Drafted

Kevin Drum dares someone to defend the booming business in overdraft fees.  Basically, a lot of people running their finances close to the line use their debit cards for small purchases, and find that each one has triggered an overdraft fee of $35.  I wouldn't discourage a law making opt-out, rather than opt-in, overdraft mandatory.  But what's to stop the bank from selling it to you at time of purchase?  It probably sounds great if you're the kind of young or financially uneducated person who racks up a lot of overdraft fees.  I have an overdraft because someone asked me during a routine call to Citibank, and I thought, sure, why not.

Meanwhile, we'll probably get annual fees on our checking accounts anyway.  The banks need to repay TARP and get out from under the eye of their legislators, and the banking business is only getting more competitive as customers can shop tiny differences in interest rates.  Bounced check fees are drying up, because people no longer write many checks.

In theory, you could switch banks if they imposed a small monthly fee.  But are you really going to, for a couple of dollars a month in fees?  Especially if all the other banks are having the same problem?

But no attempt to save people from their overdrafts will work if we don't get to work educating people to know that they need a buffer of savings between themselves and the bottom of their bank account--and to watch their bank balance to make sure they're not going to incur overdraft charges.  Yet most people don't; I've incurred an overdraft more than once through stupidly failing to transfer money from savings to checking.  And I'm not sure I even noticed what the fee was.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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