases with cash... sometimes even with exact change.

Oddly enough, I don't think of poor people, or those making small purchases with cash, as losers, and I can't think of the last time I've wanted to throw things at them. Are you sure you're not really Will Allen?

Now, if you want to advocate throwing random items at the knuckleheads who wheel a shopping card full of groceries into the "15 items of less" aisle, I'll give it some thought. And if you want to point out that it should actually be "15 items or fewer"...

BTW, while they were merging with MBNA last year they gave my credit line to MBNA to take over, and the took out my overdraft protection for six+ months without warning. And then put it back without telling me, too. Posted by: Crissa

Actually, as MBNA was notorious for giving credit cards to anyone with a pulse, B of A's acquisition was a blessing. While they should have told you about the change, my guess is that they were doing this to help clear out some of MBNA's dead beat clientele - check for those customers who are chronically overdrawn, and then dump them. Credit is not a right but a privilege.

Fascinating thread showing a great deal of ignorance about banking and credit. Helps explain why consumer debt now averages more than $5K per household in the U.S.

A couple of points.

Firstly, I hate to even be in the same discussion as Al, let alone coming even somewhat close to agreeing with him.

However, Caveat Emptor is a legal concept that should be nailed into people's head from birth. If you buy something YOU personally are responsible for doing sufficient due diligence on the product/service to protect - yourself.

Secondly, on the point that only losers use cash, most Chinese in Asia will be happy to be called losers. After all they own most of the Bonds America has issued along with the Japanese.

In both cultures cash is still just about king. Most Americans are so patriotic that they've placed their country in hoc to what Clive Cussler calls the yellow menace of China.

When you shop locally why not pay with a cheque or by cash? Is you 3 inches of manhood threatened by not using the plastic?

And what's wrong with proper financial planning? When did basic arithmetic become so difficult that people in America cannot remember Mr. Micawbers maxim that:

"Annual income twenty pounds, annual expenditure nineteen (pounds)six (shillings), result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six (shillings), result misery."

I don't understand why anyone would prefer debit cards over credit cards. With credit cards, you get: substantial legal protection against fraud and theft, float time (of around 2 months, if you use a BofA credit cards to bill pay your purchase credit card), everything in one or two easy to read monthly statements. It takes a little more oversight than a bank account, but there's much more built in safety for my peace of mind.

Add me to the set of people who have tried to get overdraft protection removed and failed. I'm looking for a new bank right now because the current one also:

sorts incoming debits largest first to maximize charges

delays transfers from savings to checking until sometime the next business day ditto.

Before the bank was bought out repeatedly by megabanks, debit-card transactions that were too large simply didn't go through. Then there was a period when they caused a debit at the bank but a refused-transaction signal at the store...

What's the specific line of reasoning behind overdraft charges? Obviously, you can't spend money you don't have, but what is the point of a bank charging someone extra money because this person went $5 over what he had?

Would be nice to have a usury law with some teeth

My bank increased overdraft fees from &13.00 each to $36.00 each. They always cash checks or accept debit charges.

Still, times are tough.

Ah, Kevin

We're over 5 years into a booming economy.* Haven't you read the papers? Stocks are up, corporate profits are up, pay for anyone who really matters is up.

(*This part, scarily enough, is true.)

They're called bank fees, but there's a better word: seigniorage. This issue should be filed under "social justice." There was a great annotation entitled "A Wicked Cheat: ATMs and the neo-feudal economy" by Gustav Peebles in the June, 2004 Harper's. The title comes from a 1724 essay by Jonathan Swift. He was writing about an Irish private currency. Peebles noted that "the corner ATM is, in effect, a reincarnation of the private mint." It used to be that one got a cash from a private issuer, who charged a fee. The private suppliers are gone, the fee isn't.

Peebles pointed out that 12 million families cannot afford a basic checking account in the USA. For those who cannot maintain a minimum balance, their average fees total $228/yr. Faced with ATM fees, many poor citizens instead go to a private check-cashing service, which then charges fees up to $5, which is typically 1 to 6 percent of the face value of the check.

The injustice of seigniorage (a fee charged to feudal citizens for assaying and imprinting of gold and silver) is that it is inversely proportional to income. Let's stick it to the poor, the banker says. If you're wealthy enough, the bank charges you no fees. The rich have always depended upon an abundant supply of the poor. It's true for rich bankers, too.

I lived in Germany for two years. There were no overdraft charges. You could run a negative balance for a short time. No problem.

Fees have become more plentiful and higher in cost as we've become more captive to them.

It used to be the case that anyone would take cash for anything - you didn't have to use some other facility to pay for things. But sometime in the '70s it became virtually impossible to do some things with cash, and many places wouldn't do business with you unless you had a credit card.

So banks and credit card companies, while lecturing us about "responsibility", have felt free to divest themselves of most of the responsibilities that were once part of their service, and force the responsibilities - and their business risks - entirely onto the shoulders of the individual customer.

We should probably be on the warpath against "the fine print" altogether, because there are just things you have to do that require you to sign things without benefit of a lawyer, and much of it involves agreements that, once upon a time, wouldn't even have been legal.