U.S. banks to make $38 billion from overdraft fees

[Tilted]

U.S. banks to make $38 billion from overdraft fees: report | U.S. | Reuters

That's over a hundred bucks per person in the U.S. - probably close to $200 per person that actually uses banks.

 

[Pete]

I have a buddy who was a VP of a small regional bank in Tennessee. He lived a very unassuming, modest life despite his job. We were talking about money and investments and the general financial acumen of average Joe and he asked me how much a bounced check fee was at my bank, where I replied that I thought it was $25. He said his bank charged $5 and they had enough bounced checks every month to pay the payroll for every employee.

I was shocked.

 

[Larry Gude]

Why is this surprising?

How many people do you think even know their balance? How many people do you think actually reconcile their accounts each month? How many people do you think even know how to reconcile an account absent accounting software? How many people do you think actually know the difference between a debit and a credit?

We are a nation filled with people who do not know basic, fundamental things. Basic finance. Basic nutrition. Basic governmental knowledge. Basic science.

But we do know how we feel.

 

[GWguy]

Why is this surprising?

We are a nation filled with people who do not know basic, fundamental things. Basic finance. Basic nutrition. Basic governmental knowledge. Basic science. Basic birth control.

I thought hard about this, and I cannot ever recall bouncing a check. I've had overdraft protection on my accounts since I was a teenager, and have never had to use it. It would be a personal embarrassment to me to do that.

It IS amazing that there is enough of it to pay salaries.

 

[Larry Gude]

I thought hard about this, and I cannot ever recall bouncing a check. I've had overdraft protection on my accounts since I was a teenager, and have never had to use it. It would be a personal embarrassment to me to do that.

I know how to reconcile accounts by hand. I reconcile my accounts every month. I know debit and credit in relation to asset and liability accounts. And I still bounce checks once in awhile. I just don't keep enough cash in there and I push it too close once in awhile or just flat out forget. My bank charges $38 per and I know I bounced three checks this year. I forgot to deposit my paycheck.

So, I have no problem seeing people who don't have a clue bouncing checks all the time.

 

[ProfMoneyWise]

Dr. Elizabeth Warren of consumer credit protection and education fame tells a story of briefing a group of bankers on proposed increasing importance of credit reports prior to loans/cards/etc being granted to the consumer.

Many of the regular bank loan officers and staff in attendance were thrilled in that they too saw if the requirements were tightened up they would spend less time chasing after delinquents and assessing penalties, fee's, etc . . .

She said the head of the bank stood up and the room fell quiet. He stated something to the effect that he could care less if we ever paid back the principal because the money is to be made in the interest, fee's and penalties.

Agreeing to buy on credit, or bounce checks, is agreeing to pay more than is being asked. On what level does this make sense?

 

[ProfMoneyWise]

Why is this surprising?

How many people do you think even know their balance? How many people do you think actually reconcile their accounts each month? How many people do you think even know how to reconcile an account absent accounting software? How many people do you think actually know the difference between a debit and a credit?

We are a nation filled with people who do not know basic, fundamental things. Basic finance. Basic nutrition. Basic governmental knowledge. Basic science.

But we do know how we feel.

Seven out of ten live paycheck to paycheck (as in miss one and it is disaster), have $10K of credit card debt, and an average of 8 - 10 open consumer loans. Seven out of ten "have to be" at work instead of "want to be" at work. Seven out of ten are spending money they do not have for things they cannot afford. Seven out of ten think being able to afford the item is being able to afford the payment.

Seven out of ten do not have a budget because they already know the answer.

I pity them to a degree but in reality they cause my personal finances to suffer so the pity fades to a different emotion all together.

It really does not have to be this way. Id'ing the problem is easy. Getting the person to fix the problem is the hard part.

 

[Larry Gude]

Agreeing to buy on credit, or bounce checks, is agreeing to pay more than is being asked. On what level does this make sense?

Investment. If ProfMoneyWise decides to borrow money at 6% to buy a home he hopes will appreciate more than 6% a year, then, he is making money when he sells.

Or, If PMW decides the interest is worth buying property or a home he really enjoys for it's own sake over renting then there is value there.

If PMW decides to borrow money to start a business that is planned to return more than the cost of the money, then, that is a good decision.

If PMW decides to buy a $4,000 TV and borrow the money instead of saving and then buying, then that boils down to 'wants' the value of having it now.

Money always has some value. Sometimes that value is negative.

 

[Larry Gude]

. Seven out of ten think being able to afford the item is being able to afford the payment.

I bought a $40,000 tractor 6 years ago that I needed. I could not afford the $40,000. I could afford the $700 a month.

I could have kept fixing the tractor I had but reliability was a critical issue for my business. I could have bought used at some level yet still had, to some extent, the same issues.

Buying new fit my budget, brought the guarantee of service for the first three years at which point a tractor should be good to go longer term and fit into my longer term plans of having it serve for 2-25 years.

It all depends.

 

[ProfMoneyWise]

Investment. If ProfMoneyWise decides to borrow money at 6% to buy a home he hopes will appreciate more than 6% a year, then, he is making money when he sells.

Or, If PMW decides the interest is worth buying property or a home he really enjoys for it's own sake over renting then there is value there.

If PMW decides to borrow money to start a business that is planned to return more than the cost of the money, then, that is a good decision.

If PMW decides to buy a $4,000 TV and borrow the money instead of saving and then buying, then that boils down to 'wants' the value of having it now.

Money always has some value. Sometimes that value is negative.

Good discussion points. I have opted to never borrow money again for anything. If I do not have the money then I do not buy it.

A home loan I will entertain for folks but I have stringent "buying" criteria that I recommend there as well and have posted this criteria prior. I do however, point out that it does cost money to live in the home well in addition to the payment itself.

I do not advocate buying a home in hopes of making money. I advocate buying a home to live in it, and if one makes money someday . . . good for them.

It would have to be a slam dunk return for me to borrow money on a business. Just the way I see things.

And don't get me started on that TV :<)))) And going the route you describe that TV is not a $4K TV.

 

[vraiblonde]

I have a phobia about paying interest - the only thing I have a loan on is my house, and I pay extra on the principle each month so I can get it knocked out sooner. I don't even carry a balance on my ONE credit card.

Can't even remember the last time I bounced a check. So it's good to know I'm not one of the seven out of ten.

 

[ProfMoneyWise]

I bought a $40,000 tractor 6 years ago that I needed. I could not afford the $40,000. I could afford the $700 a month.

I could have kept fixing the tractor I had but reliability was a critical issue for my business. I could have bought used at some level yet still had, to some extent, the same issues.

Buying new fit my budget, brought the guarantee of service for the first three years at which point a tractor should be good to go longer term and fit into my longer term plans of having it serve for 2-25 years.

It all depends.

Yes, it all depends.

If we had discussed way back when I would have said in your case you would have known the tractor would have needed to be replaced and I would have recommended you had a separate fund set aside that you continued to make a tractor payment to so that when the time came you had the money to pay for the new tractor in full.

Paid for tractors, like paid for cars, just seem to run better.

 

[Larry Gude]

Yes, it all depends.

If we had discussed way back when I would have said in your case you would have known the tractor would have needed to be replaced and I would have recommended you had a separate fund set aside that you continued to make a tractor payment to so that when the time came you had the money to pay for the new tractor in full.

Paid for tractors, like paid for cars, just seem to run better.

That is definitely wiser.

Unless I could have earned more with that money than what I saved on financing the tractor.

 

[ProfMoneyWise]

That is definitely wiser.

Unless I could have earned more with that money than what I saved on financing the tractor.

Remember to factor in "risk." That and the taxes on the earned money are sometimes disregared.

Debt-free investing allows singles and doubles to equal others homeruns and the debt-free investor does not need to hit homeruns to prosper.

 

[vraiblonde]

You know what I never understood? Store credit cards, like a J C Penney's or Target, or whoever issues their own credit cards that you can only use at their store. What is the point of this? Why wouldn't you just use your Visa or MC for those purchases?

 

[Pete]

You know what I never understood? Store credit cards, like a J C Penney's or Target, or whoever issues their own credit cards that you can only use at their store. What is the point of this? Why wouldn't you just use your Visa or MC for those purchases?

Special deals only if you use your store credit card.

 

[mAlice]

You know what I never understood? Store credit cards, like a J C Penney's or Target, or whoever issues their own credit cards that you can only use at their store. What is the point of this? Why wouldn't you just use your Visa or MC for those purchases?

It's a scam. They suck you in w/a 10% discount, then charge you the maximum allowable interest. As long as people buy into it, they'll keepn doing it.

 

[vraiblonde]

Special deals only if you use your store credit card.

The best deal I was ever offered from them was like 10% savings or something. So if I buy $50 worth of stuff, I get to save a whole $5 if I get their credit card to muck up my credit report.

 

[ProfMoneyWise]

You know what I never understood? Store credit cards, like a J C Penney's or Target, or whoever issues their own credit cards that you can only use at their store. What is the point of this? Why wouldn't you just use your Visa or MC for those purchases?

They are then the "bank." They do not have to pay the fee to Visa or MC. All fee's, interest, etc, stay in-house.

Oddly enough, J.C. Penney's real name was James Cash Penney. Also of note is he was one of the last to get onboard with allowing credit to be used to begin with. Now JC Penney, Sears, and a few others are just money-stores that happen to have a bunch of stuff sitting in the store to sell. The bulk of their profits come from the money side of the operation as well.

Think about it. It does not take any effort at all to assess a late fee.

 

[mAlice]

Special deals only if you use your store credit card.

Because whatever you save by using the card, they get back in interest.