How My Bank Stole $1,000 From Me
I checked my account, expecting to see $200. Instead, there was negative $800.
In 2007, I was broke — not Ramen-noodle-dinner broke but discount-chicken-that-HAS-to-be-eaten-tonight broke. I pulled up to the ATM, since hard cash was still a thing, and withdrew some paltry amount (hehe), probably 40 bucks or so. When I looked at the screen, my gut churned. My account was 800 bucks in the red.
The Showdown
I swaggered into my local branch like a gunslinger looking for an ill-fated poker game.
“Can I help you?” said the greeter.
“I need to speak to the manager,” I announced, channeling all the future Karens to come.
“OK, one of our relationship managers will be with you in a moment. Please have a seat.”
Relationship manager? What was this, an impromptu therapy session? It turned out to be not far from the truth.
“Pablo?” said a 30-something-year-old man in a Men’s Warehouse suit.
“Yep.”
“Let’s have a seat in my office,” he offered.
“Whatever you say, dick.”
I didn’t say that, but he got the vibe.
I followed him to a small, windowless office that compensated for the absence of windows with a frosted glass door that turned the bank’s sunny reception area into a motel van Gogh.
He gestured toward the lone guest chair in front of his desk, as if I might get confused and stick my ass in the trashcan.
“What can I help you with?”
“I had a couple of hundred dollars in my account a few days ago. When I checked it today, I was overdrawn by almost 800 bucks.”
He turned to his computer.
“Let’s have a look,” he said. “What’s your account number?”
I dragged my dog-eared checkbook out from my slash pocket and relayed the numbers.
“Mmm,” he said. “Looks like you overdrafted five days ago.”
“How is that possible? The last time I withdrew, the ATM said I still had like 200 bucks.”
I fished out the crumpled-up ATM receipt from the same pocket that held my curling checkbook. I held up the white mini scroll, a crackling talisman against the man in the boxy suit and the empire behind him.
He pressed his lips together and nodded with avuncular indulgence.
“Unfortunately, there can be a discrepancy between your available balance and your current balance.”
“They aren’t the same thing?”
I don’t remember exactly what he said here, but here’s the gist: The balance displayed on the ATM wasn’t always current.
The 35-Dollar Curse
When I overdrafted, unbeknownst to me, Bank of America charged me thirty-five dollars. In fact, I incurred a series of thirty-five-dollar charges that week. Every day my account was overdrawn, the bank charged me thirty-five dollars. That alone was $210 (including the initial charge).
Every time I took out money = $35
Every time I made a purchase = $35
Every day that passed = $35
Incidentally, I used the card so frequently because I was trying to avoid debt. I made small, frequent purchases at the grocery store to restrict spending and prevent waste. I used my debit card as a way to avoid racking up credit card debt, which I ended up doing anyway.
Fast-forward a week: I’m out a grand. That was a big deal for me. It was rent. It was food. It was my subway pass. It was my bus pass. It was keeping my head above water.
The worst part wasn’t the overdraft or even being charged for being overdrawn. It was finding out a week later. If I had been alerted about the overdraft, I would have stopped using my debit card. I probably would’ve switched over to my credit card, borrowed money from a friend, and held my breath until my next paycheck cleared. There was no text alert. No email. The “relationship manager” told me they’d sent an alert IN THE MAIL. Super helpful. Thanks.
History of Fees
Dan Price, the founder and CEO of Gravity Payments, commented on this topic on LinkedIn a few days ago. His words were the inspiration for this post.
“Overdraft fees were not popularized until the 1990s. Now, banks make $8 billion a year in overdraft fees. The CEO of one bank even named his yacht ‘Overdraft.’ It is very expensive to be poor, and easy to stay rich.”
Some banks have changed their policies, like Bank of America, which started changing their policies shortly after my overdraft snafu. (To be fair, they didn’t do it of the goodness of their hearts. Consumer advocacy groups forced their hand.)
In 2010, they eliminated overdraft fees at the point of sale.
In 2017, they eliminated the extended overdrawn balance charge.
And in 2022, they reduced the overdraft fees from $35 to $10.
Even so, overdraft and non-sufficient fund penalties remain a keystone of the banking industry’s revenue generation, accounting for two-thirds of fee revenue, a staggering $15.47 billion according to the Consumer Finance Protection Bureau (CFPB).
It’s no surprise, then, that, according to the CFPB:
“Banks are on pace to surpass their pre-pandemic profitability.”
Read the Fine Print
You need to be vigilant, especially if you’re walking a financial tightrope. I found that out the hard way, more than once. When you’re treading water, any unforeseen charge and any lapse in concentration can result in an unexpected fee.
You think it’s a coincidence that my bank buried the overdraft notification in snail mail? That’s their strategy. Stack up the overdraft fees and the late fees. If physical mail buys them another couple of days, that’s another $70 (at least) per consumer customer.
According to the aforementioned CFPB research, there are
“9% of consumer accounts paying 10 or more overdrafts per year, accounting for close to 80% of all overdraft revenue.”
It’s a surprise to absolutely no one that the bulk of that revenue comes from black, Hispanic and young consumers.
Banks, lenders and credit card companies are hoping you don’t pay attention to the details. They want you to overlook when you’re overdrawn. They hope you’re late on your credit card and mortgage payments. They want you to forget when your zero percent APR lapses. No matter how much they may beat this drum, their primary concern is not your well-being. It isn’t customer service. They’re customer service is only just as good as it needs to be to keep you placated.
This relationship manager told me he could remove the bank’s processing fees, as in the initial thirty-five-dollar fee. A token gesture.
Overdraft and non-sufficient fund form a multi-billion-dollar industry. Don’t contribute to that pot.
This made me so mad, but not surprised. I think about this kind of thing as society goes more and more "cashless." The banks have more control all the time.
ConEd mis-metered my apartment the first month I moved in, charged me $4000, auto-withdrew it from my account where I had only $1800, low for me because, you know, I had just moved and paid two months rent, moving costs, and so forth, and the bank charged me an overdraft fee.
I got things sorted with ConEd. I got things sorted with the bank. I spent about a week filing a "Yes this happened ask ConEd here's the number no I am not committing fraud" paperwork with the bank. In the end my account was cleared back to its correct number and no harm no foul.
Except the overdraft fees the bank charged during the week it took to clear this issue up.