One look on how banking in Europe are dealing with this might prove interesting. While each national market has it’s own practices (usually influenced by a stiffer regulation), apart from the UK customers do not face overdraft fees that high.

E.g. in Germany customer have to pay interest on the overdraft amount. Typical interest rates for this are between 12 and 18%. But the customer only has to pay the interest for the timespan his balance is negative.
So if a customer would overdraft a small amount (e.g. 50 Euros) for a short time (e.g. a week) the overdraft fee amounts to just pennies.

Wiseclerk
Editor
http://www.p2p-banking.com

As for “overdraft privilege,” I like the idea of opt-in. If you want it, sign up. My experience is that people don’t want to their items returned because it is embarrassing and pricey (merchants charge more than banks).

At the bank where I worked for 16 years, we paid overdrawn checks in the order they were written–the customer decides which is most important. There are problems with paying largest to small (you addressed) and small to large (no one wants their mortgage/rent or vehicle payment returned). If you pay in check order, the customer decides.

Also, I have always believed in a limit on the number of overdraft fees paid per day. Five is what I have always advocated.

And, the banks where I have worked have ALSO offered overdraft protection from a savings account @ $5 per transfer (combined so one per day you are overdrawn). So, customers could easily choose this option and avoid overdraft fees.

For example, if a restaurant’s floor is $15 and you buy lunch for $6, it’s still going to clear your account and make you negative. But that’s not your financial institutions fault, we can’t control what their policies are.

How is Bank of American turning off their ability to spend and guranteeing it will work without knowing what the merchants will do?

Please note: While this website welcomes the occasional consumer comment, the primary purpose of TheFinancialBrand.com is to help financial institutions build and manage their brands.

Banks have a tendency to put hold on check deposit at their leisure, it happened to me where I deposited a check, I was given a clear date, the date comes around the funds are not available, you call the bank and they advise you that they decided to extend the hold. I can give a bunch of those

The bottomline is that these banks can see things customers don’t. Pretty much the majority of banking industry is done automatically via software that has been programmed to do what it has been told. Bank use the “pending” state as an excuse to move numbers at their leisure. Every business processes batches each night and submits them for payment. so there is no reason for a payment to be in pending for more than a week.

NSF fees make up 40% of their income. So you don’t believe that the programs have been written to favor the banks? Why is it that Bank of America doesn’t allow Branch Managers to reverse NSF fees without approval? I believe that they should be able to charge money for mismanagement of an account but there has to be a cap to when to stop. As long it is viewed as a part of the revenue stream it will never be fair to the consumer because they will manipulate the system so that they can charge fees and a lot of them. Isn’t this what happened to our country in the first place, exploiting people for pretty much all they have? How can we stand for ethics on one end but approve of unethical behavior on another.

The article isn’t written as a reflection of my personal feelings though. It’s written from the perspective of financial marketers. The service may be a necessity — for both consumers and their financial institutions — but I think most would agree the system isn’t perfect? So where is the innovation? It seems financial institutions are reticent to make changes.

Please note: The article in no way suggests banks eliminate overdraft fees. Quite the contrary. The article readily acknowledges overdraft fees are a reality. It is simply suggesting financial marketers might be able to apply some creativity and innovation that could give them a competitive marketing edge.

Overdraft is overdue for an overhaul. I’d prefer to see financial institutions sort it out themselves using free market forces rather than seeing the big hand of Uncle Sam step in… again.

Additionally, as much grief as we give financial institutions for these fees, how about we give grief to those who habitually abuse the system. A large portion of those complaining are people who can’t and don’t manage their money and have no desire to do so. Additionally, a large portion of those affected by overdraft fees aren’t one-time instances. These are habitual overdrafters.

Lastly, banks have expenses as well. If a check comes in, the bank has to take the time and expense to process the check. Same goes with the processing side of transactions. Regardless of the amount of said transaction, it still takes a human to process these. Where is this person’s salary going to come from?

Manage your money and don’t expect others to manage it for you. We live in a world where we feel things need to be given to us and can’t accept responsibility for our own actions. I’m all for banks continuing to charge overdraft fees.

..We are eliminating overdrafts for debit cards unless the customer opts in for the service….”

Chuck, I think checks would fall under NSF fees. Financial institutions and retailers alike should do what they can to work together and get paper checks out of the system as much as possible. In this digital day and age, there’s almost no excuse to use/need paper checks.