I understand that - I was asking because of the different time frames. If they will reverse a transaction I authorized within 8 weeks and one I didn’t authorize within 13 months, they need some way to know if I authorized the transaction. Otherwise, why bother having different timeframes?
From @Mops’ answer, it seems the other party gets some sort of authorization that they can send to the bank if I try to reverse an authorized transaction six months later.
US accounts can have various protections against overdrafts . I have actual overdraft protection with a pretty high limit ( which is not a multiple of my income) and my bank also has a program by which they will automatically move money from my savings account to cover a check. It’s not that protection doesn’t exist - it’s that some people don’t qualify and I suppose it’s possible that some people just don’t want it . I know some people for whom it wouldn’t be “ I have to pay this bill on Friday and I get paid Monday so I’ll use the overdraft for a couple of days” . It would be more of a permanent debt for those people , like the $10 a kid borrows from a parent every week and pays it back every week. Except instead of $10, it would be hundreds or thousands.
Regarding the question why Europeans aren’t afraid that someone might withdraw money from their bank account when they know their account number:
AFAIK banks will not allow random people to claim payments from someone else’s account. They do some checks to see whether there is a real business involved who can provide proof of authorization of payments, and only then they may believe future claims. This does allow fraud (there was a case like that decades ago in The Netherlands).
Second part is, as was mentioned, that the European rule is that banks are liable for fraudulent transfers (i.e. transfers not actually authorized by the account holder). This seems to me obvious, payment requires consent. I have a hard time following why the US doesn’t have this rule.
This rule has now been laid down in the EU Payment Services Directive (Directive - 2015/2366 - EN - Payment Services Directive - EUR-Lex), see particularly art. 64, 71-74 which show the system for liability.
It may be true for some issuers and seem true for others who have a limited view of the business model. Or maybe the key word is “directly”. Credit card companies are making plenty of money off me, and I’ve not paid a dime in annual fees, interest or late fees since 1992.
That’s because they are getting about $500 a year from merchant fees a year for lending me an average of $3000. This is not the entire transaction cost to the retailers and e-tailers. The interchange operators and MasterCard/Visa are making a further $200-300 a year.
Credit card companies soliciting my business for the last 25 years aren’t doing it because they think I’m going to start carrying a balance and paying 25% interest. They are doing it because they are able to get a very good effective interest rate with a very low default risk.
The customers carrying a balance and paying high interest rates also have a much higher default risk and that’s all unsecured debt.
I agree; I’m the same as you.
But my comment you quoted about “banks” was in the context of credit card issuers, not as deposit-taking institutions.
“Excelpunk”. You made my day with that one. Bravo!
A couple of comments after a quick skim of this thread that addresses some of the issues raised.
Credit cards – how do the credit card issuers make money? Basically three ways. First, merchant fees. The issuer gets a cut of a few percent on every transaction, paid by the merchant. That’s the lifeblood of the CC issuer, and it’s very lucrative. The other two may or may not apply. The second one is interest payments by the cardholder, which are waived if they pay the full balance by the due date. If they don’t, then extortionate interest is charged right from the day of each purchase. Finally, some premium credit cards with extra benefits charge an annual fee to the cardholder.
On the matter of someone with your account information being able to withdraw money from your account, this is nonsense, and seems to be a uniquely American paranoia. They can if you authorized automatic payments (“autopay”) but otherwise wire transfers are strictly one way – someone with your bank info can send you money, but they can’t take it out of your account.
Wire transfers have existed for many decades. When you send someone money using a system like Interac in Canada, or I presume Venmo or the like in the US, or any of the systems that banks provide for international money transfers, those are just front ends for the user that ultimately activates SWIFT – the global interbank wire transfer system established by the Society for Worldwide Interbank Financial Telecommunication. SWIFT – aka “wire transfer” – is strictly bank-to-bank; bank customers have no direct access to it, but systems like Interac are convenient front ends to it.
There are also credit card late payment fees. Traditionally they were $30 to $40 or so [even if only a day late]–but the Biden administration cut them back to $8. The Trump administration wants to eliminate the Biden changes. But there are ongoing lawsuits and injunctions–so it is not clear exactly what the current situation is.
The wire transfer system is a push system only so wolfpup is correct with regard to that system.
However there are other payment systems–such as the ACH system which is both push and pull–and that system is much bigger in the U.S. than the wire system in terms of number of transactions [ACH systems about 34 billion transactions a year and wire about 210 million transactions a year]. And pulls are where people are concerned about theft from only knowing the name and account number.
There are significant security holes in this system, but I am not clear on the details.
Wow! I’m in Canada and have never heard of these extra fees. Being scatterbrained as I am, it’s not unusual for me to miss a credit card payment, but I have never been charged any such fee. Retroactive interest, yes, but not a “late payment fee” on top of that. Canadian banks are not exactly paragons of virtue, so I suspect that such fees are just simply illegal here.
So, @msmith537 reminded me of a totally different question that I wanted to ask about the US system versus others: minimum checking account balances.
Many years ago, on this board, I made it known my displeasure with a bank that rhymes with “Schmells Blargo,” and since then, have been exclusively banking with a ‘Veterans-Catering’ bank (20+ years) now.
A month or so ago, I was flabbergasted to get some junk mail from Schmells Blargo, inviting me to open up a checking account with an initial deposit of $25* Note buried in the fine print: minimum required checking account balance is $1,000 or else a $5.99 monthly ‘service fee’ would apply.
After spending exactly 4.638 nanoseconds contemplating their ‘offer’, I endured .724 seconds in analysis paralysis on whether I should shred this invitation, or use it to start my wood stove–the shredder won.
My question for non-US Dopers: do your banks charge ‘service fees’ at all? Is it the crappy banks, or all/none?
Follow-up for the US Dopers: are other “big” banks like ‘Piti-Bank’, and Bank of Crap-erica still pulling this kind of crap?
Tripler
Names changed to protect the innocent–or something.
My bank (US Bank) does charge a monthly service fee on my checking account, though it’s always waived, because my balance is big enough in any given month that I meet their minimum requirement.
Yes, here in Canada we get “service fees” and they’re pretty much the same for all the major banks. The upside is that they’re pretty minimal, and us Old Farts get rebates on those fees, but neither the fees nor the rebates amount to more than, after a year, would add up to enough to buy you a Big Mac and a diet Coke.
I use Chase. Largest bank in the USA, a good 20% larger than #2 BofA.
Free for veterans. And free for people who keep the kind of balances any upper middle class comfortable American ought to keep in a checking account.
Those monthly fees are all simply deterrents that let them offer checking accounts to everyone (“See Feds: no redlining here.”), while making their product line unattractive to people who live paycheck to paycheck-ish. “For some strange reason no poor people choose our bank, but by golly we’d happily open an account for them if one ever asked.”
Re service fees/Germany:
It used to be the case that almost all banks offered a current account without service fee with the condition that your monthly wages were paid into that account.
Nowadays this is only offered by a few banks. Typically these banks have very few branches, and the account can only be used online (no paper statements mailed; bank transfers cannot be ordered by paper form) which is hard on elderly people.
Most banks take a service fee in the single digits, and take extra fees for mailing bank statements, bank transfer orders in writing, cash withdrawals from human cashier, etc. - people who are not able to operate their bank account online pay through the nose.
All of what you describe in Germany is pretty much the current norm in the USA. and the smaller your balance the higher the BS fees are. As an absolute amount, and even more so when viewed as a percentage of your balance and probable monthly cashflow.
And yes, waiving the basic keeping-the-account-open fee if you direct-deposit your wages is still commonplace in the USA. Not universal, but not rare either.
A few banks don’t, like Tangerine, but the “big ones” do (CIBC, Royal, BMO etc).
Tangerine doesn’t have any physical banks, though. I’ve never had an issue with that; I’ve been able to do everything I’ve needed to do with them on the phone app or occasionally the need to log in on a computer, and the very rare phone call. This includes getting a mortgage, and a rather large bank draft.
I recently had to go to the USA for work and was a combination of alarmed and amused at the old-school credit card usage (taking it away and signing a receipt? Using a pin and STILL having to sign a screen? Using a pin and for some reason still needing to sign a receipt? It was inconsistent and bonkers).
I’ve really come to appreciate what the interac system enables. And paying people by just popping their email address or even cell phone number into the app is awesome.
Tangerine is owned by ScotiaBank now. They are using it as a value brand.
Probably due to weird interactions with your own card and US systems.
Nobody uses a PIN for their credit card in the US. And signatures are mostly dead, except in restaurants where they take your card. But pretty much everywhere else is just a single tap with your card (or phone/watch), only rarely demanding a signature. No PIN. That’s only for debit cards.
Perhaps not today, but it was only a few years ago that I had a corporate Amex* card, which I had trouble with while using it at a hotel on a business trip, because the hotel’s card reader was demanding that I enter my PIN, and I had no idea what the number actually was.
*- Yes, I know, Amex cards are technically “charge” cards (i.e., you are expected to pay off the balance each month), not “credit” cards.
It seemed like there was a period of credit cards trying different systems–I had tap-to-pay for a while, and then my next card didn’t have that, instead having the embedded chip, and then the card was back to tap-to-pay. So it doesn’t surprise me that someone, somewhere tried a PIN for a while. But on the whole, it’s rare to unheard of today.
Restaurants really seem to be the last bastion of the old-school method. I think it’s cultural, not technological. The portable cardreader things just seem like an intrusion on an otherwise tech-free meal.
I’ve seen permanently mounted pay stations at each table in chain restaurants like Olive Garden or Red Lobster. And some suppliers are promoting portable digital pay terminals in the United States.