Chase, Overdrafts, And The Evil Of Small Checking Accounts

Today I was woken up by a phone call from a guy who wanted to know if I would do a “check by phone” to pay the $10 that is overdue on my Chase credit card.

This guy, who was obviously reading from a script in India, didn’t balk when I refused to confirm my checking account information, because I was half-asleep. After all, he had it right in front of him; my checking account is with Chase, the same bank to whom I owed the $10. He read the account number off to me and assured me that it was correct.

The total amount of the transaction was $49, which is to say, the $10 that I owed, plus a $39 late fee.  So, I was charged $39 for being late to give Chase permission to move money from one Chase account to another.

There is nothing new here, of course. This happens to millions of people every day, and others have written about it more skillfully and at greater length.

And yet, we live in a time when consumers have public platforms, and mine has more of an audience than some. And I believe that the use of those platforms, collectively speaking, has the power to affect wide-scale change, eventually. So here’s my little contribution.

I’m 38 years old. I’ve had a bank account of some kind or other since I was about 11. And for all the fees I’ve paid that I didn’t think were justified, and even those that I do think were justified, I would have a lot more money at this point if I had been storing it all under my mattress from day one.

Last week, on Mad Men, Betty found Don’s secret drawer, in which, among other things, he keeps huge packets of cash. “I see how you are with money. You don’t understand it,” said Betty. And I thought, Oh, I don’t know about that…do you see him paying hidden banking fees?

It often seems to me that there is a myth of banking that’s analogous to the myth of, say, marijuana as a dangerous substance. If you’re wealthy, then it’s much easier to get out of annoying bank dings, because the banks actually care about your continued business. If you’re not, then you keep your money in the bank mainly out of a fear that, if you don’t, it’s at risk to being stolen. The fact that the bank then proceeds to steal part of it from you while they’re looking after it is just the price you pay for safety.

I used to work in a video store, where I learned that it didn’t make sense to be forgiving on late fees, because those fees where actually what keeps the business profitable. And that’s how it works in a great many similar situations, including this one.

As a society, we need to move away from the idea that ridiculous penalties for small errors -or no errors at all – are acceptable, because we are being punished for something that we have done wrong. The mistakes that we make – the small overdrafts, the slightly late payments, the non-reading of fine print – we are supposed to make those mistakes. They were predicted by the same establishments that punish us for making them.

I’m not sure what the answer is. Could a bank stay profitable purely by investing the money that they are holding for their customers? Or are all the tricks necessary just to keep the system afloat?