It took us two years to pay for a Pepsi. A fifteen cent overdraft ballooned into a $300.00 overdraft and penalty fee. We were cash only for those two years.
Thing is, it took more than six months before the Chexsystems finally cleared us so we could open our checking account. Four or five months later the whole thing came back and we had to do it all over again. So far we haven’t had any problems for over a year, but we haven’t tried to open any new accounts so I don’t know for sure. Getting into any financial trouble is a Helluva deep hole to climb out of.
I’m fairly poor right now. I tend to pay by debit card or cash, or if I have no other choice, money order. I can’t get a credit card because of credit issues. I hate to write checks, and suspect other low income people hate too for similar reasons (assuming they have a checking account), because my balance is always flirting dangerously close to zero. Yes, i try to keep track, but it’s often hard to predict when something will finally get cashed, or when a deposit will be delayed due to some random holiday.
Most banks have ridiculous overdraft fees, some of which compound themselves for arbitrary reasons. I’m now a member of a Credit Union, which has much more reasonable policies, but even their one-time more reasonable overdraft fee is something that could make the difference to me in a rent payment or gas for the week…
Most banks and credit unions have overdraft protection you can apply for, but it’s been my experience that anyone that actually needs overdraft protection will inevitably be denied it.
Because the US does not have a robust financial consumer protection agency, like Australia and Canada do. Obama has proposed the creation of such a department but the odds look poor for passage.
In the US, banks have made enormous amounts of fee income in recent years: they’ve jiggered their rules to make lots off of the overdraft protection racket. In the US, big guv seems to get some more exercised than intentionally impenetrable contracting by financial institutions.
I’m not exactly poor as some people but I’m really no where near middle class either.
I used to have a bank account until oneday I was over drown by exactly $.50 cents. Bam! $28 fee, and $6 per day. By the time I had any money it was well over a $100, Deciding it better to eat then pay the interest on what was essentially a 40,000% interest loan, I paid them a dollar for their trouble then told them they could get stuffed for the rest.
2 more years and it’ll be gone from my credit history.
As a point of interest, last year a bunch of class action lawsuits related to overdraft fees were filed against most of the major banks.
My last boyfriend lived on cash. His credit had gotten all screwed in the last town he lived in: he was overdrawn on a bank account, and while he had the money to pay off the account (and wanted to), he couldn’t close it from another branch of the same bank in our city, and his car was dead, so he had no way to make the trip up to close it in person at that branch. With the old account outstanding, he couldn’t open a new account at any bank, and with the bad credit from the outstanding account, he couldn’t get a credit card. He cashed all his paychecks as they came in, and kept the cash stashed in his bedroom.