Overdraft Fees

I recently heard The Indicator from Planet Money’s Overdraft Fees podcast episode. Two statistics immediately jumped out at me.
1) Banks made $15.5 BILLION dollars on the fees in 2019 (CFPB Link).
2) Less than 10% of the banking population generated approximately 80% of the fees.

HOLY CRAP… #2 surprises me the most yet at the same time doesn’t really surprise me at all. Given the income wealth inequality… many people on the lower end of the income distribution are literally cash strapped and living paycheck to paycheck. I’ve heard instances when banks charge a set fee for every transaction that’s overdrawn. That’s fucking ridiculous. Why doesn’t the consumer opt out of this predatory behaviour? Apparently the consumer was under the impression that they HAD to sign up for overdraft fees without realizing that they can opt out. EGADS!!!

I will say that early in my career, I also got hit with overdraft fees. I learned two valuable lessons at that time. First, the ACH transfer delay is a fucking joke since the ACH transfers now could be same day if the banks wanted it so. Also, why use ACH when payments can be electronically delivered immediately through other applications like the bank supported Zelle, Venmo, and Paypal? Second, pending transactions by the bank doesn’t work in your favor and acts as if money is not there. I got hit a few times mainly because I didn’t plan ahead to transfer the money I needed.

I wonder though… if this issue masks a much larger issue of the lack of financial literacy in the US population.

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