[HN Gopher] Debit cards are hidden financial infrastructure
___________________________________________________________________
Debit cards are hidden financial infrastructure
Author : smitop
Score : 271 points
Date : 2021-11-13 01:25 UTC (21 hours ago)
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| latchkey wrote:
| In Vietnam, even the 'credit cards' are 'debt cards'. There is no
| concept of a credit score there (or a legal way to really make
| people pay up a debt), so they came up with this work around. To
| get a credit card, you have to carry the total amount of 'credit'
| as a time deposit in your account that you can't touch.
| f3d46600-b66e wrote:
| Secured credit cards also exist in America :-)
| coconut_crab wrote:
| It's not entirely true. Some banks only issue credit cards if
| you receive salary via their bank account or have a deposit
| there (mostly state owned banks) but other have no such
| requirement. Also they already have a credit score database up
| and running (CIC).
| latchkey wrote:
| Name one bank in Vietnam that has no such requirement.
|
| The credit score database only applies to locals and not
| foreigners living there, so that is what my reference was.
| victor106 wrote:
| > The government's current target is 40% of the payments mix,
| about double the current amount, which would put it on parity
| with the present state of play in the U.S. (and behind Asian peer
| nations, at around 50%)
|
| It's shocking that still about 50% is cash based.(if I am reading
| that right)
| stelonix wrote:
| I think it means 80% is cash-based, since the double of the
| current amount of e-money transactions is said to be 40%.
| jasondigitized wrote:
| Bankers are product managers for financial products. They
| implement features to acquire, activate, retain, and refer
| customers to ultimately drive revenue and margin. Debit cards are
| a first class product and overdraft fees are nothing more than a
| feature.
| alberth wrote:
| > "This user might very well have somewhere on the order of
| $2,000 of debit card transactions a month. This implies about
| $300 a year in interchange revenue"
|
| There seems to be a mistake in the math above. It's not $300 a
| year in interchange revenue. It would be closer to $12.
|
| Interchange in the US for credit going to an issuer is around 125
| bps (and that correlates to the $300 calculation).
|
| But the US is highly regulated on debit and interchange is around
| just 5 bps for debit. Making the yearly debit interchange revenue
| to be ~$12.
|
| Which means this account holder in the illustrative example is
| still a net loss for the issuer.
|
| EDIT: I just finished reading the article. It's even called out
| at the end of the post that debit interchange is much lower. I'm
| confused now how patio11 did his original math knowing he's aware
| of Durbin.
| loosescrews wrote:
| I think that number was supposed to be pre-Dodd-Frank (or
| Durbin-exempt).
| alberth wrote:
| Ah. Yes, that makes more sense - though definitely should be
| called out for those readers unaware of the regulatory
| change.
|
| Rumors have it there's another change also on the US horizon.
| Cederfjard wrote:
| It makes sense to me, since it's in chronological order. If
| you read the whole article, you get the whole and up-to-
| date picture. Also don't forget the exemption for banks
| with less than $10 billion in deposits - presumably that's
| pretty relevant to a lot of his readership, given fintechs
| and how they partner with community banks on this.
| smallerfish wrote:
| I took a look through glassdoor reviews of stripe as a result of
| his pitch at the end - lots of complaints about work-life balance
| / being overworked. Any stripe engineers want to weigh in on
| that? Are there areas of the company that are better than others?
| unicornmama wrote:
| I mean it's a hyper growth startup. Expect to haul ass.
| mdorazio wrote:
| Stripe is 12 years old, has ~4,000 employees, and does
| several billion in revenue each year. It's not a startup
| anymore. Although I do agree with your general sentiment that
| if you want real work-life balance, an actual startup is
| probably not for you.
| smallerfish wrote:
| I mean I'm no stranger to startup hours. It's just unusual
| to see glassdoor reviews so consistently negative about the
| amount of work that's expected.
| armendhammer wrote:
| I wonder how regulated they are.
| spir wrote:
| I'd be interested to know patio11's updated take on the long arc
| of crypto.
|
| As a crypto person, it's cool to see how the benefits he
| describes-- eg lower transaction costs, embedded finance, and
| novel items such as bundling reporting and instant settlement--
| are also driving much of the product-side interest in crypto and
| web3.
| simonbarker87 wrote:
| Lower transaction fees? I moved a few hundred PS into my wallet
| the other day for some Ethereum and paid like PS50 in various
| fees and gas. The crypto world is full of layers of middle men
| taking their slice. Even swapping some ENS to ETH cost over
| $100 in gas
| capableweb wrote:
| There are thousands of cryptocurrencies in use today. If
| you're out after faster transactions with lower fess,
| Algorand seems like a good option. Fee seems to be about
| 0.001 ALGO (0.002044 USD) about finalizes in about 5 seconds.
| spir wrote:
| You're right that ethereum's fees are extremely high, and
| they will only get much higher. That's because, heading into
| the future, ethereum isn't intended for direct use by end-
| users.
|
| End-users may expect to use ethereum's live & emerging
| scaling solutions, also known as Layer-2 networks or L2s.
|
| The ethereum chain itself has become known as the "base
| layer" or, more commonly, "the L1". Only rollups,
| governments, megacorps, and extremely rich people will be
| able to afford transacting directly on the L1.
|
| The good news is that L2s are becoming great for end-users.
| Some are live now (optimistic rollups), and the most
| promising of them will be live soon (zk/validity rollups).
|
| For example, Arbitrum and Optimism are optimistic rollups L2s
| and have achieved a significant linear decrease in
| transaction fees.
|
| As another example, zkSync 2.0 and StarkNet are zero-
| knowledge rollup L2s, also called validity rollups, that
| achieve a greater linear decrease in end-user cost than
| optimistic rollups, and unlock a (truly) exponential decrease
| in end-user fees by using a spectrum of off-chain data
| solutions. This fantastic result of exponential decrease in
| cost for end-users is achieved by way of an important new-ish
| branch of mathematics called "zero knowledge proofs".
|
| Currently, zkSync 2.0 and StarkNet are the "Luke Skywalkers"
| of ethereum scaling. We are expecting great things from them,
| and need them to deliver to allow hundreds of millions of
| users to onboard to ethereum next year.
|
| https://l2beat.com/
|
| https://l2fees.info/
|
| https://arbitrum.io/
|
| https://www.optimism.io/
|
| https://zksync.io/zkevm/
|
| https://starkware.co/starknet/
| simonbarker87 wrote:
| Thanks for the explanation, very useful
| spir wrote:
| You're most welcome! I'd be happy to discuss this with
| anybody interested. The best way to reach me is via
| twitter DM https://twitter.com/ryanberckmans
| throwaway98797 wrote:
| I mean your ENS was free money tho, so ...
| simonbarker87 wrote:
| Very true, but same experience buying an NFT, 15% in fees
| etc
| numair wrote:
| The beginning of this article is a fairy tale that ignores what
| used to be one of the biggest drivers of revenue for banks:
| overdraft fees. Maybe the HN crowd has never been in a situation
| where they were auto-billed into a negative balance, which then
| caused an overdraft fee that then further drove their balance
| into negative territory, but this was a weekly/monthly fiasco for
| millions of Americans.
|
| I was once in a meeting with one of the senior executives at
| JPMorgan, where the guy smugly told me he felt they were "doing a
| service for the community" by charging people overdraft fees.
| After leaving the meeting, my very senior colleague said, "I had
| to hold myself back from throwing that guy out of his window."
|
| These sorts of articles -- half PR, half history lesson -- tend
| to leave out these sorts of politically inconvenient but
| important bits of history. It's so much work to unpack the
| bias...
| eyelidlessness wrote:
| Overdrafts were the second thing that came to mind, a decade
| into clawing my way out of poverty and just plain being broke.
|
| The first was the scam of debit cards and secured credit cards
| being treated fundamentally differently. They both operate
| basically the same way for customers (you're only spending your
| own money, it's not credit in the lending sense), but debit
| cards are a profit center with no credit reporting for the
| customer and secured credit cards can be recommended or not in
| any discriminatory way anyone wants (which they are).
| rp1 wrote:
| What do you mean by secured credit cards can be recommended
| is any discriminatory way? I definitely think the nation
| should prioritize financial literacy in the education system,
| but I'm not sure you should be trusting any information you
| get from a bank regarding what to do with your money.
| rjzzleep wrote:
| Well they work like debit cards in a way, you can't
| overdraft and you build credit with it. It's what's
| recommended for newcomers to the US. But I'm not sure
| they're really the same given that your credit limit will
| be as high as the spare amount of money you can keep as
| security in your bank.
| eyelidlessness wrote:
| What I mean is that for customers, secured credit cards and
| debit cards have roughly the same risk, but banks have
| obligations to offer checking accounts fairly but offering
| the equivalent credit-building account is up to their own
| discretion. It's considered lending even though they're
| lending the customer their own money.
| rp1 wrote:
| Do you feel that the "discretion" violates the equal
| credit opportunity act? Technically, credit
| discrimination is illegal, but I could see a bank taking
| liberties with people who don't have the means to protect
| themselves.
| eyelidlessness wrote:
| Given that the risks to "creditors" (banks lending money
| back to people who own that money) are equal for debit
| and secured credit cards, and that the risks to "debtors"
| (people who would be using their checking account to
| build a neutral-at-worst credit history)...
|
| Having the means to protect yourself is the baseline
| definition of a secured credit card. That's why it's
| secured. You're starting with some positive balance and
| spending your own money. That's what debit cards are too.
| The liberty banks take is choosing who gets to benefit
| from their normal spending of their own money being
| considered as credit at all.
| xdennis wrote:
| Debit cards are a fraud? Living on borrowed money is a fraud.
| eyelidlessness wrote:
| It's a scam that:
|
| 0. for many aspects of life you need positive credit
| history to live at all
|
| 1. debit cards don't help you build credit
|
| 2. secured credit cards (your own money! not borrowed!) do
|
| 3. both function almost the same way, but the latter is
| much less equally available
|
| And if you think "living on borrowed money is a fraud", I
| suppose that means you think only independently wealthy
| people should own homes? Nearly no one could afford to buy
| a home anywhere without a mortgage.
| passerby1 wrote:
| How about the printed money?
| pessimizer wrote:
| Even worse, they batch transactions by the day, and reorder
| them highest debit first in order to maximize overdraft fees.
|
| So if you spend $5, $5, $5, and $40, in that order, with $38 in
| the bank, instead of getting one $35 overdraft fee, you get 4.
| It's the difference between a balance of -$52 and a balance of
| -$157.
|
| I once worked at a bank where they had for a period
| doublecharged people for overdrafts, driving them into further
| overdrafts even after deposits clearly intended to cover those
| overdrafts had been made. The cheery low-level administrators
| loudly resented that they had to refund the overcharges at all,
| because people who kept their accounts that low were obviously
| deadbeats anyway.
| raydev wrote:
| I got hit by this two separate times in the early 2000s
| before I learned it was better to withdraw whatever cash I
| had left. I was already stuggling, living out of my car, and
| having _additional_ overdraft fees on top of the one I
| expected was devastating. It literally left me unable to buy
| food for days, because each overdraft fee was $20 IIRC.
|
| I'm shocked that the transaction reordering is still a
| practice nearly 20 years later.
| jakub_g wrote:
| Fun fact: when you get money in and money out the same day on
| an account, some banks count the money out first, so that they
| can charge you for a possible overdraft
|
| Edit: just saw another comment on reordering by tx size, omg
| https://news.ycombinator.com/item?id=29210357
| tehabe wrote:
| I'm really confused about those overdraft fees (or rather
| overdraft interests). My bank has also charges overdraft
| interests, they are currently 6.99% p.a. So if I get into
| overdraft due to one payment but money comes in on the very
| same day it shouldn't be that much interest I have to pay to
| the bank.
|
| For an overdraft of 100 euros it should be like 2 cents for a
| day.
| loeg wrote:
| In the US they were often flat charges on the order of $30.
| jedimastert wrote:
| > Maybe the HN crowd has never been in a situation where they
| were auto-billed into a negative balance
|
| I wonder about this some times. It's truly not something I wish
| upon anyone, but at the same time it's almost a privilege to
| have live it first hand, as it's an...I was gonna say
| "unfortunately rare" but I think I'll go with "severely under-
| represented" point of view in this industry, especially
| silicone valley.
|
| Also yes, overdraft fees are _truly_ disgusting. What 's worse
| is that there are transactions that can bypass "overdraft
| protection"
| tzs wrote:
| This happened to me once, at BofA, before web-based and app-
| based banking so you only got verification that things were
| what you thought they were when you got your monthly statement,
| went to an ATM or teller, or used a cumbersome telephone
| interface via a touch tone phone:
|
| 1. Initial balances: -L on BofA credit card, 0 on checking
| account, S in savings/investments. When I write a check I
| transfer money from savings or investments to checking to cover
| it.
|
| 2. I attempt to pay my credit card bill in full by check, but I
| don't get the money transferred to the checking account in time
| to beat the check.
|
| 3. Overdraft protection on my account kicks in, which was
| backed by the credit card and treated as a cash advance. That
| did the following: 3a. Transfer L from credit
| to checking 3b. Charge overdraft fee O to credit card
| 3c. Charge cash advance fee F to credit card for cash
| advance of L+O+F 3d. Transfer L from checking to credit
| card
|
| Note that the credit card balance went from -L to -2L-O-F from
| 3a through 3c, then to -L-O-F after 3d.
|
| Since the credit card always had a debt of L or more on it
| during all that, an interest charge I for not paying off the
| card completely during that month was changed.
|
| I didn't find out about this until my next statement, where the
| balances were: -L-O-F-I on credit card, L on checking, S-L in
| savings/investments.
|
| I found this absurd and irksome for two reasons.
|
| 1. If it had been my Discover card or my Capital One card I was
| trying to pay off, the card balance would have ended up at 0
| after all this so I wouldn't have incurred interest charges.
| This would have been a lower net cost than what happened.
|
| 2. My BofA card included allowing skipping the minimum payment
| every so often with no late penalty (it would still accumulate
| interest on the unpaid balance of course). If I had NOT had
| overdraft protection, what would have happened is that when the
| check bounced due to my savings/investment transfer not making
| it in time, I'd have been charged a bounced check fee B on
| checking, my "skip a payment" would have been used on the
| credit card, and my next statement balances would be: -L-I
| credit card, L-B checking, S-L in savings/investments. This
| would have been a lower net cost than what happened.
| loeg wrote:
| Writing a check for a balance that isn't in your account
| (step 2) is called "kiting" and is a relatively minor fraud.
| In general, one should avoid doing it regardless of overdraft
| fees.
| netcan wrote:
| Hoo... Ho. That's a bit much.
|
| _" half PR"_ & " _politically inconvenient_ " are an
| unnecessary assumption of bad faith. Patio11's not doing PR or
| propoganda.
|
| Disagree and/or add to the discussion as you see fit, but let's
| try to be a little more generous... especially to a member with
| such a history of contribution to the community.
| numair wrote:
| > Patio11's not doing PR or propoganda.
|
| An employee of a multinational financial services company
| writes a historically revisionist article about an area in
| which his company has direct regulatory and financial
| exposure.[1] With only implicit disclosures of conflict of
| interest. I would say that it is _only_ because of the
| author's long-term goodwill in this community that this stuff
| isn't looked upon with a very critical eye.
|
| I've learned the hard way that someone's past identity does
| not necessary correlate with good behavior in a new, more
| "important" persona. Silicon Valley is filled with examples
| of _exactly this sort of thing_.
|
| 1: Remember, the former _Governor of the Bank of England_ is
| on his employer's board. This isn't a passionate evangelist
| for a struggling startup charity case, or someone telling us
| cool facts about their weird hobby.
| netcan wrote:
| historically revisionist?
|
| I don't see how we can get anywhere discussing like this.
| Instead of discussing the topic, it's all meta. Ad
| hominems, characterizations of the argument and accusations
| of bad faith.
|
| As I said, disagree and make your case. You don't have to
| assume credibility, but don't assume malice. What's the
| point of having a discussion if it's not a good faith
| discussion.
| numair wrote:
| > historically revisionist?
|
| Yes. The "big banks lost money servicing the poor people"
| narrative is totally wrong, and the author knows this. We
| can't let this incorrect story get more traction than it
| already has. Too many innocent people suffered great
| hardships in the real story of what happened -- look at
| the stories in this thread!
|
| > What's the point of having a discussion if it's not a
| good faith discussion.
|
| Edward Bernays might have a few ideas.
| roystonvassey wrote:
| Long back when I worked in my first job at a large private
| bank, I remember being in a meeting where they spoke about
| overdraft fees + late fees + interest on these + god knows what
| else and the lady, our systems counterpart, looked at all of us
| and said 'We better plan a trip to Ganges to atone for all this
| and we might need to go ever year' (it's a common saying in
| India, as Ganges is supposed to wash away one's sins)
|
| It's been 16 years since I worked there but I still remember
| this vividly. Modern banking has to be one of the biggest scams
| legally running and once you go below the prime segments, it's
| basically just exploiting the poorest and weakest to make some
| of the easiest money you can.
| pinkfairy10 wrote:
| Your comment seems false given private banks commonly don't
| charge overdraft fees, or late fees, or interest charges.
| pessimizer wrote:
| Your comment seems ill-informed.
| xook wrote:
| What would classify as a private bank? IME, you're given
| the option for overdrafts regardless.
| stevenicr wrote:
| around my neck of the woods the most common banks, like
| bank of america, regions, fifth third - afaik - all charge
| over draft fees.
|
| not sure that late fees or interest fee apply, unless you
| consider things like paying BAM late on a mortgage payment
| - surely has a late fee.. perhaps if you have one of those
| account like. free checking so long as your balance stays
| above 1500 or/and you use your debit card 15 times a month
| to push fee onto retailers.. if these are not met you could
| say it'd be like a late fee.
|
| I've seen news stories that have discussed discovery of
| some banks structuring debits to an account with the same
| 24 hour period that would cause an overdraft.. so take out
| all the payments and then apply your deposit after those
| are settled - now that is super extra shady.
|
| personally I'd just prefer them to bounce back and refuse a
| payment if there was not enough money in the account.
| Although I was charged for a bounced/bad check someone had
| given me at one point, so I'm guessing they could find a
| way to charge for similar.
|
| Maybe I am missing the qualifier in "'private' banks" in
| that statement - but I've seen a lot of people pay a lot of
| overdraft fees and have accounts closed for them, not sure
| what "private" banks don't do such things, or how common
| uncommon.
| beh9540 wrote:
| This and the glee of executives over systems that increase the
| potential for overdrafts or charge backs is why I'm glad to not
| be in banking anymore.
|
| One of my most memorable conversations was with a rep from one
| of the core processors about how she makes it her mission to
| make sure everyone in her family opts out of overdraft
| protection.
|
| Banks spend so much time on the wording to make it sound like
| they're doing you a favor, I've had to convince my wife not we
| didn't want it.
| rdevsrex wrote:
| Yeah, that's why eventually paid 5 bucks a month more for an
| account without an overdraft facility, meaning any negative
| transactions would be rejected. I can't believe this isn't the
| default.
| ThunderSizzle wrote:
| Or just use a credit card with a low credit limit?
| [deleted]
| claraem0201 wrote:
| s
| mherdeg wrote:
| It's not just overdraft fees right? It's overdraft fees plus
| transaction reordering which makes the magic happen.
|
| I'm still kind of mesmerized on this one, it felt like
| regulatory action _almost_ happened, the most lucrative of the
| overdraft practices got limited circa 2009 /2010, and then
| banks voluntarily toned it down and the regulators mostly
| looked the other way on things like reordering?
| rjzzleep wrote:
| What's transaction reordering?
|
| 1. have $10 in your checking
|
| 2. pay $9 for steak
|
| 3. fill account with $500
|
| 4. buy sausage for $2
|
| bank reorders it as
|
| 1. have $10 in your checking
|
| 2. pay $9 for steak
|
| 3. buy sausage for $2
|
| 4. charge overdraft
|
| 5. count $500 deposit
|
| Is that what banks would do? I faintly remember that really
| old accounts I had in Germany had overdraft capability, but
| for all newer(last decade or so) accounts, I had to
| explicitly request overdraft. I guess it was inherently more
| user hostile in the US. Although in German its not because of
| good service, but rather because banks don't trust the
| consumer.
| namibj wrote:
| My German back account has overdraft, but that only charges
| via ~12% annual interest (billed at end-of-month, but
| charges proportionality if you've been in the red for part
| of the month).
|
| Also note that for ATMs (including deposits) and within-
| bank transfers, we had no more than a couple seconds
| latency since EUR, which got expanded for all willing banks
| to cross-bank push transactions specifically requested to
| be "SEPA instant push".
|
| The "SEPA instant push" transactions have some issues with
| reversing in case of accidentally fat-fingering IBAN
| (target account; like a crypto wallet address but no
| crypto) or amount. Once the money is in the target account,
| you basically have to go to court if it wasn't outright
| fraud. And being instant removes the window you had to call
| your bank and cancel the transfer. IIRC there are some
| further liability shifts.
|
| And yes, this transparent interest-based handling is why we
| get by perfectly fine without credit cards.
| t0mas88 wrote:
| Exactly the same in the Netherlands. Didn't even know the
| Americans got screwed so badly.
| AdamJacobMuller wrote:
| The specifics of it are dependent on the bank, but it can
| be more insidious than even your example.
|
| Given a balance of $100 and 4 transactions of $20, $20,
| $20, $90 you can either be charged one, or three overdraft
| fees depending on the order in which your bank deducts
| those from your account. Basically, ordering from largest
| to smallest will cause the most number of overdraft fees.
| NikolaNovak wrote:
| I'm going to re learn the lyrics to Oh Canada and sing
| them joyously and thankfully... Our banking system gets a
| lot of ire but dear Gawd.
| 8ytecoder wrote:
| It a uniquely American stupidity that somehow everyone
| just lives with. The concept of overdraft doesn't even
| exist in normal consumer accounts anywhere else in the
| world. The first thing I do when I open an account here
| is to disable overdraft - but then you have to pay return
| cheque charges by whoever was trying to charge your
| account.
| jlmorton wrote:
| The history is that people used to write paper checks,
| and merchants would charge a bounced check fee. Overdraft
| _protection_ was actually a banking feature which would
| save you from the cost and embarrassment of a bounced
| check.
|
| There is very nearly zero usefulness to overdraft
| protection in a real-time authorization world. Nobody
| charges a fee for a rejected debit authorization.
|
| I suppose merchants might charge a return check fee for a
| failed ACH payment, but nobody uses ACH payments for
| anything routine in the US.
| JoBrad wrote:
| Consumers don't use ACH for very much. Businesses utilize
| ACH a lot, because despite the additional time lag, it's
| free.
| kgermino wrote:
| > nobody uses ACH payments for anything routine in the
| US.
|
| Water bill, electric bill, mortgage, and property taxes
| are all ACH for me. Many people pay rent that way. I
| don't think it's commonly used for day to day
| interactions but a lot of payments are still ACH
| rootusrootus wrote:
| The latest thing I've noticed is that if you attempt to
| debit, say, $100 from an account that has only $95, it
| will successfully debit $95 and then the POS equipment
| will show that you still need to find some other way to
| pay the remaining balance. Used to be in this situation
| it would just be rejected outright.
|
| It's more handy for gas pumps, but less transparent. It
| stops before your tank is completely filled, but doesn't
| say why. You can hear the difference if you are standing
| there while it fills, of course, but other than that you
| may be confused why it slowed down and stopped exactly at
| a certain amount and won't go any farther.
| throwaway8689 wrote:
| We have exactly this concept in normal consumer accounts
| in the UK. It is not uniquely American.
| t0mas88 wrote:
| Netherlands has overdraft if you request it, otherwise
| the payment would fail / card declined. But we don't have
| overdraft fees, that's the weird American thing that
| caused all those crazy optimizations like reordering
| transactions.
|
| The way it works in NL is you pay a (high like a
| creditcard) interest rate for every day the account is
| below zero. The transaction order doesn't matter it looks
| at the balance at the end of the day and charges you
| 1/365th of 13% interest.
|
| The only way banks fuck you over in this system is with
| the dates. Using a card means a transaction date of
| "today", getting paid almost always has transaction date
| tomorrow. So you end up paying 1 day of interest. Much
| less than a $ 40 overdraft fee and regardless of the
| number of transactions.
| jon-wood wrote:
| Overdrafts are very much a thing in the UK, most accounts
| allow it, but you have to request it in advance. In
| effect they work like a pre-approved loan, which at least
| when I was working badly paid jobs and needed food right
| up before payday was a very welcome feature.
| another-dave wrote:
| With both HSBC and RBS if I didn't have an overdraft in
| advance they just hit me with an even larger "unapproved
| overdraft fee" -- both refused to disable overdrafts &
| just bounce the payment instead
| joecool1029 wrote:
| I seem to recall there being service levels at banks in
| Canada and maximum numbers of transactions per month
| until one gets hit with per-transaction fees. I was told
| explicitly when I opened my TD Canada Trust account there
| that it was imperative that I both keep money in the
| accounts and use them occasionally or dormancy fees would
| accrue (and if there was no money left, they'd then slam
| it with overdraft fees).
|
| The benefit of US banking despite lax regulation was that
| there's a ton of different banks and credit unions to
| choose from. Some are great and some are shit. Literally
| hundreds to pick from. Canada there was like 5 big banks,
| a large credit union, and then depending on your area
| there was maybe perhaps a small community credit union.
| cameronh90 wrote:
| UK banks are pretty heavily regulated. For example, the
| overdraft fee spiral has been banned and in many cases
| banks were required to pay compensation.
|
| Yet we have quite a lot of banks to pick from - around 60
| if you include building societies (more if you include
| private, niche and specialist banks). We also have a fair
| few new and digital challenger banks like Monzo,
| Starling, Atom, Revolut and arguably Metro Bank. If
| anything our banking system seems far more innovative
| than the US system.
|
| I don't know about Canada, but clearly regulations don't
| mean that you can't have competition and innovation.
| JoBrad wrote:
| I could be mistaken about this, but I thought it had
| something to do with the UK's relationship with the EU
| (and perhaps the US, as well?) that made the UK
| particularly attractive to financial industry.
| philjohn wrote:
| There are a lot of things that are just plain better in
| the UK compared to the US. Out of network ATM fees being
| a big one.
|
| See also regulation about what the incumbent last-mile
| network provider (Openreach) can charge ISP's to provide
| services on their lines which has led to a larger number
| of ISP's available in any one place (unless you're in
| Hull, because of historical reasons).
| leetcrew wrote:
| if ATM fees are important to you, you could always
| consider opening an account with schwab. they reimburse
| 100% of ATM fees.
|
| as for ISPs, it's hard to do worse than comcast, but at
| least they don't block a wide range of content by
| default.
|
| https://en.wikipedia.org/wiki/Web_blocking_in_the_United_
| Kin...
| dsomers wrote:
| Totally agree, the Canadian banking system is a corrupt
| cartel the levies it's own tax on every Canadian. This
| was made even more clear to me when I moved to the
| Netherlands and every banking fee was suddenly 1/3 as
| much as in Canada for the exact same service.
| doikor wrote:
| Here in Finland banking fees are a thing only for the
| poor (and even then we are talking about a total of 20 or
| 30 euros per year)
|
| Basically every bank has some kind of "premium customer"
| program that you qualify for by having enough investments
| or loans from that bank and magically all your banking
| fees go away (obviously they just make their money from
| the services they provide for your investments/loans)
| kwhitefoot wrote:
| Banking fees? Never paid any as far as I can tell, not
| for the ordinary things. My bank here in Norway won't pay
| a bill if there isn't enough money in the account. It
| sends me a text and an email to say what happened and
| doesn't charge me anything.
|
| The only fees I pay are a small percentage for management
| of mutual funds.
| adpcm wrote:
| I'm assuming parent meant fees like X per month for
| having a debit/credit card or for access to "online"
| banking.
| doikor wrote:
| Yeah that is what I meant. Basically having online
| banking + debit/credit card. Also for under 2X years old
| (depends on the bank) they are usually free.
| refurb wrote:
| Oh boy no. Canada has only a handful of banks, minimal
| competition (they make money hand over fist) and
| customers get bent over on a regular basis.
| katbyte wrote:
| My Canadian bank (rbc) doesn't charge me any fees outside
| of interest if I keep a negative balance for going into
| my overdraft.
| rudian wrote:
| Canada sure learns a lot of tricks from their big
| brother.
| refurb wrote:
| What's hilarious is Canadians banks can come up with that
| all on their own.
| ryandrake wrote:
| Yes, that's exactly what they would do. Even better (for
| the bank's profits) is if you had lots of other smaller
| transactions that day too. They would re-order everything
| from largest-to-smallest, so it's:
|
| 1. have $10 in your checking
|
| 2. pay $9 for steak
|
| 3. buy sausage for $5
|
| 4. charge overdraft
|
| 5. buy milk for $3
|
| 6. charge another overdraft
|
| 7. pay $2 for parking
|
| 8. charge another overdraft
|
| 9. buy a pack of gum for $1
|
| 10. charge another overdraft
|
| 11. count $500 deposit
|
| It was truly despicable behavior that benefited nobody but
| the banks.
| beebeepka wrote:
| Dear gawd. I've never heard of this shit before and hope
| it's not a thing anywhere else. Amazing it's all legal.
| That's the very definition of fraud
| rootusrootus wrote:
| I may be wrong, but I think this is now illegal in the
| US. I haven't heard of it in a while, at least. But it's
| also been some time since I left little enough in my
| account that it could happen to me, or banked at a shitty
| bank that would even do it to begin with.
| plorkyeran wrote:
| Banks "voluntarily" stopped doing it once regulators got
| serious about forbidding it and then the regulations
| never actually happened, so while it's not currently a
| thing anyone does it probably will be again some time in
| the future.
| dntrkv wrote:
| I know Chase and USBank always credited deposits first
| (going back to about 2006).
| zaphirplane wrote:
| This thread assumes intentional reordering not that the
| transaction arrive at the bank out of order
|
| I have transactions that show up out of order to the event
| time. Thou I wouldn't put it past some smaller banks in low
| regulation geographies
| desmosxxx wrote:
| I think it's pretty well documented that intentional
| reordering happens and still happens
| mdp2021 wrote:
| Should not that cause legal action - duly and factually?
| organsnyder wrote:
| Only if it's illegal.
| mdp2021 wrote:
| It's a scheme with the purpose of theft.
|
| You cannot have law as a list of specific cases: it must
| be based on patterns - "All arbitrary appropriation is
| forbidden and sanctioned", then further made into
| distinct categories to substantiate and differentiate the
| amount of gravity. All theft is illegitimate.
| [deleted]
| klipt wrote:
| Yes they reordered transactions to maximize their money.
| E.g. you have $495 in the account, and you spend:
|
| -$5: $490 left
|
| -$5: $485 left
|
| -$5: $480 left
|
| -$500: -$20 left, overdraft fee of $40, $-60 left.
|
| They will reorder it as:
|
| -$500: -$5 left, overdraft fee of $40, $-45 left.
|
| -$5: -$50 left, overdraft fee of $40, $-90 left.
|
| -$5: -$95 left, overdraft fee of $40, $-135 left.
|
| -$5: -$140 left, overdraft fee of $40, $-180 left.
| Aerroon wrote:
| Wow.
|
| Yeah, the bank employees involved in this should go
| straight to jail.
| Avshalom wrote:
| And of course even if you deposited a check that day it
| wouldn't clear until the next business day so you'd pay a
| negative account balance fee for three days before your
| money hit.
| Larrikin wrote:
| I think it was more like
|
| 1. have $100 in your checking 2. pay $10 for steak 3. buy
| sausage for $5 4. Buy a ticket for $99
|
| You think you get one over draft fee
|
| bank reorders it as
|
| 1. have $100 in your checking
|
| 2. Buy ticket for $99
|
| 3. buy sausage for $5
|
| 4. Pay 10 for steak
|
| Get 2 over draft fees. Add more transactions in between the
| ticket purchase to increase the fees.
| brazzy wrote:
| Germany here as well. I have never heard of event-based
| overdraft fees, only interest-based. Which makes this
| transaction reordering pointless
| jmkerr wrote:
| Because it's not true, check the largest consumer banks:
|
| https://www.postbank.de/dam/postbank/pdf/privatkunden/Pos
| tba... https://www.deutsche-
| bank.de/dam/deutschebank/de/shared/pdf/...
| https://www.commerzbank.de/portal/media/efw-
| dokumente/preisa... https://www.hypovereinsbank.de/conten
| t/dam/hypovereinsbank/s...
| https://www.ing.de/girokonto/konditionen/ https://www.die
| bank.de/content/dam/f0032-0/PDF_neu/preisaush...
| (Volksbank) https://www.ksklb.de/content/dam/myif/ksk-
| ludwigsburg/work/d... (LBBW)
|
| In this sample, if overdraft is enabled, you pay up to
| 15% p.a., if disabled the cancellation fee is up to 2EUR
| for the postal notice, but mostly just porto (0,80EUR).
| [deleted]
| steveklabnik wrote:
| I left a comment about how this happened to me... 8 years
| ago, wow https://news.ycombinator.com/item?id=6424493
| EdwardDiego wrote:
| Sounds like one of those "Look! We came up with a voluntary
| code of conduct, so your regulatory body can stop
| investigating necessary regulations, we've changed honest, so
| please feel free to have a triumphant press conference and
| congratulate yourselves without actually holding us to
| account."
| loh wrote:
| I remember this happening to me when I was a broke college
| student over a decade ago. I had to pay some bills and buy
| some things, and I expected a single overdraft fee, as I knew
| my exact account balance and the order of the purchases. I
| remember being hit with 3 (maybe 4) overdraft fees and
| immediately called my bank for an explanation. They gave me
| some bs like, "We reorder transactions to make sure your
| large ones go through first since they're probably more
| important." It was obvious at the time what they were really
| doing and why, which led me to eventually close my account
| with them and go with a local credit union.
| eyelidlessness wrote:
| My last bank (US Bank, don't bank with them) did this in a
| way where in one day where I had only one transaction which
| could overdraft they charged 6 overdrafts even though my net
| would have been positive. If I wasn't (at the time) skilled
| at ~~kicking and screaming~~ advocating for myself I would
| have been out $180 plus whatever 30 cents they had calculated
| I went negative. Which (again at the time) was the difference
| between whether I was gonna be homeless.
| c22 wrote:
| Oh man, I banked with US Bank back in 2003/2004. One day I
| overdrafted my checking account by about $5. "Overdraft
| protection" kicked in and they automatically transferred
| money from my savings account, but not before charging a
| $25 fee that caused... another overdraft. This repeated
| automatically over a dozen times in one day to the tune of
| around $300. I noticed what was going on that evening and
| manually transferred some extra into checking to stop the
| cycle.
|
| The next morning I went in to sort it out and was told I
| needed to travel an hour away to the branch I had
| originally set up my account at. Upon arriving at my "home"
| branch I was told the manager was on vacation and no one
| else could help, but she would call me as soon as she got
| back. Two weeks later, having received no call, I went back
| in and saw the manager sitting at her desk. I closed all my
| accounts on the spot and never looked back.
| passerby1 wrote:
| There're several of stories of some level of craziness
| here in the thread. I wonder why none tried to sue bank?
| Are banks in the US really above the law? Or probably not
| too high to be sued, but enough to make good money.
| c22 wrote:
| Lawyers cost money. There are a lot of bad actors in the
| US that know they can get away with stealing small
| amounts from people because the legal costs will quickly
| eclipse any returned gains.
|
| Anyway, in my case the bank _did_ ultimately return my
| $300 as they desperately tried to retain my business.
| Pretty sure this is another way they get away with stuff
| like this, just refund the squeaky wheels. "Oh, sorry
| for the mistake."
| eyelidlessness wrote:
| Oh since I'm naming names. The bank before that, Wells
| Fargo, honored a check I wrote > 2 years earlier. Sure, I
| wrote it and I was good for it at the time. I forgot about
| it. Maybe I could've left that money in limbo but at a
| certain point I assumed my moderately wealthy aunt wasn't
| gonna cash it.
|
| Well it doesn't matter what I assumed, the law said the
| check was no longer valid. When Wells Fargo honored it and
| overdrafted me they disregarded the law and said I was
| committing check fraud if I didn't pay up. That's how I
| ended up at US Bank, because fuck if I'm going to pay you
| for illegally processing my check.
|
| Edit: and yeah I had "check fraud" on my record for years
| after because Wells Fargo said they didn't care about the
| law and just lectured me about being responsible for checks
| I wrote.
| mdp2021 wrote:
| Again (to other cases in this page, ref. reordered
| transactions): should not this be a case for legal
| action?
|
| A contract has a time limit, one part arbitrarily extends
| it and claims rights: this is completely absurd.
| eyelidlessness wrote:
| I'm sure it could have made a case. But I wasn't exactly
| in a financial position to hire a lawyer.
| t0mas88 wrote:
| Wasn't there some money to be made for you and the
| Lawyer? Sue the bank, make lots of noise, then offer a
| settlement in which they pay the lawyer and some amount
| of damages for getting your credit score in jeapardy.
| bagels wrote:
| You got charged and convicted of a crime?
| MereInterest wrote:
| Not the OP, but having it on his record likely refers to
| his credit record, maintained by private agencies, not a
| conviction record.
| rootusrootus wrote:
| Probably ChexSystems. Kinda like a credit report,
| governed by the same laws, but distinct from the big
| three bureaus everyone is familiar with. All the banks
| use them. And anything negative on that report will
| prevent you from opening up an account somewhere else
| until you get it removed.
| eyelidlessness wrote:
| As mentioned in replies, I was flagged in ChexSystem for
| check fraud.
| steveBK123 wrote:
| The transaction re-ordering to maximize the amount of
| overdraft events should have put execs in prison. Out of all
| the obviously corrupt, mal-intent, direct consumer harming
| practices this was quite near the top.
| Foobar8568 wrote:
| In a French bank, I have credit transactions first then
| debit ones, in a Swiss bank, the contrary, I was shocked,
| especially that day, I did check my bank account to verify
| if I could proceed with a wire transfer, the following day,
| it shown a temporary minus amount but I didn't get an
| overdraft. So yes, fuck banks.
| laurent92 wrote:
| In Australia in 2010 I got a debit card for the first
| time in my life. The card would simply reject
| transactions. "As should be", I thought. It was a
| revolution for me.
| tacocataco wrote:
| Some banks allow you to "turn off" overdraft protection.
| Of course it's enabled by default.
|
| Who on their right mind would rather me charged $30-40
| instead of having your card be declined?
|
| Not me, so I try to turn off any such things when I
| create a bank account
| devoutsalsa wrote:
| Revolut, Simple, and Chime, the three online only banks I
| have tried, all do (or did) this. It really helped back
| when I was living paycheck to paycheck.
| sueders101 wrote:
| For what it's worth; I banked with Simple for the better
| part of 10 years, but then they acquired by BBVA who was
| then acquired by PNC. That meant that all Simple
| customers had to go through account migration twice this
| year, and in the end now have all the typical fees
| associated with traditional accounts. Ultimately I
| decided to move to a local credit union.
| kybernetyk wrote:
| In capitalist West bank robs you.
| JoBrad wrote:
| It wasn't illegal, and maybe isn't (although I thought it
| was). I know that I was impacted by this as a college
| student, and ended up paying hundreds of dollars in fees
| for a single weekend. I had OD protection fees and "bounce
| fees" for the "protection fees". It was insane. However I
| thought this was at least made unprofitable by capping fees
| and limiting when they could be applied.
|
| All of this insane behavior is a big reason why the CFPB
| was created, and legislation was passed to limit "overdraft
| protection" auto-opt-in.
|
| https://www.consumerfinance.gov/rules-
| policy/regulations/100...
| iskander wrote:
| I remember getting hit by reordering when I was in college,
| getting by on a coffee shop job. The bank ordered a group of
| concurrently unresolved deposit/withdrawals to maximize the
| overdraft fees (I think I got hit with ~3x $35). It seems
| silly now but when you're making $5.25/hr, going more than
| $100 in the red really stings.
| numair wrote:
| Thanks for reminding me about reordering. There were (are?)
| just so many dirty tricks. It's been a couple years since
| I've lived in the US, so I am not aware of what things look
| like now -- hopefully others can comment.
| NoblePublius wrote:
| It wasn't voluntary. Wells Fargo lost a mega million dollar
| lawsuit for reordering transactions.
| Ozzie_osman wrote:
| Yea. For people who aren't familiar with this, the bank will
| reorder your transactions and batch them to do the biggest
| one first. Then you get charged an overdraft fee per
| transaction after that. If they did the small ones first, you
| may not go into overdraft until the last big one... So you'd
| pay one fee. Do the largest first, then each small one causes
| a fee.
|
| Highway robbery.
| pbourke wrote:
| The argument, which I do not buy as sufficient but add here
| for completeness, is that it's better for your large
| purchases (ie rent) to clear before your $10 lunch, etc.
| [deleted]
| [deleted]
| chasebank wrote:
| In 2004 I was traveling around Europe as a 20 year old.
| Spent my debit account down to my last $20. I had a flight
| from Barcelona back to Boise and the airline had supposedly
| issued a paper ticket, not an e-ticket. Long story short,
| if I couldn't produce the paper ticket, my flight was going
| to leave without me. I didn't have a credit card and I knew
| I was out of money but I said what the hell, try my debit
| card to purchase a new flight. Lo and behold, it went
| through! I came home and a week later my account was
| -$5,500. Wells Fargo had taken the last charge, the $900
| flight, reordered it and I accumulated $4,600 in overdraft
| fees. I've never been so angry in my life. They did not fix
| the charges, and I got bailed out by my mom. I plead my
| case over and over but everyone, including my mom, just
| drew it up as an non-responsible college kid.
|
| Every time I tell this story it makes my blood boil.
| jakub_g wrote:
| How in the hell they calculated so much overdraft fees?
| They charge 500% overdraft?
| nodemaker wrote:
| Ha I had the exact same experience with Wachovia bank in
| New York City once and basically their argument was on
| the lines of "The highest value transaction was probably
| the most important for you so we ordered it by price so
| that your most important transactions go through first".
|
| In a way though I feel like the American system is set up
| to traumatize you for being poor so much that you develop
| the thirst to become a millionaire one day when these
| things don't affect you.
| [deleted]
| renewiltord wrote:
| When you come to America as a student, the first thing the
| other international students tell you is that you turn those
| off when you get a bank account.
|
| Easy access to cheap credit is one of America's best things but
| this is expensive credit. You don't want it.
| NikolaNovak wrote:
| Hmm I thought that previous article leading into this one
| specifically addressed that exact point on overdraft fees?
| clippablematt wrote:
| Had five years or so of that awful cycle. It's interesting when
| you meet people who haven't experienced living under the
| brutality of the banking system. Overdraft, payday loans, high
| interest credit. They think it's all fine. Fear of overdraft
| fees is a real class divider. One thing I really remember is
| being absolutely broke, and a guy from the bank calling to see
| if I'd be interested in taking on a credit card "we think it'll
| help you out right now", I'm so glad I didn't. I think the same
| people also fail to see the passionate drive it generates, I've
| been working in crypto a few years now and there really is a
| shared hatred for the big banks, with many people feeling
| abused by those systems. The result is a lot of politically
| driven people, who now also have raised funding for the next
| few years, who's goal is to make those places irrelevant and
| create as many other options as possible.
| LMYahooTFY wrote:
| I'm curious about your journey, what do you do in Crypto?
| Have you written about it anywhere?
| capableweb wrote:
| It seems to be a common theme that the ones who have been
| screwed by the banks or are currently being screwed by the
| banks are cheering for cryptocurrencies, while the ones with
| no experience of getting fucked themselves keep asking "But
| what problem does cryptocurrencies really solve? Seems
| useless to me because banks do the same thing"
| simonh wrote:
| If cryptocurrencies were actually being used significantly
| as currencies, you might have a point. My skepticism of
| cryptocurrencies has nothing to do with how they replace
| banks, because they flat out don't replace banks at all. Or
| rather, the extent to which they do so is trivial. I mean,
| if they were taking significant business from banks,
| wouldn't you think the banks would be lobbying to have it
| banned? But no, instead they think it's wonderful because
| it's another highly volatile new asset they can trade and
| provide services for.
|
| I'm sorry, but the idea that crypto is sticking it to the
| man by disinter-mediating the banks is a crypto-cult
| delusion.
| capableweb wrote:
| The invention of cryptocurrencies (specifically Bitcoin
| at least) is not to replace banks, but to replace the way
| transactions happens. A normal bank transfer involves
| contracts and processes to make sure everyone that
| handles the transaction is honest. You basically put your
| trust on contracts that the transaction will actually go
| through. Bitcoin replaces this need of trust in the
| contracts with need of trust in the protocol that can be
| inspected easier than contracts that are most often
| private, at least that's the thinking.
|
| > wouldn't you think the banks would be lobbying to have
| it banned?
|
| There are plenty of examples where the banks in a country
| no longer accepts transactions from/to cryptocurrency
| exchanges, Sweden being one example where it's basically
| impossible to deposit/withdraw SEK/EUR to your bank if
| they think it has anything to do with cryptocurrencies.
|
| In a ideal world, cryptocurrencies are as protected as
| normal currencies, and the need for banks are still there
| as not everyone will run their own node and have custody
| over their own wallet. Banks adds extra security,
| something some people want.
|
| Problem becomes when you start thinking that one solution
| applies for everyone. Cryptocurrencies, just like normal
| currencies, doesn't work for everyone. People should be
| free to choose, without being banned left and right for
| arbitrary reasons. Try getting through banks fraud
| departments when you make transactions from/to countries
| like Nigeria, and you'll know what I'm talking about.
| BorgHunter wrote:
| > The invention of cryptocurrencies (specifically Bitcoin
| at least) is not to replace banks, but to replace the way
| transactions happens.
|
| This is a wonderful hypothetical in much the same way as
| spherical cows, but in the real world today, crypto is
| treated as a (quite volatile) speculative asset, not a
| way to transact everyday business. The world does
| desperately need fast payment processing that doesn't
| involve companies like Visa or MasterCard skimming off
| the top every time to enrich themselves and dictating
| one-sided terms to others (hello, OnlyFans), but I'm not
| seeing any evidence that crypto is poised to handle that.
| It's too risky. And the compatibility layer with legacy
| currency is too unwieldy: Every time you convert to
| regular currency you generate a taxable event, which is
| fine if you treat crypto as akin to a stock, but it'll
| make tax time hell if you're buying groceries and lattes
| and gas with it. It's not impossible to pass laws to make
| the best-case for crypto happen, but that would require a
| lot of political will that I just don't see happening;
| too many people benefit from the current system.
|
| If there's a cryptocurrency that solves those problems,
| please let me know, I'd be interested to hear about it.
| But the current players all just seem like speculative
| bubbles for wealthy techbros to play around with. Many of
| which are driving electricity consumption for mining,
| which has, shall we say, some environmental downsides.
| simonh wrote:
| I know how cryptocurrencies work.
|
| The restrictions on crypto are coming from regulators,
| not the banks, and the reason regulators aren't happy is
| due to the volume of criminal transactions, tax avoidance
| and scams enabled by crypto.
|
| The reason the banks don't care is because at both ends
| of most crypto transactions you will find, er, a bank
| account. Crypto is only useful to the extent that it has
| real currency value, those Nigerian scammers and many
| others using crypto for transfers are just using cyrpto
| as an intermediate step to avoid pesky laws. That's fine
| as far as the banks are concerned because that's more
| money flowing into their systems.
| intarga wrote:
| I ask that question, not because I haven't been screwed by
| the banking system, but because everyone I see in the
| crypto space is out to screw people even harder.
|
| Your comment presupposes that crypto solves the problem of
| perverse incentives. Really, it just worsens them.
| R0b0t1 wrote:
| If your colleague had thrown him out of the window the world
| would be a better place. Think on that.
| bagels wrote:
| Not really, the bank would just pay someone else to say and
| do awful things.
| numair wrote:
| We later learned that the executive in question hung out with
| Jeffrey Epstein... So... You might be on to something.
| nickthemagicman wrote:
| It takes orders of magnitude more effort to dispute bullshit
| than to create it
| saxonww wrote:
| I don't know if it addresses your point at all, but two posts
| back he talked about overdraft fees:
| https://bam.kalzumeus.com/archive/financial-innovation-is-
| ha.... There was an HN thread for this one too; patio11 is HN-
| famous.
| numair wrote:
| That seems like yet another PR piece that revolves around a,
| "look, finance didn't need regulatory action to fix itself,
| it just needed 'innovation!'" narrative. No, sorry, these
| markets were _created_ by regulatory action, and they _still_
| need regulatory action to fix the flaws in their design.
|
| I found patio11 to be more informative before all of his
| writing suffered from a Stripe bias. And I found Stripe more
| interesting when it wasn't trying to be the Microsoft of
| finance.
|
| Edit: And so people understand how these two things --
| abusive banks and Stripe -- are connected: revenue-envy among
| large corporations trying to move up the ranks and attract
| bigger valuations almost inevitably leads to "innovations"
| that are bad for the customer / community / whatever. All
| roads lead to Rome.
| nverno wrote:
| at least they got rid of those $35 overdraft fees on a 50
| cent negative balance, that was BS. So, maybe there is a
| brighter financial future
| ffggvv wrote:
| j.p. morgan existed before regulatory bodies did
| numair wrote:
| The system that maintains the banking oligarchy is a
| regulatory creation. We replaced the wildcat [bank] with
| the fat-cat [banker].
|
| https://en.wikipedia.org/wiki/Wildcat_banking
| tryptophan wrote:
| The whole criticism of wildcat banking is so myopic imo.
|
| Laws were set up that explicitly made these banks very
| weak. Then after they inevitably failed like they were
| set up to do, everyone goes "omg, look! private money is
| so bad! time to nationalize banking and regulate
| everything!".
|
| https://www.alt-m.org/2021/07/06/the-fable-of-the-cats/
| DaiPlusPlus wrote:
| > "doing a service for the community"
|
| Go on then... what was their argument?
| dec0dedab0de wrote:
| I believe the argument in favor of overdraft fees is that
| they are essentially extending a line of credit at the moment
| the customer needs it. As opposed to just denying the
| transaction outright. I had this happen to me once well over
| a decade ago, and I argued with my bank to make it so I would
| just be denied if it ever happened again. They acted shocked
| as if most people would rather go into debt than be denied.
| numair wrote:
| There is Congressional testimony somewhere on this topic that
| provides their talking points. They were scolded without
| being actually punished, if I remember correctly.
| chrisseaton wrote:
| I guess stopping you defaulting on loans so losing your car
| and things.
| salawat wrote:
| When I realized this is when I swore off of Fintech.
| Permanently.
| ggm wrote:
| The credit to debit card ratio is something the Australian
| banking regulator looks at too. The charge fees in EFT/POS have
| become a significant issue when there is a floor fee for small
| transactions. During covid, cash handling nosedived and paywave
| exploded. Now, many coffee shops and traders who used to do cash
| are stuck with a market acceptable price for coffee, but bank
| charges on card processing which eats their margins in fees they
| can't easily pass on. Other traders have gone back to $10 minimum
| for card type rules.
| kccqzy wrote:
| > Typically, the apps offer their users a choice: payouts at the
| speed of banking, for free, or payouts at the speed of the
| Internet, for a small convenience fee. Cash App charges 1.5% with
| a minimum of a quarter.
|
| This is just another way the financial system (including fintech
| startups) preys on the poor. If you are well off, you wouldn't
| want to pay any convenience fee for the privilege of receiving
| money from a business a few days earlier. In fact, you can think
| of it as interest: from first principles if someone delays a
| payment to you, theoretically they should pay more because of
| interest; now if you opt for waiting 3 days and saving the 1.5%
| convenience fee, you would effectively earn an interest of
| 1/(1-0.015)-1 = 1.5% in 3 days. That's not even an annualized
| figure. If annualized it would be 1.5%/3*365=122% implied annual
| interest rate. No one in their right mind who does not have cash
| flow issues would opt for receiving debit card payments with such
| a fee.
|
| > Many report that it transforms the nature of their interaction
| with the underlying application; delivery driving for casual
| drivers becomes something that you can burst up to fill an
| immediate cash need or mentally allocate against a particular
| desired expenditure (e.g. "Drive for 3 hours to afford a night
| out starting immediately after you log off.")
|
| If your cash flow is not an issue and have credit, this is how
| you would handle it: let's drive for 3 hours, receive the full
| payment amount in a few days instead of immediately, and put all
| the charges from the night out on a credit card, whose bill will
| become due in a month or two, with no interest. But the poor
| doesn't have a bank account or a credit card, so they suffer.
| They pay more in fees. That's the injustice of the system.
| lotsofpulp wrote:
| > This is just another way the financial system (including
| fintech startups) prey on the poor.
|
| This is the way a government preys on the poor by not making
| electronic transfer of money a utility.
|
| The businesses are just doing business, no one sets out and
| says I want to screw the poor. The prices simply reflect the
| risks to the business. If society wants to subsidize those
| risks for the poor, then it should by creating a utility that
| allows quick and free transfers of money, and for all people to
| have free accounts.
| ironmagma wrote:
| There's a certain point where neglect becomes malice. The
| bystander effect has a name for a reason; it's not the
| obvious way humans should behave.
| mattcwilson wrote:
| Neither is compelling others to behave in a way that you,
| particularly, think is morally justified, and trying to
| lobby to have them forced to comply.
|
| Working for a business that doesn't also happen to be
| charity isn't neglecting the needy. Charging rates that
| fairly reflect the value of your work isn't malice to those
| who can't or don't want to pay your rates.
| ironmagma wrote:
| I think a lot of these platitudes don't hold true when
| your company is not just providing a product but in fact
| infrastructure for a nation.
| okwubodu wrote:
| Actively doing harm because nobody stopped them doesn't
| absolve them, regardless of government passivity. In fact,
| doing it for that reason might actually make it worse.
| mattnewton wrote:
| You are right, but "it's just profitable and not illegal yet"
| is how we get all kinds of negative externalities, like
| dumped waste into rivers and this borderline usuriousness. I
| think it's worth regulating (but carefully)
| lotsofpulp wrote:
| > I think it's worth regulating (but carefully)
|
| Hence the government needs to get its act together and make
| it a utility.
| afc wrote:
| > 1.5% in 3 days. That's not even an annualized figure. If
| annualized it would be 1.5%/3*365=122%
|
| Your formula for annualized interest rate is incorrect.
| Interest compounds.
|
| 1.5% in 3 days is 612% annualized, not 122%, a large
| difference. You can compute this thus:
| pow(1.015, 365.0 / 3)
| anonymouse008 wrote:
| Now do payday loans... it's sickening.
|
| When US leadership speaks about systemic racism, and they
| don't talk about payday loans and overdraft fees I can't take
| them seriously. It's insulting
| dustintrex wrote:
| It's also another illustration of how backwards US payments
| infra is. In the EU, SEPA instant payments are just that: by
| law it can take a maximum of _10 seconds_ for the recipient to
| get paid, including across countries. And, of course, they 're
| free.
|
| https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
| morsch wrote:
| Maybe they're free where you are, but apparently in Germany
| banks, if they support it at all, charge 0.5 EUR on average.
| I've never used it.
| dustintrex wrote:
| Technically the regulation says that charging is allowed,
| it just has to be the same flat fee across the entire SEPA
| zone, whether it's domestic or international. Most banks
| found domestic fees unpalatable, so they just made
| everything free. In this, as many other things when it
| comes to e-payments, Germany seems to be a bit of an
| outlier.
| kgwgk wrote:
| If Germany is an outlier, so are France, Italy, Spain,
| Portugal...
|
| Germany does seem an outlier in charging as well for
| _incoming_ instant payments though. (I may be wrong!)
| Daedren wrote:
| I mean, it's the same over here in Portugal as well. SEPA
| standard transfers are free, but SEPA instant transfers
| have a flat fee in every bank (Unless you have a sort of
| premium account)
|
| Perhaps your country's the outlier.
| nottorp wrote:
| Flat fee is the keyword. Not a percentage like with
| cards.
| bserge wrote:
| N26, a German bank, has unlimited free ATM withdrawals in
| most countries and only 3/mo in Germany.
|
| If not for all the laws, this country would be USA on
| steroids.
| tomp wrote:
| Yeah but the bank won't perform them at different hours of
| the day.
|
| So _the transaction_ is practically instant, but the _waiting
| time_ before the transactions starts (after you authorize it
| in the app) can be hours. Or instant, if you wish, for a fee.
| toomuchtodo wrote:
| The US Federal Reserve is building an instant payment system
| (FedNow) that goes live in 2023 [1] [2]. Payment providers
| are moving upmarket and to features that stave off churn (my
| analysis here) due to expected revenue destruction caused by
| a free alternative being available (a US version of SEPA).
| This is alluded to in the second half of this blog post.
|
| If payment revenue (interchange and the like) declines, and
| net interest is insufficient for providing large swaths of US
| deposit accounts, something is going to have to give
| (community and megabanks have a ton of pull in Congress, and
| neobanks are beholden to someone with a bank charter).
|
| I'm not in payments (but in adjacent financial services), so
| I'm happy to be corrected if any of this is wrong.
|
| [1]
| https://www.federalreserve.gov/paymentsystems/fednow_faq.htm
|
| [2] https://www.frbservices.org/binaries/content/assets/crsoc
| ms/...
| pc86 wrote:
| What do you think is most likely to "give" in this
| scenario?
| supertrope wrote:
| The Durbin Amendment to Dodd-Frank capped debit
| interchange revenue. Bank of America responded by raising
| the minimum balance to qualify for no fee checking to
| $1500.
| Tenoke wrote:
| I don't know who supports it but I frequently wait days for
| SEPA transfers without seeing a more instant option in
| Germany. Occasionally it is instant (e.g. to those using my
| own bank) but I can never rely on it.
| [deleted]
| FunHearing3443 wrote:
| I get where you're coming from, but is the solution to simply
| not allow instant receiving of money? No one's being forced to
| use these apps.
| throwaway98797 wrote:
| There's social pressure. Who wants to be weird to avoid a
| small fee?
| vmception wrote:
| > An interesting wrinkle about net interest is that most
| customers don't contribute much. In much of the U.S., median
| checking account balances at account creation are only around
| $3,000
|
| Thats a lot of money not in crypto or stocks. Surprising.
| Beaver117 wrote:
| I have exactly $3000 buffer, curious how you eliminate that?
| Basically for rent, venmo payments to people and credit card
| payments.
| smabie wrote:
| I suppose you could liquid some of your return generating
| assets every month right before you pay off your cc. However
| since 3k is a neglible amount of money to most people here, I
| wouldn't really worry about not having earning yield on your
| 3k. Also it's often useful to have some literal cash in your
| bank account.
| rtpg wrote:
| If you think that having $3,000 in a checking account is being
| wasteful because that's a "lot of money", you shouldn't be
| buying stocks or crypto.
| vmception wrote:
| I dont think that
|
| I thought the common amount deposited would be like 1/10th of
| what the article said
| [deleted]
| dkokelley wrote:
| If you're using a credit card for most purchases, you still
| likely pay the bill with a checking account. You might also
| have to pay rent/mortgage from this account, so keeping a
| ~$3,000 buffer seems pretty healthy. (Let's assume $1,500 for
| rent/mortgage[1], $1,500 for other monthly expenses,
| emergencies, plus any other buffer the account holder is
| comfortable with.)
|
| 1. Average rent seems to be around $1,100, and median mortgage
| payment is about $1,600 based on a quick search.
| shahbaby wrote:
| Need to save something for emergencies too.
| greenyoda wrote:
| Not to mention everyday expenses. You can't pay your rent or
| phone bill with stocks or cryptocurrency.
| toomuchtodo wrote:
| It really depends where on the income and wealth ladder you
| are. Lower and middle income, cash is king. Upper income,
| you're as invested as possible and you're able to pay for
| expenses with a combination of credit/margin, investment
| income, and comp (salary and equity liquidation). You're
| keeping as little cash on hand as possible because "cash is
| trash" and doesn't keep up with inflation such that assets
| do.
| jltsiren wrote:
| Shouldn't that be the opposite? The less money you have,
| the more effort you should put to using it efficiently.
| Once you have enough money, it's worth keeping a tiny
| fraction of it as cash for convenience, because investing
| it won't change anything.
| adamnew123456 wrote:
| It has to do with how long you expect a given dollar to
| live.
|
| Below a certain point a dollar doesn't persist very long
| since you're mostly living paycheck to paycheck. If
| you're spending most of what you earn, then what matters
| is that you can pay for all the essentials. It doesn't
| really matter what the price is in absolute terms _if_
| your paycheck keeps pace.
|
| (It would be really weird to cash your paycheck, buy some
| ETFs with it, then sell them all back a week later to pay
| rent and buy groceries. You'd just get back what you put
| in.)
|
| Higher up a given dollar lasts a lot longer. Even the
| dollars in a retirement fund will last for decades -
| imagine if you were wealthy enough that 95% of your
| assets were like that. At that point you have two
| choices:
|
| - Either keep it under a mattress, and lose a few percent
| of most of your money each year
|
| - Or put it somewhere more active, where you have enough
| growth to keep pace
| leetcrew wrote:
| there's a reason why most finance advice lists "3-6
| months expenses in cash" as priority one. being forced to
| sell assets during a market downturn hurts you a lot more
| than parking a couple extra thousand in an index fund
| helps you. when you're barely making ends meet, the smart
| move is minimizing variance. when you can comfortably
| cover your expenses, you prefer to accept more variance
| to maximize EV.
| kcb wrote:
| You still need a buffer to pay for expenses...$3000 to
| someone with Upper Income is not a lot. I don't think
| anyone is liquidating assets to pay for their electric
| bill.
| toomuchtodo wrote:
| Expenses can be paid from margin and credit, and that
| paid back when the income lands in the brokerage or cash
| management account. Credit cards are usually ~20 days
| float, margin is 1-2% for as long as you're extended with
| it (ignore margin rack rate on brokerage sites, high net
| worth folks aren't paying that).
|
| Higher level, being poor is expensive and it gets cheaper
| and easier to get ahead as you get ahead.
| loeg wrote:
| Credit cards are at least 20 days - you also have on
| average 1/2 a month before the monthly statement, and
| then another 20 days until the statement is due.
| chrisseaton wrote:
| Seems like a modest amount of day-to-day liquidity and
| emergency money for a working class family? I wouldn't advise
| someone to have zero cash.
| recursive wrote:
| I don't think most Americans understand stocks. I definitely
| don't. Even more so for crypto-currency.
| alphabettsy wrote:
| True, even most people who believe they understand stocks
| don't understand the complexities of the market.
| richardw wrote:
| At least in my country, inflation is higher than what I get
| in interest. I lose money every month. I prefer to, over the
| long term, earn more than inflation. The only way to do that
| it to add risk. Over the long term, the risk reduces and I'm
| net positive.
|
| Index funds reduce the need to know about stocks. I buy the
| economy, not a stock. (Well mostly. That's the idea.) There
| are times I hold more cash but then I feel the drain on my
| return every month.
|
| In any case, $3k cash seems like a small amount for the
| safety it brings. Emergency funds are crucial.
| rootusrootus wrote:
| > Index funds reduce the need to know about stocks.
|
| And for that vast majority of people, whether they are
| expert or not, the index fund will outperform their
| personal stock picks anyway.
|
| 99% of the population only needs to know 'put it all in a
| vanguard S&P 500 fund' as their long-term investment
| advice, at least until they're old enough to see retirement
| on the horizon.
| axbytg wrote:
| I grew up hearing 6 months expenses liquid cash on hand at all
| times
| vmception wrote:
| And that most people don't have $2,000 for emergencies
|
| So for a common amount to be $3,000 deposited is surprising
| Cameri wrote:
| The bank cartels probably won't last long, just wait until money
| becomes mostly decentralized and digitalized. We'll finally be
| able to use our money without limits or immoral intermediaries.
| starwind wrote:
| What limits are you talking about?
| capableweb wrote:
| Have you tried sending $10,000 or more between two "high
| risk" countries, like from Nigeria to Ecuador? There are so
| many limits for most people using banking today, where your
| money gets stuck in multiple places before you "verify" this
| and that, and then transfers take multiple days if they even
| get approved in the end.
| wara23arish wrote:
| Bankrupt governments also control what money you can
| receive.
|
| Example is Lebanon where if you send someone US Dollars,
| they'll receive it in the local currency which is under
| hyperinflation.
|
| The central bank governor (government too) there is pure
| evil and is a US political pawn. I know it sounds
| outlandish, but if you look into it, you almost wont
| believe its real.
| silexia wrote:
| Please note that the article points out that it cost tens of
| millions of dollars to launch a new bank and takes years of work.
| Overregulation is the reason we can't have nice things.
| aynyc wrote:
| Use credit card, it's the card issuers that are on the hook for
| fraud. It'll help you build credit. Use debit when you don't have
| the means or credit history.
| kingcharles wrote:
| Absolutely, but there are so many people in the USA that are
| excluded from the ability to obtain a credit card - even a
| secured one - that debit cards are a god send to us.
|
| Both Cash App and Venmo sent me debit cards without requiring
| any ID.
| toomuchtodo wrote:
| Even though you didn't provide ID, I assume you provided a
| name, address, and other info they could use to perform KYC
| (Know your customer), no?
| TingPing wrote:
| Name and address, yes. Kinda needed to send a card anyway.
| tasogare wrote:
| What? That seems totally backwards. Don't spend money you don't
| have, which mean using debit. Credit is useful for the single
| use case of buying a house.
| smabie wrote:
| I have money and I will take as much debt as I possibly can
| get.
| chrisseaton wrote:
| Why spend your own money when someone is willing to loan you
| money for free, will give you some of your money back, and
| will also protect you against consumer issues?
|
| You're leaving money and protection on the table by not using
| them.
| Frondo wrote:
| Not the original poster, but I don't want to spend my
| limited time on earth trying to minimize the money I'm
| leaving on the table -- thinking about credit cards,
| points, money systems and wheeling and dealing in order to
| eke out a little extra scratch is thinking I would
| personally rather put toward nearly anything else.
|
| That's why I would rather spend my own money when someone
| is willing to lend it to me for free.
| lottin wrote:
| Because I don't want a loan, even if it's for free.
| chrisseaton wrote:
| Well up to you but that's irrational - it's leaving money
| on the table and what's more you're actually paying for
| _my_ free loan and my cash back and my protection and my
| free flights and not getting anything yourself, as I'm
| paying the same price for products as you.
| lottin wrote:
| It's not irrational, there's a whole bunch of other
| things you're not considering. For example, a debt
| creates a financial obligation and as such it diminishes
| one's personal autonomy. People who value their personal
| autonomy will take that into consideration before going
| into debt.
| NikolaeVarius wrote:
| Its incredibly irrational.
|
| You're shipping a ton of personal baggage under "personal
| autonomy".
|
| Why even take part in economic transactions at that
| point. If your definition of autonomy is that extreme,
| the concept that someone might have something you want
| but don't have must be a alien concept
| lottin wrote:
| My definition of personal autonomy is extreme? What
| definition? Why do you think it's irrational to assess
| how getting into debt affects my personal autonomy?
| throwaway98797 wrote:
| Arent you in debt to your stomach?
|
| You need to eat.
| xdennis wrote:
| Because when you spend someone else's money you still have
| to pay it back... sometimes more.
|
| A bank is a lot smarter than me. It wouldn't want me to use
| credit cards if it were in my advantage.
| chrisseaton wrote:
| You have to pay it back... one month later. You can keep
| your own money safe and invested until then. And you
| don't have to pay any more if you pay it on time.
|
| The bank wants you to use credit because they get paid by
| the merchant every time you do.
| JadeNB wrote:
| > What? That seems totally backwards. Don't spend money you
| don't have, which mean using debit. Credit is useful for the
| single use case of buying a house.
|
| Using credit in this sense means using a credit _card_ , not
| necessarily running up a debt in anything other than a
| nominal sense. Using a credit card and paying off your
| balance in full every month (so that no fees are assessed) is
| way better for later loanworthiness and similar credit-based
| evaluations than using a debit card.
| raegis wrote:
| > Credit is useful for the single use case of buying a house.
|
| If you can exercise self-control with spending, you can use a
| credit card for almost everything. I think Dave Ramsey
| advises you're less likely to spend money if you use real
| cash, but for some people, this is not an issue at all.
| starwind wrote:
| I've always noticed that cash has a way of disappearing
| from my wallet with me wondering "what did I spend it on?"
| With a credit card I have to think: will I punch myself in
| the face when I see that on my statement?
| LurkingPenguin wrote:
| > Credit is useful for the single use case of buying a house.
|
| I haven't paid a cent in interest on a credit card since I
| was in my early 20s. Thanks to credit card points/miles, I've
| flown all over the world (often in business class), enjoyed
| stays at hotels, had access to airport lounge access,
| received various upgrades on hotel accommodations, car
| rentals, etc. -- all for next to nothing.
|
| Credit cards are an excellent tool if you are willing and
| able to use them properly.
| cloudbonsai wrote:
| To be fair, debit card offers a few advantages over credit
| card:
|
| * Debit card allows to set granular spending limit (e.g. $100
| per day). So you can protect the potential amount that a
| fraudster can spend with your card.
|
| * You can set it up to send transaction details via email on
| every purchase. This is a lot more convenient than, say,
| checking the credit card statement at the end of every month.
|
| I actually prefer using debit cards for daily expenses. For me,
| credit card is almost exclusively for online purchases.
| zippergz wrote:
| My credit cards (multiple issuers) all send me emails for
| every transaction.
| jjav wrote:
| You can set up email alerts on every transaction for credits
| cards in many banks. Probably not all.
|
| On the fraudsters, with credit cards the limit you'll be
| liable is generally $0 ($50 in rare cases), by law
| (regulation).
| CrazyStat wrote:
| Neither my debit nor credit card allows the first, as far as
| I know, and both allow the second.
|
| Perhaps these are advantages of the particular debit card you
| have over the particular credit card you have. I don't think
| they are general.
| nunez wrote:
| you can get email alerts on cc transactions
|
| i have alerts sent to me for anything higher than a cent
| reaperducer wrote:
| Are there American banks that don't cover debit transactions
| with the same guarantees as credit card transactions?
|
| I've had two debit cards from two different large banks skimmed
| in the last five years, and both times the banks took care of
| it instantly.
|
| I think the whole "no coverage if you use debit" notion is many
| years out of date.
| mb7733 wrote:
| Even if things are taken care of in the end, with debit fraud
| the money leaves your bank account immediately and then it is
| up to you to make sure you get it back.
|
| With credit card fraud it won't get to the point -- you
| dispute the charges before paying them back.
| starwind wrote:
| Exactly. $10k skimmed out of my bank account is a huge
| problem for me while it gets resolved. $10k skimmed off a
| credit card, eh, I'm never that close to my limits anyway
| kibibyte wrote:
| Really the primary disadvantage these days is that you won't
| be able to access that part of your bank balance (often lower
| than most credit limits) for a bit of time until the bank
| either issues you a temporary credit or the dispute is
| resolved. This happened to me once in the earlier half of the
| 2010s and it was frustrating to have to wait for my balance
| to get restored.
|
| There are enough banks in the US nowadays that cover debit
| fraud that any bank that doesn't do it will really stick out
| like a sore thumb and eventually lose their customers.
| chrisseaton wrote:
| With a debit card you're relying on the bank's good will.
| With a credit card it's the law.
|
| Also with credit you can dispute it before you pay it. With
| debit you're trying to fix it up after your paid it.
| oneplane wrote:
| It's almost as if the law is setup to let people make bad
| choices with money they don't actually have so that some
| value can be extracted from them later.
| maccolgan wrote:
| Like it or not protecting people costs money, with credit
| cards banks have an opportunity to potentially recoup
| that, otherwise they don't do that at all or only do it
| when they can afford it.
| jjav wrote:
| > With a debit card you're relying on the bank's good will.
| With a credit card it's the law.
|
| Can't emphasize this enough!
|
| It is true that many banks do offer fraud protections on
| their debit cards. But those are just a choice by the bank.
| They can at any moment stop or withdraw those protections
| and then you're out of luck.
|
| With a credit card, the protections are written into
| regulation, so every bank must follow them and can't change
| the terms.
| p2t2p wrote:
| Australian here. Don't use credit card, setup a separate
| account for bills, direct debit everything from there, don't
| keep anything big on your debit card and use it with Apple Pay
| everywhere. No fraud, no fees, no complex things and rules to
| remember.
| smabie wrote:
| Why would you ever not want to put something on a cc? It's
| quite literally free money (rewards/points + you can delay
| payments for a month and pay no interest)
| jacekm wrote:
| In Poland I get rewards for using debit cards too, credit
| cards do not offer anything more in that regard. The
| rewards offered by bank are the same regardless of which
| type of card I use. They are in fact based on referral
| programs (bank gets a small percentage of a transaction if
| we use their link and they share that earning with us).
| Debit cards are free and the cheapest CC I can get from my
| bank is $10/year. And every month I would need to make sure
| that the CC is paid. There's nothing CC can offer me
| besides maybe building a credit score.
| oneplane wrote:
| There is no free money, and delaying is essentially
| spending money you don't actually have. If you want to buy
| something that comes out of your short-term savings account
| here. Or you can choose to not do that and have all your
| money in one single account and everything you do goes in
| and out of that. And you can configure it in a way that
| disables going negative so you don't get this weird
| overdraft fee system unless you choose to.
| vagrantJin wrote:
| Free money?
| starwind wrote:
| I can't speak for Australia specifically, but most EU
| countries sharply cap the interchange fees that credit card
| companies can charge so they don't really have rewards to
| speak of
| markdown wrote:
| In my country, merchants add a 2.5% fee to every credit
| card transaction. Cash is king.
| ikr678 wrote:
| Australian here - Points systems are only really worth it
| in Aus if you're collecting frequent flyer related ones.
| There are not as many cash-back rewards as the US. We have
| had a universal fee free bill payment system called Bpay
| for 20+ years, and paying via cc usually incurs a minor
| fee. So most households will direct Bpay household bills
| rather than via credit card.
|
| I don't fly much, so I dont feel the need to harvest
| points. I dont want my purchasing data picked up by any
| more companies than necessary (my bank & the vendor), and
| all the various chargeback and refund facilities offered by
| credit card companies are a bit less critical as Australia
| already has stronger consumer protection law around goods
| fit for purpose & refunds. Credit scores are not really a
| thing in Australia either, you are assessed on your current
| ability to service a loan rather your history. Defaults
| still show up & count against you, but 'building good
| credit' is again an American concept.
|
| Credit cards are a product designed largely for the
| American market.
| polishninja wrote:
| Australia put a cap on interchange fees in 2017 that
| caused a drop in card rewards. Merchants argued that the
| lower interchange costs would be passed on to consumers.
| However, it appears to only significantly affected the
| consumer rewards.
| donarb wrote:
| Rewards/points are not free. You're paying more upfront to
| get something "free" later on.
| xdennis wrote:
| Why spend money you don't have?
|
| If you do have money, why do you need to borrow money you
| already have?
| freeone3000 wrote:
| Because I get 2-5% of it back if I put it on a credit
| card and pay it off and the end of the month.
| blitzar wrote:
| > Why spend money you don't have?
|
| Classic mistake, using credit or specifically a credit
| card does not _always_ mean you dont have the money.
|
| > If you do have money, why do you need to borrow money
| you already have?
|
| Do you have a mortgage? Do you also have any money in a
| bank account / savings / cash in your wallet? If so "why
| do you need to borrow money you already have"?
|
| Indeed the mortgage example is even worse, because
| typically a morgage has interest paid whereas a credit
| card paid off within the month does not.
| lottin wrote:
| As a matter of principle, I don't accept "gifts" from a
| bank or financial institution, because there's no such
| thing.
| oneplane wrote:
| Same here in Western EU. And if you can't or won't use Apple
| Pay, any NFC EMV or Pin + Chip EMV will do. Don't combine
| automation with manual transactions (the direct debit thing),
| don't put a bunch of value on a thing if you don't have to
| (both the direct debit thing and the cards) and don't use a
| credit card or 'overdraft' (or whatever the local equivalent
| is) features.
| hahajk wrote:
| Amex pays me over a thousand dollars a year to use my credit
| card (which it takes from the merchants as fees.) I kinda
| feel bad about that, but I know those fees are built into the
| price and if I used cash or debit I'd still be paying the
| same price, just not get the reward.
|
| But if they accepted lightning payments, I would pay them in
| BTC.
| oneplane wrote:
| They advertise it as 'paid by merchant fees' but somewhere
| in a ledge or spreadsheet everyone makes a profit except
| the individual consumer. Maybe the prices are higher in
| general, maybe there are some consumers where more value is
| extracted than from others, but money doesn't appear out of
| thin air (except when you get into the whole derivatives
| gamble). Someone, somewhere, gets screwed over when a bank
| or credit company "gives" you money.
| tcgv wrote:
| I used to ask "can you give me a discount if I pay in
| cash?" and most of the times the merchant would say no.
| Then I stopped asking and started using only credit cards
| for at least earning some "rewards" back.
|
| ("rewards" purposely in quotes since it's not really a
| reward, but amex/visa/mastercard want us to think it is -
| there's no free lunch)
| markdown wrote:
| In my country you pay extra (2.5%) at the checkout
| counter for using a credit card.
| kijin wrote:
| In my country that would be illegal. Here, the price is
| fixed first, and the customer has the right to choose any
| supported method of payment.
|
| Merchants are free to offer more reward points or
| discount coupons for cash payments, though.
| drdec wrote:
| The proper term for these "rewards" is kickback.
| hn_throwaway_69 wrote:
| Also Australian here. Use a credit card which is set to
| direct debit (auto pay) the full outstanding balance from a
| high interest savings account. Credit card is added to and
| only used through Google Pay.
|
| * Never pay anything in the way of fees or interest,
| including international fees.
|
| * Never have a positive balance sitting in a transaction
| account earning zero interest (or as Americans would say,
| checking account).
|
| * Never worry about overdrawing my transaction account.
|
| * Card authorisations don't deprive me of my own money (eg
| hotel security bond).
|
| * Importantly, in the event of fraudulent use of the card,
| the bank wears the damage while an investigation is underway.
|
| A debit card might tick the first item on this list, but not
| the rest.
| just-ok wrote:
| One of the biggest wins from credit cards (imo, of course) is
| reward programs. Getting a 1-3% discount on purchases is pretty
| nice (plus, obviously, fraud protection, etc.). However, some
| issuers are using crypto to claw back at this perk; for
| example, the Coinbase debit card can give you 4% back.
| Nursie wrote:
| I find it hilarious that Americans will tell you about the
| great discount/cashback they get, then in the next post
| crypto advocates will tell you that crypto currency can avoid
| the insane credit card fees.
|
| It's almost like the two things are related, but few people
| seem to link them...
|
| In Europe and Australia, caps have largely fixed the latter,
| at the expense of the former. Seems better all around.
| barsonme wrote:
| Insane credit card fees? What? Most cards do not have a
| fee.
|
| And for those that do, it's very easy to recoup much more
| than the fee in rewards. For example, Chase Sapphire is one
| of (or actually _the_ ) the most expensive cards at
| $550/year. But even then it's very easy to recoup much more
| in rewards.
| avianlyric wrote:
| They're talking about interchange fees you pay on every
| transaction. Which is where the money to fund rewards
| comes from.
|
| In the US you'll be paying something like 1% on
| interchanges fees for every transaction, in the EU it's
| something like 0.05%. Orders of magnitude less, thus
| orders of magnitude less rewards, and also fraud, because
| banks can't use the interchange to write off fraud and
| thus implement proper controls.
| trinovantes wrote:
| Unless the merchant is offering discounts for cash
| payment, it's the customers who are not using credit
| cards that are paying/subsidizing the fees. Sadly, not
| using a credit card is just throwing money away in North
| America
| blntechie wrote:
| Your reward is basically money paid by the poor routed
| via the merchant and bank.
| avianlyric wrote:
| In reality it's people with poor or non-existent credit
| that pay. They can't access cards that offer rewards, so
| they end up eating the costs. It's a remarkably good way
| of transferring wealth from the poor (who are usually
| deemed not worthy of credit) to the rich (who are worthy
| of credit). Pile on the other costs like fees for using
| cheques rather than direct deposit (also common for poor
| people who aren't salaried), crazy overdraft fees etc,
| and becomes pretty clear that the US banking system is
| paid for by the poorest in society, and only benefits the
| richest.
| nightski wrote:
| The Coinbase card ties up your assets (you have to hold USD
| or crypto on their platform). Whereas the credit card is an
| interest free loan for the statement period. I'd take the
| latter any day of the week.
| reducesuffering wrote:
| Bank account savings interest rates are like 0.40% annual,
| 0.03% monthly. I'd take an extra 1% cash back over a loan
| that accrued me only 0.03%.
| oblio wrote:
| Credit history isn't a thing in many countries and credit card
| rewards are often minimal.
|
| Do what makes sense in your country.
| simonbarker87 wrote:
| This is a strong US vs the rest of the world difference. In the
| UK for example most people will do their day to day spending on
| debit because the rewards we get aren't worth the faff of
| paying for things a month later, when you are less "flush"
| (Americans just seem to have a lot more money sloshing around
| compared to even well paid Brits and Europeans) it's much
| harder to manage that monthly offset from salary payment to
| credit card falling due and when the rewards are so paltry it's
| just nit worth the faff. Only one of my friends does any
| regular spending on a credit card and he says "it's Amex so
| it's worth the extra faff but only just"
| barsonme wrote:
| > most people will do their day to day spending on debit
| because the rewards we get aren't worth the faff of paying
| for things a month later, when you are less "flush"
|
| This sort of thinking misses the point that even with credit
| cards you don't spend what you don't have. You (ideally)
| treat it like a debit card. If I spend $100, then I've $100
| less in my checking. If you do that, then "flush" never
| enters the equation.
| GordonS wrote:
| This is what I do as well. Monthly bills are all direct
| debit, but almost all other spending goes on my credit
| card, and, without exception, I paying it off completely at
| the end of the month. I've done this for decades, and never
| paid a penny in interest - the key is to not spend money
| you don't have.
|
| I get some small amount of Amazon vouchers every month for
| doing this (PS10/m or something like that), but really I do
| this for the fraud and chargeback protection.
|
| I feel like this works well for us, _but_ you have to be
| able to budget - if you 're not capable of budgeting or
| find credit too alluring, then you're better off using a
| debit card.
| simonbarker87 wrote:
| Glad it works for you, we are very good at budgeting but
| i find u less you put 100% of the "cash" like spending on
| the credit card it falls apart as you can double spend
| without realising and when we tried it for a few months I
| hated paying for August's groceries in mid October - it
| just felt weird to me, far easier just to have a set XX
| amount in a current account each month and spend it down
| to 0 through the month on the cash transactions etc.
| drdec wrote:
| With online account availability I've moved to paying my
| credit card weekly. I pay for everything with it.
| astura wrote:
| You can (and probably should) reconcile your credit card
| purchases more than monthly - I used to do it weekly
| (every Friday) now it's semimonthly.
| simonbarker87 wrote:
| Poor choice of word on my part I think. I don't mean flush
| in that the following month you have more money but that in
| general Americans have more money and so are less
| susceptible to the ramifications of miscalculating. I've
| had a couple of long conversations with Americans about
| this topic of credit vs debit and the cultural difference
| is so strong that we inevitably can't reconcile each others
| point of view. My debit card will bounce any payment that
| will take me over drawn, my credit card doesn't care if I
| can't pay it off next month and that's what the banks hope
| you forget.
| xdennis wrote:
| The possibility of spending more money than you have means
| you are more likely to spend more than you have
| simonbarker87 wrote:
| A much more succinct summary than I gave that hits at the
| heart of the CC issue - the banks want you to spend more
| than you have.
| huge87 wrote:
| Correct. I use YNAB as a system to ensure that every dollar
| of spending on my credit cards are backed by liquid cash.
| I'm not going to argue the merits or downsides of something
| like YNAB; use whatever suits you.
|
| But when that card statement balance comes due every month,
| it should make no difference because the cash was already
| deducted from my books when I made the charge.
| greenyoda wrote:
| Good advice, but only if you pay off your balance in full every
| month to avoid the huge interest charges.
| wetpaws wrote:
| Why in the world wouldn't you want to do it.
| smabie wrote:
| You can earn higher interest than the APR on your cc by
| yield farming stablecoin pools
| wmf wrote:
| Please don't do this; it's really dangerous.
| throwaway98797 wrote:
| I would but tax implications scare me.
| jacoblambda wrote:
| That... is a terrible idea for literally every reason.
| DJBunnies wrote:
| Can <> want.
| iratewizard wrote:
| With or without a credit card it's still spending what
| you don't have. The credit card just makes it easier to
| ignore the fact that you're in dire financial straights.
| DJBunnies wrote:
| Should <> need.
| wruza wrote:
| I don't understand this one (in a context), can you
| explain?
| reaperducer wrote:
| Sounds like you've never had a car break down.
|
| Or a relative get hurt on the other side of the country.
|
| Or been seriously ill.
|
| Or unemployed.
|
| Or had a major appliance break.
|
| Or a million other things that happen to people every
| single day.
| oneplane wrote:
| Pretty much all of that is handled by the social safety
| that the government is there for or by your own savings
| that you build up because you are an adult and look ahead
| to make sure you can deal with such events. One of those
| things is planning and specifically financial planning.
| c22 wrote:
| A full quarter of adults in the US have no savings at
| all. It can be hard to build up your reserves when more
| than half the money you make from your two jobs goes to
| rent. Did I mention those jobs are both "part time" so no
| benefits either.
| wetpaws wrote:
| The discussion was about debit card vs credit card, not
| about the credit.
| just-ok wrote:
| How does this change with a debit card?
| Lammy wrote:
| My credit score goes down unless I carry some revolving
| balance.
| throaway46546 wrote:
| For maximum FICO score you ideally want every card except
| one to report a $0 balance and one card to report a $1
| balance (some issuers will forgive a balance of $1 so you
| might have to use $2). You do this by paying down the
| cards before the statement generates. Once the statement
| for the $1/$2 card generates you can then pay it
| off.There is no need to revolve a balance. In fact if you
| pull your credit reports it does not even show if you are
| revolving a balance. If you would like to see what data
| is in a credit report you can obtain a copy for free.
|
| https://www.ftc.gov/faq/consumer-protection/get-my-free-
| cred...
|
| If you are interested in how FICO scoring works there is
| a lot of information available on various forums. The
| best resource I have found is on
| https://creditboards.com/. The FICO algorithm is
| proprietary and they do not disclose it, but through
| experimentation people have managed to reverse engineer
| quite a bit of it.
| Spooky23 wrote:
| No, that's not how it works.
| raegis wrote:
| It's a little complicated. My credit score has been
| consistently higher than my wife's score, and but she has
| never carried a credit card balance in her life. You get
| high credit score marks for making banks money, but not
| borrowing so much that they get nervous.
| [deleted]
| Spooky23 wrote:
| Not really, it's all about payment history. Use your card
| for gas, etc is more than enough to demonstrate a pattern
| of on time payments.
|
| People who don't use credit often get penalized from a
| scoring perspective because they don't have a large
| credit line and have a higher utilization.
|
| The bank wants you to make payments, period. More credit
| lines means you have more resilience.
| leviathant wrote:
| It's more than payment history. I avoided credit until I
| bought a car, and I made a point to pay my car loan off
| early. Seemed like a way to demonstrate that I was
| responsible with my money.
|
| The month I paid off that loan, my credit score dropped
| precipitously.
|
| In 2006, my wife and I bought a home, and had to get two
| separate loans to make it work, because our credit scores
| weren't great at age 26, since I generally avoided
| credit.
|
| As soon as we opened those two loans, our credit scores
| jumped to the highest they've ever been.
|
| That and other patterns I've watched over two decades are
| why I believe credit scores are entirely about how well
| you pay the banks' game.
| Spooky23 wrote:
| You made my point -- they care about _payment_ history,
| not paid off. You'd be better served taking a $500
| personal loan from a credit union and paying the payments
| every month.
| tata71 wrote:
| Using a very, very low, or no percentage of your
| available credit for ages makes you just as bad of an
| investment for these companies as customers who run off
| on the bill.
|
| In both cases, higher risk of default, less chance of
| profiting from interest, lower creditworthiness score!
| singlow wrote:
| I have never once carried a credit card balance or paid a
| cent in interest. My credit score is over 800 which is
| pretty much maxed out. The only things on my credit
| history are a few credit cards that I got to establish
| credit history, and my mortgage, which is why I needed a
| credit history.
|
| So I got 3 credit cards and used them each during each
| month so that I would established on-time payments on all
| three and boom, I had perfect credit after a couple years
| and qualified for a mortgage. I didn't use any credit
| before I decided to buy a house in my 30s so I had a
| completely empty credit history prior to that, apart from
| a library that reported a lost book. So it just took a
| little while to get my average account age up and my
| number of on-time payments above some threshold.
|
| Now if you don't use the card at all, it is less
| effective at establishing credit because you don't get
| the on-time payment history or balance. The credit
| bureaus just get reports of on-time or late payments,
| balances, and delinquencies/defaults, etc.
|
| You will be given the best rating at a small non-zero
| percentage of your total available credit being used each
| month, but it doesn't have to be carried.
|
| All you have to do is make sure you don't pay it off too
| early. Just wait until the due date, and pay off the
| statement balance, not the full balance. If you pay it
| off mid-month, before the end of the statement, or paid
| the full balance instead of what is due, you may get a
| zero balance reported which is a slight temporary hit to
| your score, but not that significant. I found that it was
| best to have a few cards with a total available credit at
| least 5 times my monthly spending. That way the reported
| balance ends up being <20% of my total available credit
| which is near the sweet spot. If I am going to do a refi
| on my house i might try to micromanage it to somewhere
| close to 5% for a few months ahead of time and get a few
| points added to my score, but once you get your score up
| around 800 it doesn't really matter if it is up or down
| 10pts or so. I found that as my average account age
| increased, the swings from slight differences in balance
| were smaller.
| Spooky23 wrote:
| Maybe, but it's good for your credit score.
| [deleted]
| thrower123 wrote:
| Debit cards prey on poor people, who have been memed into
| thinking credit cards are dangerous.
|
| There is no good reason to use debit over credit in the US if you
| have the option, but I constantly see advice from people who
| should know better arguing in favor of debit.
|
| If someone steals your credit card and makes fraudulent
| purchases, your rent and heat and electricity bill checks aren't
| going to bounce while the bank is resolving the issue.
| bool3max wrote:
| Is that the only argument for credit over debit?
| robot_no_419 wrote:
| In the United States, paying with credit cards often rewards
| you with 1%-5% of the value you spent, among other things. It
| adds up to a lot over time, so everyone in the US should
| always being using credit cards whenever possible to secure
| those rewards.
| thrower123 wrote:
| Again, I'm speaking from a purely US perspective, but there
| is no good reason to use a debit card instead of a credit
| card, for the same purchasing patterns. You have better fraud
| protections, you don't worry about overdrafts or transaction
| reordering, you get a month interest-free loan if you pay
| back your balance every month. You get cash back or reward
| points or etc. And if some emergency comes up, you have
| credit you can call on if you need it.
|
| The argument for debit is basically "I cannot control my
| spending without a hard limit". Everything about debit is the
| same as credit cards or worse.
| wara23arish wrote:
| I think the argument you mentioned is actually worth it for
| some people.
|
| Credit card interest rates are really high and people are
| better off getting charged a one time overdraft fee rather
| than buying stuff they cant afford and get saddled with
| high interest credit card debt.
| rootusrootus wrote:
| Ha, it's true, the limit enforced by a debit card is
| handy. I love my wife dearly, but her spending habit is
| 'if it is in the account, I can spend it.' So after
| trying various strategies, we just settled on keeping a
| debit account specifically for routine household
| purchases, groceries, etc. It is budgeted exactly what we
| plan for, not a dollar more, and she knows that when it's
| gone it's gone. That's not strictly true, of course, we
| replenish if we buy a lot of groceries in a month, but it
| serves as a useful signal for her that she's spending
| more than the generous amount we budgeted for this
| purpose.
| catdevbrain wrote:
| I guess everything in the US is controlled by fear. So for
| them this might be a legit argument. "What happens if someone
| breaks into your house?". "What happens when somebody robbed
| you?". "What happens when somebody uses your credit card to
| do fraudulent transactions?"
|
| Guess what, having a debit card in the Netherlands gives you
| protection against all of the above. Luckily not many people
| are ruled by scare tactics over here.
|
| Lost your debit card for some reason? Just a simple click in
| your online banking app on your phone is enough to block the
| current one and recieve a new card the day after.
| rootusrootus wrote:
| > Lost your debit card for some reason? Just a simple click
| in your online banking app on your phone is enough to block
| the current one and recieve a new card the day after.
|
| This is how it works in the US as well. What you haven't
| addressed is how you get money back in your debit account
| if someone manages to steal it. For that period of time,
| you are out the money until the bank resolves it. By
| definition, this is not true of a credit card.
| w3ll_w3ll_w3ll wrote:
| The contract I have with my bank (Italy) states that in
| case of dispute they will refund the money immediately
| (end of the working day).
|
| Then they take some time to review the transaction and
| then they can take their money back if they think my
| chargeback request was not legitimate.
| rootusrootus wrote:
| That sounds pretty similar to my relationship with my
| bank. They will refund immediately while they
| investigate. I doubt it is regulated by the gov't,
| though, I think it's just because it's a bank that
| markets themselves as having superior customer service.
| wmf wrote:
| Besides the gig economy I heard that a lot of retail businesses
| like Walmart now pay employees by debit card instead of check. So
| instead of a check cashing place taking 3% of people's paychecks
| some bank is taking 1.x% in interchange, and if the bank happens
| to be owned by Walmart well who would notice.
| [deleted]
| chrisseaton wrote:
| > a check cashing place taking 3% of people's paychecks
|
| You have to pay to deposit your pay in the US?
| em500 wrote:
| The more shocking tidbit is that lots of Americans still get
| a literal paper paycheck.
| GordonS wrote:
| Back in 2005 or so, I recall my American colleagues also
| saying they were paid every 2 weeks, instead of monthly.
| That seemed pretty strange to me, for salaried positions.
| rootusrootus wrote:
| It varies by employer, to this day. ADP (biggest HR
| company in the world, likely) probably still pays its
| employees every two weeks, but I no longer work there. My
| current company is on the twice-a-month schedule. I've
| been paid monthly in past jobs. And my wife is currently
| getting paid once a quarter!
| blntechie wrote:
| Paid every 2 weeks is still the norm in the US. It's
| nice, I wish I get paid every 2 weeks in my country.
| kccqzy wrote:
| Not if you have a bank account.
| josephcsible wrote:
| Only if you want cash immediately. In this case, the fee is
| basically insurance against the check bouncing. It's free if
| you instead deposit the check and wait a day or two for it to
| clear before withdrawing the cash, since in that case they
| can just take the money back out of your account and not
| suffer any loss if you gave them a fraudulent check.
| kingcharles wrote:
| If it is a physical check (cheque), then often, yes.
| kcb wrote:
| Often? Aren't check cashing places just for people who have
| a specific reason to not have a bank account.
| foolfoolz wrote:
| yes this is for check to cash at a store or something.
| the bank does not have a fee
| [deleted]
| dukeyukey wrote:
| Damn
| metalliqaz wrote:
| yes, if you don't have a bank account.
|
| if you are not living paycheck to paycheck, you can keep the
| minimum balance in a checking account and then arrange have
| your paycheck automatically deposited every payday with
| Direct Deposit. This is free.
|
| Check cashing places give you cash for paper checks. They
| charge a fee for the service.
| TingPing wrote:
| Just to clarify, many banks have no minimum balance and
| charge no fee to cash any check. However some may have a
| harder time opening accounts than others.
| oneplane wrote:
| Wouldn't that be a good item for a government at some
| level to look in to? Life without a working bank account
| would seem unreasonably hard to me.
| thrower123 wrote:
| If you cannot manage to get a bank account, then you have
| problems that the government is not going to be able to
| fix.
| Symbiote wrote:
| Britain doesn't agree, so there are rules requiring the
| banks to offer basic accounts to those who would
| otherwise be ineligible.
|
| https://www.moneyhelper.org.uk/en/everyday-
| money/banking/bas...
| wmf wrote:
| The US government looks at this occasionally but banking
| lobbyists keep convincing them not to do much.
| https://www.fastcompany.com/90683033/the-post-office-is-
| fina...
| sokoloff wrote:
| Isn't that still better for the employee? I don't care if
| Walmart is getting a little taste if they're genuinely making
| it better for the employee.
| [deleted]
| whimsicalism wrote:
| > the industry generally estimates approximately $350 a year in
| costs to maintain a checking account, of which approximately $120
| is direct marginal cost
|
| Does this not seem ridiculously high to anyone else?
| wmf wrote:
| Mainframes and lawyers aren't cheap.
| likpok wrote:
| The bigger cost is the branch and the teller, both of which
| scale less well.
| throwaway98797 wrote:
| If you think you can do it cheaper, build it. Save all of us
| money.
| chondl wrote:
| This seems most likely to be an error in the document: "median
| checking account balances at account creation are only around
| $3,000 ... At a 4% net interest margin, this account would only
| contribute about $120 in margin during its first year...." 4%
| of $3,000 is $12. I suspect both $350 and $120 are 10x too big.
| Alternatively the average checking account is 10x the median
| which seems unlikely.
| whimsicalism wrote:
| > 4% of $3,000 is $12
|
| no
| NoblePublius wrote:
| This is fantastic. It's long been difficult for me to understand
| the prevalence of instant payout mechanics, or the propensity of
| ordinary people to use debit cards like credit cards. I'm that
| guy who only uses his debit card to withdraw cash, puts
| everything on high reward credit cards, but never carries a
| balance.
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