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.

  • Neato@ttrpg.network
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    10 months ago

    Overdraft fees should just be illegal. Bank knows how much money is in there. Don’t allow withdraw if it’s insufficient.

    • Trollception@lemmy.world
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      10 months ago

      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.

      • UnderpantsWeevil@lemmy.world
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        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.

      • Rivalarrival@lemmy.today
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        10 months ago

        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.

        • UnderpantsWeevil@lemmy.world
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          10 months ago

          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.

          • Rivalarrival@lemmy.today
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            10 months ago

            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.

            • UnderpantsWeevil@lemmy.world
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              10 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.

      • Reddit_Is_Trash@reddthat.com
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        10 months ago

        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

        • UnderpantsWeevil@lemmy.world
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          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.

    • UnderpantsWeevil@lemmy.world
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      10 months ago

      How about no overdraft fees?

      I mean, this is the same argument with student debts that we had four years ago.

      You’ll get some Harvard snob issue a white paper explaining how overdraft fees disproportionately affect middle-income people (ie, people with bank accounts) and therefore eliminating them is regressive. You’ll hear a bunch of hemming and hawing from banksters, about how this will destroy jobs and create enormous amounts of bank fraud and actually technically increase fees for everyone else which isn’t fair to them. And then you’ll see a court issue some briefing about how this violates the Farts McGee clause of the Jefferson draft of the Declaration of Independence, so it isn’t an enforceable bureaucratic change in states that contain a vowel.

      Finally, we’ll get ten thousand Op-Eds arguing “Overdraft Fees Are Good Aktuly”, and in six weeks I’ll be on the phone with my mother asking whether China is trying to undermine the banking system by tricking Joe Biden into defunding her mortgage. Overdraft fees will double by 2025, the Leftist Radicals in the Democratic Party will get blamed, and Donald Trump will win in a landslide thanks to “Bankrun Biden” memes that have inundated social media in the last six weeks of the race.

  • HubertManne@kbin.social
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    10 months ago

    I still don’t get how folks don’t love this president. All these things are great for typical folks like me.

        • queermunist she/her@lemmy.ml
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          10 months ago

          Well, you said you don’t get why people don’t love this president. That’s an obvious reason.

          I don’t love that he’s a genocide collaborator. That’s why his Democratic support is so low.

          • kent_eh@lemmy.ca
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            10 months ago

            When has any US president not been friendly towards Isreal, no matter what the IDF is doing?

              • kent_eh@lemmy.ca
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                10 months ago

                My point is voting for Trump to spite Biden isn’t going to improve the situation with Isreal and its neighbors. If anything it’ll make it even worse.

          • HubertManne@kbin.social
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            10 months ago

            Well thats two different things and a very broad definition. I, for example, am american and pay my taxes. Im just as much a collaborator therefore unless I stop paying my taxes or supporting the US, no? Now granted I don’t want to support genocide but there are some rather severe consequences for me if I don’t pay my taxes. And is that enough. I mean we are talking genocide. Should I actively fight? That would involve violence on my part. Would I be slipping into being just as bad as the genociders? The idea of pinning the israeli things on him is a step to far for me.

              • HubertManne@kbin.social
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                10 months ago

                He did not go around congress he basically expedited the sales. This really goes back to 911. Many countries pushed back on us for iraq/afghanistan but still did the show of support. Heck they sent their own troops. He could have not done it but it would have repercussions outside of our relationship with Israel. All the same. We paid for the production of the weapons with our taxes. To me railing that biden is a genocide collaborator but then ignore the direct ways they support the genocide, like financially with taxes. Well its being a hypocrite. My support is fine because you know living my nice life is important but his support because of the complex decision making around global relationships in regards to responsibility of his position. Well thats not. Oh and lets ignore that its typical of what presidents and global leaders have done in these situations.

          • Chainweasel@lemmy.world
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            10 months ago

            So you’re ignoring the vote yesterday when 72/100 senators voted to continue supporting the war? How is that bypassing Congress when Congress approved it. And I assume you think Trump will do a better job? Well maybe you’ll get what you’re wishing for and we’ll end up in a Christian dictatorship. I’m sure that’ll be soooooooo much better than what we have now.

            • queermunist she/her@lemmy.ml
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              10 months ago

              That’s the bully pulpit in action; Democrats lining up behind their President.

              And I assume you think Trump will do a better job?

              I didn’t even mention anything about voting. We’re talking about whether you should love Biden.

              • Chainweasel@lemmy.world
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                10 months ago

                Unfortunately our choices are Biden and Trump.
                Biden is not perfect, but when compared to Trump I sure do love him. When compared to Obama or Carter? Not as much.
                But we don’t get a 3rd choice in America, we get to pick whether we like Biden or Trump more, and if you don’t like Biden enough to not vote for him, you better fucking love Trump.
                Is it fair that those are our choices? No.
                But life isn’t fair, so you better figure out which one you hate more.

                • queermunist she/her@lemmy.ml
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                  10 months ago

                  That’s irrelevant to the discussion! We were talking about why people don’t love Biden, not about voting.

                  You don’t have to love Biden to vote for him, and as a corollary, you don’t have to love Trump to not vote for Biden. I completely understand people who hate Biden and still choose to vote for him. They don’t believe there’s another choice and I know why they think that way. I am not commenting on how people should vote.

                  What I don’t understand are the freaks that love Biden. What the fuck?

  • Ultraviolet@lemmy.world
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    10 months ago

    It’s actually worse than just debits before credits. It’s debits in reverse order of amount, then credits. So if you get your paycheck deposited in the morning, stop for gas, pick up a coffee, go shopping, go home and pay your utility bills and rent, they can order it so the rent goes through first, then the bills, shopping, gas and coffee all trigger separate overdrafts, then the paycheck is added last, stealing hundreds of dollars from you when you didn’t spend a cent you didn’t have.

    • UnderpantsWeevil@lemmy.world
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      10 months ago

      Okay, yes, but counterpoint from my conservative relatives “Why were you simply not more responsible? I never have this problem.”