No, I want to hear the warped logic.
Then again, it may just be: no income for the banks, they go bust, who will provide banking services to poor people? kind of retarded mental gymnastics.
Crux of the argument?
Profit margins are very small on small personal bank accounts. If NSF fees are reduced, how ever will we profit from these tiny accounts?!
One bank made only 49 billion profit last year, up from 48 billion in 2022. Why won’t somebody think of the banks!?
Oh no, anyways credit unions exist and rarely have these issues
Credit unions would actually be impacted far more from this legislation than banks.
They don’t have access to the same cash making options that large banks do, and credit unions are also non profit.
If their fee income was reduced, they would have to make up for it in other areas, such as higher lending rates, which affects more people than overdraft fees.
Personally, I’d rather deal with overdraft fees than have a higher rate for loans. If you learn to bank responsibly overdraft fees won’t be an issue anyway.
Overdraft fees simply wouldnt be an issue if they didnt exist. Theres no reason a transaction shouldnt decline if there are insufficient funds. If you dont have the money then you dont have the money.
Theres no reason a transaction shouldnt decline if there are insufficient funds.
I’ll admit I’m ignorant to banking on a large scale, but the few banks I have used and worked for I’ve always had the option to just decline “overdraft protection” so indeed if I tried to make a $50 purchase and I had $45 in my account, it would just decline. Overdrafting has always been an optional service. Are there banks that force you to enable overdrafting?
Edit: now whether the choice is properly conveyed to people is another matter of course, I imagine many banks make it seem like a “good” thing or the default option.
kind of retarded mental gymnastics.
It’s 2024 you know that’s not cool to say dude
I honestly don’t understand who is supposed to be offended by the r-word. Do people actually identify as that and take offense? shouldn’t they be just as offended by any other term that denotes a lack of intelligence?
It’s 2024 I do not need to explain this. Google it or something.
plaintext
These people are far and away the heaviest users of bank overdrafts. The Financial Health Network, a personal finance nonprofit, says the group most likely to overdraft includes “financially vulnerable” households that struggle to pay their bills every month and typically make less than $30,000 a year. Almost half of financially vulnerable households with checking accounts overdrafted in 2022, and of that group, two-thirds overdrafted at least three times, one-third did so six or more times, and one-fifth overdrafted 10 times or more. With an average overdraft fee of $26.61, hundreds of dollars in fees can land on the most cash-strapped customers. Capping those fees — possibly as low as $3 — would be a huge boon to families who really need the help. Who could oppose that?
Well, as with any nice-sounding policy, it’s important to consider the alternatives, both for the customer and for the banker.
For depositors, overdraft fees can be an expensive alternative to even worse options, such as payday loans or having their electricity shut off (and paying a reconnection fee to turn it back on). And “the best of bad alternatives” can also be sort of true for bankers, who must find some way to defray the cost of providing what is basically an unsecured loan to people who are, as we’ve seen, often financially struggling and might be unable to repay the money. The fees also help pay for “free” checking (which costs banks quite a bit of money to provide).
If we cap overdraft fees, how will banks make up the lost revenue?
From profits, you say, and fair enough, but Patrick McKenzie, who writes the Bits About Money newsletter, points out that the reason your bank is so obsessed with getting you to sign up for paperless statements is that the profit margins on checking accounts are so thin, they can be meaningfully improved by saving the cost of 12 stamps a year. “Margins on small bank accounts are very thin,” he wrote recently, and “credit losses can easily be larger than several years of them.”
Now the government wants to make those accounts even less profitable. It seems possible banks would look to limit their losses by getting rid of those customers or making up the revenue somewhere else — or possibly both. This seems to have happened in the past, judging from what we saw when federal regulators preempted some state fee caps in 2001. According to researchers from the New York Fed, the exempted banks both raised overdraft fees and expanded available overdraft credit, while lowering minimum balance requirements. The rate at which checks were returned for insufficient funds declined by 15 percent. And the share of low-income households with a bank account rose by 10 percent, suggesting that minimum balance requirements had kept those households from opening accounts.
That doesn’t mean that no one would benefit from this rule. High overdraft fees can also deter people from opening a bank account, and it’s possible that effect would outweigh any contraction of credit. The financial industry has also changed a lot since 2001, with nonbank alternatives, such as Cash App, that might offer the marginal bank customer a better replacement than an old-fashioned check-cashing store. But there would still likely be winners and losers, and I don’t know whether the former’s gains would outweigh the latter’s losses. I’m not sure the administration does, either.
The general concern is if you remove the overdraft fee as a tool, banks will just require a minimum or cancel you.
If financially struggling families can’t even access basic banking, they are further disenfranchised and removed from a stability, and eventually wealth generation
Sounds like a great time to actually bring back postal banking if the “job creators” can’t handle just making “some money” instead of " lots of money" from these accounts.
I’m sure the post office would be glad to have the “some money.”
Megan McArdle is the dumbest bitch in the world. I refuse to click on anything she writes because her shitty takes don’t deserve views. She’s actually a big part of why I unsubscribed from WaPo (that and the whole neolib vibe) because I want zero of my dollars benefiting her.
I have no desire to read but I bet her argument comes down to “if they don’t have overdraft fees then they will go into deeper debt by overdrafting more and that is worse somehow”
All the extra debt they get could have been bank fees, why don’t you think of the starving CEO’s, else they can’t afford their Beluga Caviar and Dom Pérignon dinners.
