Maybe we really do need a nanny!
The banking overdraft fee laws are really interesting to me for several reasons.
First, the idea that banks are wrong to charge customers for the privilege of borrowing money without asking is a puzzling one. That is what overdrafts are; borrowing money without asking for permission. I admit some bias because I worked for a bank for a while. One of my daily tasks was to call customers who were overdrawn to rectify the situation, either with a quick cash deposit or bouncing the check if I didn’t think it would be covered. Most of the time we honored the checks because we talked with the customer and trusted they would cover it. We only returned checks if we thought they would not be covered. Overdraft fees were charged to the customers to support the extra work with their account (my time for example) plus as an accommodation fee for their “demanded” borrowing. Most customers understood that that were in the wrong and sharpened their accounting to avoid future overdrafts and costs. The ones who didn’t eventually had their accounts closed by the bank.
Some would call these fees punitive and that may be accurate. A better term would be “tuition” for learning how to manage one’s cash. I have had a few overdrafts in my life and caught on very quickly when I paid that tuition and am better off for the education. In my case, I admit to faulty record keeping!
Now we have a law that banks cannot charge overdraft fees unless the customer opts in to the concept of paying overdraft fees. This is kind of like paying a fee for getting a loan without asking the lender which I think many will eventually do in spite of the fees. If they don’t, there will be consequences.
Picture a person eating in a restaurant and planning to pay the bill with a debit card. If they have not opted in, when they present their card and there is no cash in their account they have a problem. The restaurant may inherit the problem. That is just one of many things that can and will happen with this new law.
Sure, it is very pricy to pay a $35 overdraft charge for a $2.00 cup of coffee at the coffee shop. I understand that. It is more expensive to pay with a check that bounces and the coffee shop also charges $20 for the check too, but that is what may happen.
We can criticize banks all we want, but deep down inside I think we would all agree that it is our job to keep track of our money. I think we would also agree that we would never want anyone to borrow money from us without asking. Now we have a law to protect us from our own stupidity or errors and many think this is a good thing. Wouldn’t it be better if we learned how to keep track of our money?
I am of two minds [seems to be a perpetual state] on this law.
I opted for the fees because frankly, I do not want my stupidity in accounting to harm a vendor nor do I want a ‘red face’ in holding up a line because my card has been declined. I’m not sure which comes first, the red face or the vendor.
I do think though that the fees are a teeny bit exorbitant. But perhaps they need to be to re train our ‘free wheeling’ in spending.
I’m off to deal with both my minds…author of The K-9 Boys and Girls on Locus Street series