this post was submitted on 17 Jan 2024
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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.

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[–] [email protected] 0 points 10 months ago (3 children)

What happens if you have $5 in your account and visit two stores and purchase something for $4 in each store? Not all stores process transactions immediately. Is the store supposed to just accept the loss and the bank doesn't honor the transaction? I think if it's a credit based debit card overdraft has to be a thing in order for this to work.

[–] [email protected] 0 points 10 months ago (1 children)

Not all stores process transactions immediately.

They can, if they choose to do so. You say not all process transactions immediately, but I don't know of any that process offline card transactions.

Is the store supposed to just accept the loss and the bank doesn't honor the transaction?

If they choose not to process the transaction immediately, yes, pretty much. They can retry the transaction periodically until it goes through, or they can use the payment information they have to identify the buyer and demand payment.

[–] [email protected] -1 points 10 months ago (1 children)

Would be insanely risky to process a day's worth of transactions offline, precisely because of the risk that transactions would bounce. Hell, the whole reason credit cards exist is to defer this risk. Businesses pay 2-3% of the transaction value to avoid this risk.

[–] [email protected] 0 points 9 months ago (1 children)

Not particularly risky. I mean, they did it all the time back in the day, with both cards and checks. You had all the information you needed to send the buyer to collections, and/or make a criminal complaint.

[–] [email protected] -1 points 9 months ago

I mean, they did it all the time back in the day, with both cards and checks.

Writing a bounced check is incredibly easy, and a big reason why lots of businesses refused to accept checks even at the height of their popularity.

Same with early credit cards.

[–] [email protected] 0 points 10 months ago (1 children)

Why would you spend $8 when you only have $5?

Outside of fraud the only reason you're account is going negative is from you spending money that's not there. It's not a "poor" fee, it's a fee that banks are within their rights to charge you for spending money that isn't yours.

People need to have some semblance of financial responsibility, it's not society fault that they spend money they don't have

[–] [email protected] -1 points 10 months ago

Outside of fraud the only reason you’re account is going negative is from you spending money that’s not there.

Because of the timing of credit to accounts, you can easily find yourself in a situation in which you have a $500 balance, a $300 deposit, $600 in charges, and an overdraft fee entirely due to the order in which the bank processes the transaction events.

Often, the events can be days apart and the bank still initiates the debts before the credits. As noted above, the bank may even initiate the transactions in reverse order of size, so that you get the maximal number of fees in a given rebalancing.

People need to have some semblance of financial responsibility

This isn't a problem for people who use credit cards rather than debt cards. Credit cards have a set credit balance and if you try to spend more than the balance the transaction simply fails. Since you pay the card off once a month, you don't have a dozen different transactions hitting your account in a particular order. So your maximum exposure, against the most bad-faith of banks, is one overdraft fee a month.

But credit cards are issued based on credit history. If you're opening your first bank account and you don't start with a high balance, you won't get one. So fucking with debt cards isn't a sign of financial responsibility, its a sign of financial predation.

It's a form of scam. Any conversation of responsibility ultimately has to recognize the bank as a predator. Otherwise, you're just setting people up to get preyed upon.

[–] [email protected] -1 points 10 months ago* (last edited 10 months ago)

What happens if you have $5 in your account and visit two stores and purchase something for $4 in each store?

Then your bank sees the first transaction, does some very rudimentary math, sees the second transaction and says "Not enough in account to complete purchase" and bounces the card.

This already exists for bank cards in the form of a maximum line of credit. If you have a $500 line of credit and you try to purchase two $300 widgets on credit, I guarantee you that the second transaction will fail to go through. But if you have a $500 bank balance and try to do the same thing, you get an Overdraft Fee instead.