The Consumer Financial Protection Bureau has proposed new rules that would lower overdraft fees, with President Joe Biden calling the charges “exploitative.” Currently, the fee for overdrawing a bank account averages more than $26.
If a bank temporarily lends a consumer money when their account has reached a zero balance, the consumer is typically responsible for paying back both the overdrawn amount and an additional fee, which can be more than the original amount charged. In one example often cited by opponents of the fees, a $3 cup of coffee can end up costing someone $30.
Here’s what to know.
We’ve had this system in the uk for a few years now and it’s excellent. You can set up an overdraft amount with the bank. If it’s nil, all transactions that would send you overdrawn would not be paid. Payments that take you below zero but within the agreed amount cost interest of 40% (so it would cost 400pounds to borrow 1000 for a year). That’s a steep rate of interest, but there are no fees. If i borrow 1000 pounds for a day, the cost is 1pounds10p. I can take 100 pounds out 10 times in a day, pay it all back the next day, 1.10 in interest. I’ve no argument with that!