It’s pretty simple: Desired outcomes for consumers don’t align with profit incentives. In other words – banks don’t want you to make good decisions for your own financial health. They’d rather see you miss a credit card payment, overestimate your balance – and – as evidenced below, overdraft your account. Why? Because they make money when you screw up.
I got this message on my TD Bank account a week ago…
Looks like a pretty cool program right? It’s a little hard to read on the image, but the text says:
Keep Your Debit Card Working When You Need it Most
A new regulation that takes effect soon could change the way your debit card transactions are approved or declined – unless you give us your OK to keep TD Debit Card Advance. Have peace of mind and swipe worry-free, even when you may not have enough funds available in your account.
It’s easy to make sure nothing changes – say “Yes” to TD Debit Card Advance
Debit Card Advance!? Wow! That sounds awesome right? Swipe worry free? And my bank is literally telling me to say yes? Awesome.
Ugh. This might be the most egregious case of misleading marketing I’ve ever seen. Congress recently passed legislation to protect consumers from overdraft fees. As most young New Yorkers have probably experienced, banks will hit you with a $35 fee for every debit card transaction that takes you below $0 on your checking account. This sucks. Luckily, they changed the rules so now you have to opt in to the system. Don’t do it!
Lets hope it doesn’t happen too often, but it’s pretty easy to miscalculate over a long weekend and overspend by a few dollars before your next paycheck clears. Suddenly a pack of gum, a coffee at Dunkin Donuts, and a magazine can turn into $140 dollars. It’s terrible – it doesn’t represent the real cost to the bank, and it doesn’t do anything for the consumer (hah except peace of mind when you swipe, right?). Really, it’s just a vestige of the time before debit cards and online banking when people were using cash for small purchases and over drafting on a check was a real pain in the ass. Over the last ten or twenty or years, as debit card usage increased, banks started earning significant revenues off this stuff… and now the whiny little ______s don’t want to lose another cash cow.
When your wondering what your Democratic President and Congress are doing for you, take another look at the new Bureau of Consumer Financial Protection – it flew a little under the radar during the financial reform process, but it’s a very good thing. It’s pretty much going to be the FDA of banking, and it’s designed to handle things like this.
Thank you Obama… and Happy Birthday.