Chart of the Day – 4.10.2009

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Via Felix Salmon, this chart shows how much overdraft charges cost you.  The bar on the left (labeled POS) is from point-of-sale debit card overdrafts.  Here are the numbers: the average overdraft is $17, it’s paid back in an average of five days, and the average charge is $35.  Result: you’re paying $1.94 for every dollar “borrowed.”  You’d probably need scientific notation to figure out the APR.

But here’s the kicker:

When debit cards first came into common use, they promised the convenience of a credit card without the cost, because debit card users were required to have the funds in their account to cover their purchase or withdraw cash. As recently as 2004, 80 percent of banks still declined ATM and debit card transactions without charging a fee when account holders did not have sufficient funds in their account. But banks now routinely authorize payments or cash withdrawals when customers do not have enough money in their account to cover the transaction, so debit cards end up being very costly for many account holders.

Italics mine.  This is just so you understand how deliberate this strategy is.  The banks could easily decline NSF transactions.  They used to.  But they don’t anymore because the fees from inadvertant overdrafts are so lucrative.  Alternatively, they could charge reasonable fees, since the actual administrative cost of overdrafts is minuscule these days.  But they don’t.

And who pays these fees?  Small account holders with modest incomes, of course.  That’s the modern banking industry for you.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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