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Last month brought a flurry of opinions on postal banking in response to a new proposal that the US Post Office offer financial services – including bill-pay, check cashing, even small loans – to the “financially underserved.” Reactions have ranged from enthusiastic to deeply skeptical. This post highlights two key questions that have been posed and synthesizes some of the answers offered up so far...
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No consumer likes overdraft fees. Overdraft fees are often unexpected, expensive, and in some cases undeserved. What’s more, they can wreak financial havoc on households living on a low-income.
But the larger issue is not the fees themselves. It’s the lack of transparency surrounding them and the widespread consumer distrust that results...
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The Taylors overdraft their checking account every two weeks, on purpose.
As described in a recent issue brief published by the U.S. Financial Diaries, the Taylor family’s income level varies significantly from month to month. Sometimes it’s not enough to cover all of their expenses. So, they opened an account at a bank with a simple overdraft fee structure: One $35 charge per overdraft, no daily fees, and an allowance of up to $500 at a time. Since the Taylors typically make only one large cash withdrawal per paycheck – the entire amount of pay – this bank would charge them at most one $35 overdraft fee each cycle, if they happen to need more cash than the amount of that week’s direct deposit...
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“Wow, the consumer knows about that?”
This was essentially how a banker responded when I told him the story of a woman I interviewed for the US Financial Diaries study. The participant – we’ll call her Jenna – was charged four $32 overdraft fees in the same day ($128 total, if you’re counting). Jenna explained to me that if her bank had processed her transactions in the order she had made them, there would only have been one charge. Instead, the bank posted her largest purchase first, which was enough to take her account balance below $0...